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Middle-to-high income economies in East Asia could lose as much as 15 percent of their working-age populations by 2040 due to rapidly greying demographics, weighing on economic growth and adding to government spending, the World Bank said on Wednesday.
East Asia is aging faster than any other region in history, the bank said in a report, which found 36 percent of the world’s population aged 65 and over, or 211 million people, live in the region, the largest share among all regions.
“Very fast drops in fertility rates, coupled with rapid extensions of life expectancy beyond age 60, have resulted in unprecedented pace and scale of population aging in East Asia,” the report said.
“The rapid pace and sheer scale of aging in East Asia raises policy challenges, economic and fiscal pressures, and social risks,” it said, adding that developing countries in the region are “getting old before getting rich”.
By 2040, the greying of the population could shrink the number of working-age adults by more than 15 percent in South Korea and more than 10 percent in China, Thailand and Japan.
In China alone, that would translate into a net loss of 90 million workers.
Pension spending in the region could increase by eight to 10 percent of gross domestic product by 2070, it said.
But the bank said East Asia is better positioned to cope with the challenges as people tend to save more than other parts of the world and they are more willing to work longer.
Philip O’Keefe, lead author of the report, told a news conference in Beijing that the biggest challenge facing Asian countries will be how to fund pension and health care systems.
“The fiscal pressure is really a serious concern and needs serious policy change,” he said, adding that reforms of pension and health care systems could be politically challenging.
The bank recommended that developing countries in East Asia take steps to reform their existing pension schemes, including gradual increases in retirement age.
The demographic dividend has been a key driver of rapid economic growth in Asia in recent decades.
In October, China announced plans to ease family planning restrictions to allow all couples to have two children after decades of a strict one-child policy, a move aimed at alleviating demographic strains on the economy.
(Reporting by Kevin Yao; Editing by Sam Holmes)