By Lara Holmes

The credit rating agency Standard and Poor's (S & P) warned Monday that rising government spending on health is likely to harm the sovereign creditworthiness of the G20 countries from 2015.

In a report published Monday in London, the agency expected a deterioration in the credit health of these countries if they do not control health spending through a policy of additional measures

 

S & P, which looks for a hypothetical scenario study covering the period between 2010 and 2050, says that the government tax burden will grow significantly over the next decade.

 

The further deterioration of public finances, it says, is likely to occur in Europe and other advanced economies of the G20, including Japan and the United States.

The high social protection and the rapid deterioration of the demographic profiles in these countries are left with little leeway to manage their health care spending compared to emerging economies, where economic and population growth is even more favorable, the report says from S & P analyst Marko Mrsnikes.

According to Mrsnikes, an aging population will lead to profound changes in the outlook for economic growth around the world as governments work to prepare budgets that address the growing expenditure needs.

To date, the expert argued, the main policy action by governments has been to increase spending on pensions, but we believe it is equally important to put a firm brake on increased spending on health care.

The document states that, while pension spending will continue to be more expensive in the budgets of the advanced economies of the G20, health care spending will grow faster than any other area in the coming decades.

If no changes occur in economic policy, health spending in advanced economies such as Germany, US, UK, France and Japan could reach 11.1% of Gross Domestic Product (GDP) in 2050, 4.8 % more than in 2010, predicts S & P.

The other two major demographic factors that will influence the rise in health expenditure, says the agency is investing in technology development and treatment coverage.

This is another indication that, in general, policies have focused more on reforming other areas of age-related spending, especially pensions, to improve long-term sustainable development of social protection systems, while the challenges of health care have not been adequately addressed, says Mrsnikes.

As the demographic profile of the electorate will age further in the coming years, he adds, the political climate for reform pension and health spending will be more complicated than it is now.