Fiscal implications of the ageing population in Croatia

Demographic changes altering size and age-profile are recognised in many countries, including within the EU, as an important determinant of both the size and the structure of government expenditures and revenues in the long run. In Croatia, having a negative population growth rate and total fertility rate below 2.0, projected demographic trends are quite similar to those in the rest of Europe. Therefore, significant budgetary implications of the so-called ageing population phenomenon can be expected. The aim of this paper is to use the standard methodology developed by the European Commission in order to assess the long-term implications of ageing population on the sustainability of public finances in Croatia. The results of the analysis show that demographic changes could, in the long-run, place Croatian public finances on an unsustainable path, and imply the necessity of adopting fiscal policy actions aimed at avoiding the negative budgetary consequences of an ageing population.