This report presents the DREAM long-term economic projection model for 2014. The projection models includes an update of all components of the total DREAM system, i.e. a new population projection, an education projection, a socio-economic projection1 and a new calibration of the economic model DREAM, which is consistent with the national accounts from 2009.
The DREAM model system is designed to evaluate the interaction between the public sector and the rest of the economy in the longer term. This assessment is made with the involvement of all possible relevant factors: the aging population, age of retirement from the labour market, changes in the level of education, oil and gas in the North Sea, agreed reforms, the tax freeze etc.
In this context, the fiscal sustainability indicator is a central concept. If the sustainability indicator is zero, it means that the long-term fiscal policy is sustainable - i.e. that the public sector's future income is large enough to cover the future expenditure. If the indicator is negative, it means that the future income is too small in relation to the future expenditure. In DREAM’s long-term projection for 2014 the fiscal sustainability indicator is estimated to -0.1 percent. This does not differ largely from the last time, where the indicator was -0.0 and it was estimated that fiscal policy was sustainable. So the conclusion is still that fiscal policy is about sustainable.