The OECD estimates that potential GDP in the OECD area will decline by around 4 per cent as a result of the crisis. All in all, this means that public finances in the OECD area require a structural strengthening of around 5–6 per cent of GDP over the coming years. At the same time, several factors indicate that interest rates will rise, which will lead to increased interest expenditure and thus put even greater pressure on public finances. Monetary policy is expected to become less expansionary in the years immediately ahead, which means that short-term interest rates will rise. The large general government deficits and thus rising borrowing requirements will probably lead to higher government bond rates. In addition, there is the premium that the market participants require as compensation for the risk that the debt may become unsustainable. Meanwhile, stricter financial regulations will probably also lead to higher interest rates. In the past, there have been periods when the debts of the public sector as a percentage of GDP have been reduced as a result of high inflation. But as experiences of the harmful effects of inflation have led to more or less explicit inflation targets for central bank activities  2  2  See Reinhart and Rogoff (2009). BIS Review 56/2010  and as interest rates tend to adapt very quickly to inflation expectations, it is not probable that higher inflation will reduce public-sector debt as a percentage of GDP.
The chart illustrates developments in the labour force and the number of pensioners in the period up to 2050. The blue line shows that the labour force is projected to increase by about 150 000 from 2000 to 2030. Old-age and disability pensioners will increase by some 500 000, shown by the grey line. This means that the number of persons in the labour force relative to the number of pensioners will fall from 2.6 to 1.8. These rough estimates are among other things based on the assumption that labour immigration remains at the present level. The increase in the number of pensioners will result in a sharp increase in the obligations of old-age and disability pension funds. Expenditure on old-age and disability pensions is expected to more than double as a share of total GDP in the course of the next 30 years. The increase in the number of elderly, especially those over the age of 80, will in time require an increase in resources for nursing and care services. Welfare reforms that have been adopted will also contribute to increasing the need for resources in the public service sector in the years ahead. BIS Review 13/2003  1  With an ageing population and strong growth in expenditure on pensions and nursing and care services, our petroleum wealth will be a welcome source of revenues. This is why it is particularly important that it is managed in a sound manner. Petroleum activities are a substantial component of the Norwegian economy.