FT News Briefing Ageing populations hit government credit ratings
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May 30, 2023 Confidence is brewing among lawmakers as both parties work to avert a US debt default. Meanwhile, Turkey faces economic challenges as the lira continues to slide after Erdoğan's re-election. A pressing issue emerges: aging populations are impacting government credit ratings, with predictions of rising debt-to-GDP ratios. Case studies from countries like Japan and France illustrate the urgent need for reforms to tackle these financial strains, or risk severe long-term economic consequences.
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US Debt Ceiling Deal Details
- The US debt ceiling deal caps spending at current levels for 2024.
- It then allows a 1% spending rise in 2025, impacting social safety net programs and energy projects.
Erdoğan's Economic Policy
- Despite winning the Turkish presidential election, Recep Tayyip Erdoğan's low-interest-rate policy is hurting the lira.
- Economists doubt he can maintain this policy with inflation above 40% and dwindling reserves.
Impact of Aging Populations
- Aging populations strain government finances due to shrinking workforces and increased pension/healthcare costs.
- Rising interest rates exacerbate this, making it harder for governments to afford these programs.