AUSTRIA – Without proper policy and fiscal reforms, Austria’s ageing population will put pressure on public finances and undermine the country’s sovereign ratings, according to a report by rating agency Standard & Poor’s.

The report - ‘Global Graying Country Report: Republic of Austria’ - provides a country-specific analysis on Austria following a report covering 32 countries published in May.

“Without further reforms, total age-related public expenditure will rise to 21.1% of GDP in 2050, up from 19.8% in 2005," said S&P credit analyst Kai Stukenbrock.

"Absent any policy measures on the fiscal or structural policy front, general government deficits and net debt would rise from the mid-2020s to reach 5% and 91% of GDP by 2050, respectively, which is well below the corresponding values of the sample median," he added.

According to S&P, a fiscal deterioration of that magnitude would negatively affect Austria’s ‘AAA’ rating by around 2030.

S&P was quick to point out that this scenario was not a prediction.

“It is a simulation that highlights the importance of age-related spending trends as a factor in the evolution of sovereign creditworthiness. In reality, it is highly unlikely that governments will allow debt and deficit burdens to spiral out of control,” S&P said in a statement.

It added that the scenario analysis provides some valuable insights about the power of policy choices.

“If Austria were to embark on a radical structural reform preventing age-related spending from rising, fiscal indicators would actually improve,” said S&P.