OECD: "Fiscal Burdens Rising Amid Aging Population...Bolder Structural Reform Needed"

"Public Finance Recovery" Report Published

The Organisation for Economic Co-operation and Development (OECD) has diagnosed that, although major advanced economies are facing increased fiscal burdens due to pandemic response, intensifying population aging, and expanded defense spending, reforms aimed at restoring fiscal soundness remain at a gradual level.

According to the Ministry of Economy and Budget on May 28, the OECD published its "Public Finance Recovery" report analyzing major countries’ fiscal reform cases. The report found that the ratio of national debt to gross domestic product (GDP) among OECD member countries rose from 73% in 2007 to 110% in 2024. It also noted that interest payments on national debt increased from 1.9% of GDP in 2020 to 3.3% in 2025.

AFP Yonhap News

The report identified the pandemic response, intensifying aging population, increased healthcare and pension expenditures, and expanded defense spending as the main reasons for heightened fiscal pressures. Specifically, it projected that member countries’ average pension expenditure would rise further from 9.4% of GDP in 2023 due to aging populations.

As alternatives, the report presented policies such as raising the retirement and pension eligibility ages, increasing contribution rates, and introducing automatic adjustment mechanisms. It cited Korea’s policy of gradually raising the national pension contribution rate from the current 9% to 13% by 2033 as an example.

In the area of unemployment benefits, the report analyzed that reforms are spreading to reduce fiscal leakage by lowering benefit levels, tightening eligibility requirements, and strengthening controls against fraudulent claims.

Healthcare and long-term care expenditures accounted for an average of 7% of member countries’ GDP in 2023. The report analyzed that member countries are curbing the rise in medical costs by strengthening management of high-cost drugs and procedures.

In the long-term care sector, reforms are underway to shift from facility-based care to home-based care and to tighten eligibility requirements. The report also analyzed that structural reforms are accelerating in the education sector in response to declining school-age populations and increased fiscal burdens.

Regarding public administration, the report noted that efforts are underway to improve government operational efficiency through workforce optimization, organizational restructuring, and digital administration transitions. In particular, it observed that cases of improving fiscal relations between central and local governments through redistribution of functions and revision of local government grants are increasing.

The report concluded, "Overall, OECD countries share a consensus on the need to restore fiscal soundness, but fiscal reforms currently in progress are generally limited to a gradual level." It assessed that "given the structural fiscal pressures from aging, low growth, and rising security costs, bolder discussions on structural reform are necessary."

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