Illustrating long-run fiscal challenges using the Long-Term Model

Yvan Guillemette

No 1877, OECD Economics Department Working Papers from OECD Publishing

Abstract: This paper presents updated estimates of long-run fiscal gaps for 35 OECD and accession candidate countries using the OECD Global Long-Term Model. The long-run fiscal gap measures the fiscal adjustment required at the 2060 horizon to keep public debt ratios stable near current levels while maintaining current service standards and benefit entitlements. The methodology incorporates several refinements, including projected increases in defence spending and a more detailed treatment of primary expenditure. In the absence of additional policy action, the median country would require a fiscal adjustment of 4.7 percentage points of GDP between 2027 and 2060 to stabilise debt, with substantially larger adjustments in some countries. Population ageing is the main driver of long-run fiscal pressures through higher pension, health and long-term care spending, compounded in many cases by weak initial fiscal positions. The paper also assesses the sensitivity of fiscal gaps to key assumptions and policy scenarios.

Keywords: fiscal pressure; fiscal sustainability; long-run fiscal gap; long-term projection (search for similar items in EconPapers)
JEL-codes: C53 E17 H55 H68 O57 (search for similar items in EconPapers)
Date: 2026-09-30
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Persistent link: https://EconPapers.repec.org/RePEc:oec:ecoaaa:1877-en

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