Korea and China are likely to suffer from problems of a typical aging society, since their working-age population is projected to shrink over the next 10 years, an economist at a major U.S. investment bank predicted.
A research report of Bank of America Merrill Lynch economist Hak Bin Chua was quoted by broadcaster CNBC as saying that “the next decade will be very different from previous decades when most of Asia was still experiencing demographic divides, including China and Korea.”
Chua asserted that demographics of working-age population were effective indicators of measuring a country’s actual growth in gross domestic product.
His report revealed that the dwindling labor force in some large Asian economies, including Korea, Hong Kong, China and Thailand, is expected to lead to a contraction in domestic consumption and a slowdown in GDP growth.
Korea and China will most likely have their peaks in working-age demographics in 2015, which will dip afterward.
In contrast, Chua estimated that Indonesia and the Philippines will not reach their peaks of the working-age population until 2058 and 2085, respectively. He implicated in the report that the emerging countries in Southeast Asia have yet to undergo rising population of working-age people, coupled with larger growth in the region’s GDP.
The negative impact of the aging society’s economy is best observed in the case of Japan, the first Asian country to join the group of economic powers of the West. The data in the report showed that in the country, slightly less than one-fourth of the population is 65 or older.
“Japan was largely the only country that was aging and shrinking in terms of its labor force and population in the previous decade. But in the coming decade, several Asian countries ― including China, South Korea, Hong Kong and Thailand ― will see their labor forces shrink. This will have important implications for GDP growth, consumer spending and asset prices, judging from Japan‘s experience,” he said.
Some experts, however, did not entirely agree with Chua’s demographics-real GDP correlation theory, citing that measuring a country’s GDP in the long run takes more variables than just the ups and downs of the working-age population.
“It’s a helpful situation to have a rapidly growing workforce, but one needs to think about the demand side as well,” Robert Prior-Wandesforde, director of Asian economics research at Credit Suisse, told CNBC, pointing out that supply can surpass demand.
By Chung Joo-won (firstname.lastname@example.org