Adapting to an ageing population

The global landscape is currently defined by a radical and enduring demographic shift, widely recognised as one of the greatest current challenges. Tim Evans, CEO at HSBC Vietnam, analyses this shift and suggests which policies could be required to mitigate it.

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The demographic shift phenomenon, often described as an “upside-down population pyramid”, is the result of a powerful convergence: sustained increases in life expectancy due to medical advancements and a dramatic decline in the total fertility rate across most nations.

Exacerbated by the ageing of the post-Second World War baby boom generation, this structural change places immense pressure on social and economic systems designed for a younger, faster-growing population. This transformation is not confined to wealthy nations, it is rapidly accelerating in Southeast Asia, with Vietnam quickly emerging as a nation on the brink of a profound, and potentially destabilising, demographic transformation.

The developed world offers a clear preview of the challenges Vietnam faces. Europe, for example, currently sees 20 per cent of its population over the age of 65 and is on track to hit a staggering 30 per cent before 2050. This demographic maturity is especially costly because European economies carry significant existing public welfare commitments - generous state pensions, comprehensive national healthcare, and extensive social security - all systems funded by a shrinking base of working-age taxpayers.

The resulting strain not only increases government expenditure but also impacts on crucial factors like productivity growth and investment, ultimately slowing overall economic expansion and jeopardising the intergenerational contract - the unwritten agreement between different generations to support one another.

The pace of change is even more acute in parts of Asia. South Korea stands as the starkest global example, with the collapse of its birth rate (to well below one child per woman) projecting that a shocking 42 per cent of its population will be over 65 by 2050, according to the UN’s low-fertility scenario. Mainland China is expected to follow closely behind, undergoing a demographic squeeze before it fully achieves high-income status.