Many countries also make long-term projections of specific budgetary funds, such as a public pensions and social security. A specific budgetary fund may be managed as a separate independent legal entity responsible for assets and contributions for an exclusive purpose. For example, fiscal projections of pension funds are undertaken in a number of OECD countries; see Box G-1.
The experiences of the 12 countries considered can be summarized as follows:
Most countries surveyed publish fiscal projections to assess the government’s fiscal future over a 40-50 year time horizon, and around half also over an infinite time horizon. Only half of all countries prepare their analyses annually. The practice remains relatively new in most countries, introduced in the past decade.
Although many factors, such as the fiscal consequences of population aging, global climate change, and contingent liabilities pose risks to fiscal sustainability, most projections focus solely on population aging.
A combination of projected fiscal aggregates and synthetic indicators are the most common measures of fiscal sustainability; generational accounting is prepared only in a couple of the countries surveyed. Few countries provide an assessment of how and why their fiscal futures have changed since the last projection.
Although sensitivity analyses of demographic and macroeconomic assumptions are common in many country’s fiscal projections, sensitivity analysis of the microeconomic assumptions relating to the cost of government services is not common. Analysis is typically used to assess a country’s fiscal future rather than to highlight policy options.
Although the methodology and assumptions underlying fiscal projections are disclosed in many reports, none clearly presents how assumptions have changed over time and the reasons underlying the changes.