Thursday, July 09, 2009

London, UK: Low birth rates, ageing populations and inadequate public finances make Italy and Japan the world's least fiscally sustainable countries according to the Fiscal Risk Index, released by global risks specialist, Maplecroft today.

Despite the G8 leaders' statement on the opening day of the summit in L'Aquila, Italy, committing to "medium term fiscal sustainability," the index reveals that two G8 members, Italy and Japan, are at most extreme fiscal risk out of a ranking of 178 countries.

The Fiscal Risk Index highlights countries that will come under increasing economic pressure in future years. A demographic transition towards low birth rates and high life expectancy results in increasingly ageing populations and a diminishing workforce. This in turn creates higher demands for public expenditure coupled with a likely decrease in public revenue.

"Governments like Italy and Japan, who have large public debts and fiscal deficits, plus high spending on pensions and healthcare, are going to be left especially vulnerable," said Maplecroft analyst, Fiona Place. "Populations in these countries will be negatively affected, either through higher payments towards pension funds, a longer working life or lower benefits – or possibly a combination of all three."

Of the other G8 nations Germany (21) and France (48) are considered high risk, whilst the United Kingdom (63), Russia (78), Canada (100) and USA (135) are rated medium risk.

According to the UN Department of Economic and Social Affairs, the number of persons aged 60 years or over will rise from 10 per cent of the world population today to 22 per cent in 2050. Italy's old-age dependency ratio (population aged 65+) is projected to be 33.3% by 2050, rising from 19.6% in 2005, whilst Japan's is estimated at 37.8% in 2050 up from 19.9% in 2005.

The Fiscal Risk Index is one of over 100 global risk indices Maplecroft analyses to enable organisations to identify areas of high risk in their supply chains, operations and investments. It measures a country's fiscal sustainability by projecting changes in child and old-age dependency ratios (non-working dependants) between 2005 and 2050 and by analysing current income, development levels, the structure of public finances and the extent of public spending on pensions, health and education.

Data sources used in the compilation of the Fiscal Risk Index include: UN Population Division, International Monetary Fund, Organisation for Economic Cooperation and Development, World Resources Institute, World Bank, Help the Aged, UNESCO and the World Health Organization.

For more information contact:

Jason McGeown

Communications Manager

Maplecroft

Tel: +44 (0)1225 420000

Email: jason.mcgeown@maplecroft.com

Web: http://www.maplecroft.com

Maplecroft is the leading source of global risks intelligence. We analyse, index and map over 100 global risks to help companies identify areas of high risk and secure the insight they need to manage and mitigate risk sustainably. Our comprehensive portfolio of data sets, risk indices, interactive maps and narrative reports are complimented by an award-winning reporting service and a unique company rating system, measuring corporate exposure to risks across supply chains, operations and distribution networks.

Jason McGeown

Communications Manager

Maplecroft

Bath

+44 (0) 1225 42 0000