NABO Long-Term Fiscal Projections 2022-2070

Published on August 11, 2022
Published by Estimates & Tax Coordination Division

   Korea's demographic structure has continued to see an ultra-low birth trend with the total fertility rate below 1.0 since 2018, and the country is expected to become a super-aged society where the proportion of the population aged 65 and over exceeds 20% of the entire population starting in 2025. An increase in the elderly population that their working-age counterparts must support will slow the potential growth rate of the economy, weaken the revenue base, and increase welfare spending, which will likely to lead to a heavier national fiscal burden. Fiscal spending and national debt, which surged recently to deal with the COVID-19 pandemic, have raised concerns of fiscal sustainability as well.
   Accordingly, in the “NABO Long-Term Fiscal Projections 2022-2070” report, NABO forecasted what the future of national finance will look like if the current system that is in effect as of the end of May 2022 continues to remain in place. To this end, the main premises, characteristics, and forecasting methods of the NABO long-term fiscal projections were proposed first, then demographic and macroeconomic variables, which are the main variables of the long-term fiscal forecast, were briefed. Furthermore, the main contents of the discretionary spending scenarios were presented, and the projection results for each scenario were described with a focus onfiscal aggregates such as total revenue, total expenditures, fiscal balance, and national debt.
   The Long-Term Fiscal Projections are meaningful in illustrating what is expected to occur should the current system stay unchanged for a long time, with the effects of demographic changes on the economy and finances taken into consideration amid high uncertainties. Interpreting projection outcomes should be done in a careful manner, because changes made to population and macroeconomic hypotheses or institutional reforms, which are the premise of the report’s projections, could alter the results of the forecast.