RP enjoys a population advantage
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MANILA, Philippines - A relatively young Philippine population may work to the country’s advantage in terms of economic growth, Swiss banking giant UBS said.
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"The Philippines is actually one of the advantaged countries given that its population ages moderately. It’s better off compared to fast ageing countries," UBS Investment Bank Product Manager Simon Smiles told BusinessWorld.
In the second run of its "Asian Structural Themes" reports, UBS examined the impact of ageing on long-term gross domestic product (GDP) growth, government fiscal positions, changes in consumption patterns, and the sectors that are likely to be affected.
It noted that the issue of ageing and its impact on the economy was not limited to the Western world as four Asian economies — Hong Kong, Japan, Korea and Singapore — were among the top 10 economies in the world with rapidly graying populations.
Australia, New Zealand and Sri Lanka were also among those with higher proportions of individuals aged over 65, while China and Thailand were said to be ageing quicker than France, Spain, the US, and the UK.
The Philippines — together with Cambodia, Pakistan, India — was among those with lower proportions of senior citizens.
Mr. Smiles, who is the author of the report, quoted a United Nations study, which stated that the percentage of those aged over 65 in the Philippines would rise to 5.5% in 2020 and to 7.5% by 2030. This compares to Korea’s 15.7% in 2020 and 23.4% in 2030.
This is also despite slowing population growth, with latest data from the National Statistics Office pointing to an average annual rate of 2.04% from 2000-2007, slower than the 2.34% from 1990-2000. The government expects average growth to ease to 1.95% between 2005 and 2010.
The UBS study noted that countries with rapidly ageing populations face the risk of stagnation in labor force growth. UBS said real GDP growth in Asia was somewhere between 2.4% and 9.8% on the average in the last 25 years, and that labor had contributed between 0.6% and 3.3%.
Assuming that unemployment rates remain at current levels and total factor productivity and capital labor growth are maintained at average 1981-2005 levels, long-term growth would likely to fall by 16-59% in countries with rapidly ageing populations, UBS said.
However, while the impact of ageing on tax receipts is neutral, pension funding may take a significant hit on governments’ fiscal positions, UBS said.
A number of sectors will also be affected given that older people have different preferences and tend to be conscious of the prices of goods they buy. When it comes to investing, the elderly also tend to be risk averse as they normally aim for capital preservation.
Among the industries that will benefit from rapidly ageing population are health care, travel and tourism, infrastructure, among others. Financial services such as life insurance and asset management may also shine as older people often seek assistance regarding wealth and retirement.
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