Aging Populations and their Impact on Fiscal Sustainability in the People’s Republic of China, Japan, and the Republic of Korea
22 November 2018
ADBI, Tokyo, Japan
Time of event
The People’s Republic of China (PRC), Japan, and the Republic of Korea (Rep. of Korea) are experiencing unprecedented population aging—Japan has the highest proportion of people aged over 65 in the world, the proportion of people aged 65 or older in the PRC is expected to make up a fourth of its total population by 2050, and the Rep. of Korea is aging faster than expected. The aging of populations has caused qualitative and quantitative changes in the demand and supply of the whole economy, in turn affecting inflation, household debt, government finance, as well as growth. In the long-run, it decreases the potential growth rate of an economy.
Demographic aging presents a major challenge to fiscal sustainability in terms of decreased revenue and increased expenditure. As the workforce shrinks, consumption decreases which in turn lowers tax revenue. Moreover, social expenditure on age-related programs such as public pensions, health care, and other social safety nets increase constantly. This can pose a serious long-term fiscal burden for most countries, especially developing countries with less mature and less developed social protection systems. Meanwhile, the demand for enhanced social security systems grows, thus calling for better social integration and sustainable development.
These demographic changes can render traditional macroeconomic policies ineffective. To cope, governments need to look at the consequences of population aging from a macroeconomic perspective and assess alternative paths that economies can take to properly and adequately respond.
ADBI will hold a high-level policy forum between representatives of the PRC, Japan, and the Rep. of Korea. Other emerging Asian economies such as Thailand, and Viet Nam are also expected to face large increases in public spending on pensions and health care services due to aging populations in the foreseeable future. Hence, this policy forum will bring together high-level policy makers from those countries to discuss the impact of aging populations on fiscal sustainability and economic outlooks, and to share broad perspectives for formulating appropriate policy responses to address this issue with leading experts from international organizations and academia.
The outcome of the forum is expected to provide valuable inputs to the task force for population aging under the Think Tank 20 (T20) process in 2019, which is in turn will publish policy recommendations for the Group of Twenty (G20) policy makers.
- Discuss the impact of aging populations on economic outlooks and fiscal sustainability
- Share broad perspectives for formulating appropriate macroeconomic policy responses to address this issue with leading experts from international organizations and academia
- High-level government officials from Japan, the PRC, the Rep. of Korea, and the developing economies of Thailand and Viet Nam
- Experts and representatives from international research organizations and academic institutions involved in the issue of aging populations and their implications for fiscal sustainability
- Better understanding of challenges to fiscal sustainability posed by aging
- Enhanced dialogue, trust, and partnership among government officials and experts on key issues related to aging societies and their implications for fiscal sustainability
- Knowledge sharing from the PRC, Japan, and the Rep. of Korea to participating emerging Asian economies on how to address the issue of aging population
- Valuable inputs to T20 in 2019
- Presentation materials to be uploaded on ADBI website
ASEAN+3 Macroeconomic Research Office (AMRO) and Korean Development Institute