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Emerging Asia: not so young after all
With a median age of 34.3 years, it is commonly believed most of the Emerging Asia region is still young and the demographic dividend will continue to provide a tailwind to growth.
However, a demographic transition is under way.
The speed of the transition is markedly faster than what was historically observed in more developed countries.
"Even the ‘darlings’ … cannot sit back and allow the demographic dividend to do the heavy lifting.”
From reaping a demographic dividend, a demographic tax may come sooner than later for some economies in Asia, which is facing the associated costs of ageing at lower levels of incomes.
Based on the World Bank’s definition of demographic groupings, the outlook on the working age population varies for the 10 economies sampled.
The economies are defined as:
1) an early-dividend economy if the working age population is rising in absolute terms and as a share of its total population;
2) a late-dividend economy if the working age population is rising in absolute terms, but is declining as a share of its total population; and
3) a post-dividend economy if the working age population is decreasing in absolute terms and as a share of its total population.
According to UNPOP estimates, Hong Kong, China, Thailand, and South Korea have all seen their working age populations decline in absolute terms within the last three years. This puts them firmly in the post-dividend stage.
In the late-dividend stage are Singapore, Vietnam, and Malaysia. In Vietnam’s case, it entered the late dividend stage in 2014 when the median age was 30 years. With an average fertility rate of 1.96 children per woman, Vietnam has around 21 years left before it enters the post dividend stage.
Meanwhile, Malaysia’s median age is still young at 28.5 years. Yet, its share of working age population will start to decline in 2019. Its fertility rate of 1.94 is below the replacement rate of 2.1. Even so, the window to transition to the post-dividend stage is long, at almost 30 years.
Even the ‘darlings’ of demographers like India, Indonesia, and the Philippines, which are classified as early-dividend economies, cannot just merely sit back and allow the demographic dividend to do the heavy lifting.
The Philippines shows how easy it is to waste this demographic gift.
For decades, millions of Filipinos have been working abroad to send remittances which amount to approximately 8-10 per cent of gross domestic product every year.
On the other hand, when China’s economy was growing at double digit growth rates, it absorbed a massive literate labour force into its factories allowing a rapid transition.
In stark contrast, India’s literacy rate at over 69 per cent is the lowest in the region which has an average of 92 per cent. Coupled with the low economic participation rate of its females, its demographic potential will likely remain under-utilised.
Eugenia Victorino is an economist for Asia Pacific at ANZ
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
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