An ageing population will drag on growth of six Asian economies, said Moody’s recently.
The growth of six Asian economies — China (A1 stable), Hong Kong(Aa3 stable), Japan (A1 stable), Korea (Aa2 stable), Singapore (Aaa stable) and Taiwan (Aa3 stable) — will face domestic pressures due to rapid increases in their populations aged 65 and above and huge declines in those of working age over the next two decades, the credit rating agency noted.
In addition, what might happen in these six economies would shape global inflation and interest rates, the firm added.
"Ageing populations will drag on public finances and growth of these six economies, which together comprise one-fifth of the world's population. China will face the greatest erosion in growth from population ageing, followed by Singapore and Korea," said Anushka Shah, a Moody's Vice President and Senior Credit Officer.
Given the role of the these economies in driving international savings, Asia's changing demographics will have global implications for interest rates and inflation," Shah noted.
Fiscal pressures will be most pronounced for Korea, Japan and China, Moody’s predicted.
Ageing-related spending, particularly on healthcare and social services, will rise as a share of GDP, increasing debt burdens and straining debt affordability, the credit rating agency noted.
Managing other expenditure and revenue reforms will play a key role, especially for Japan, which already has a very high debt burden and constrained fiscal space, Moody’s observed.
Wide-ranging policy efforts to temper the effects of ageing populations are already in train, including initiatives to boost workforce participation, raise retirement ages, enact pension reform and amend immigration policies, Moody’s said.
Increasing the quality of labor through education is another focus, according to the firm, adding that while technology, automation and the use of labor-saving capital can increase productivity.
All six economies have scope to benefit in this area — particularly China, given its relatively low educational attainment on average, falling female participation and low retirement ages, Moody’s said.
