Daily Management Review

Moody's cites ageing people as reason for slower economic growth


Analysts at Moody's have concluded that an ageing world population will be reducing global economic growth by 0.9 percentage points a year over five years, from 2020 to 2025.

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Ageing of the world's population would cut global economic growth by 0.9 percentage points a year, Moody's experts said. Europe will become the "oldest" region in the world, and a number of countries will face a reduction in the number of people of working age.

"We estimate that ageing is likely to reduce global economic growth by 0.9 percentage points a year over 2020-25," the agency's analysts said. They observe that population growth is slowing globally. Meanwhile, productivity growth has been declining for several consecutive years and the ongoing pandemic of coronavirus infection resulted in rising debt levels.  

"Ageing will further increase the fiscal burden as health and social care costs rise," the analysis report said. "The pandemic has exacerbated the risks associated with a decade-long wave of rising debt levels around the world. It is also likely to exacerbate a long-predicted slowdown in potential economic growth over the next decade," the experts wrote in the study.

Analysts predict that global growth of the working-age population will slow by more than half over the next two decades. "The world's "oldest" region as a result will be Europe, with a number of countries, including Japan, Italy, Korea, Spain and Germany, facing a decline in their working-age populations. The working age population will grow over the next decade in the US and UK, but at a slower rate than a decade ago. 

Slower growth in the working-age population poses a threat to the long-term sustainability of health, welfare and social benefits programmes, experts estimate. Analysts note that immigration to advanced economies at its current rate will not be able to compensate for the decline in the growth rate of the working-age population, especially in Europe.

source: moodys.com