Romania’s expenditures for pensions as part of the social security budget would make up half of the state budget in the next 50 years, according to the Sustainability Report released by European Commission quoted by the Association for Privately-Held Pensions in Romania (APAPR).

According to the sustainability analysis carried by the European Commission, the long-term budgetary impact of ageing would come out significantly above the annual costs of current financial and economic crisis making the effects look insignificant in contrast with the negative demographic effects.

“Public expenditures on state pensions will increase in average from 10.2% of GDP (in 2010) to 12.5% (in 2060) on reduction of birth rates and ageing. In this general context, Romania is among countries with the most unsustainable pension public finances in European Union, the pension expenditures as weight in the GDP being expected to double by 2060, from 8.4% in 2010 to 15.4%”, report shows.

In 50 years, Romania will be EU’s fifth biggest spender on pensions as share of GDP, being outstripped only by Greece, Luxembourg, Slovenia and Cyprus.

The sustainability analysis shows that Romania has a sustainability gap (S2) of 9.1% of GDP, which is significantly above the EU average (6.5% of GDP). This means that to put public finances on a sustainable path, Romania should improve its structural primary balance in a durable manner by 9.1% of GDP. The sustainability gap is largely driven by the increase in age-related expenditures.

Romania should improve its structural primary balance in a durable manner by 9.1% of GDP. In principle, this adjustment could take place via both an increase in revenues and cuts in expenditure. Alternatively, the social protection system (in particular public pensions and health care) would have to be reformed to decelerate the projected increas