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Economic aches and pains of global aging

Thursday, August 07, 2014 - 02:06

By 2015 the majority of Moody's-rated countries will be classified as aging, and the economic impact will be dramatic. Bobbi Rebell reports.

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Getting older is full of aches and pains- for economies. By 2015 the majority of Moody's-rated countries will be classified as aging. Anne Van Praagh, Managing Director for the Sovereign Risk Group at Moody's. SOUNDBITE: ANNE VAN PRAAGH, MANAGING DIRECTOR FOR THE SOVEREIGN RISK GROUP, MOODY'S (ENGLISH) SAYING: "We all hear about aging as a problem, but certainly aging is often viewed as a long term problem. But in fact, aging is now upon us and we know that aging will contribute to a dampening of economic growth globally." That dampening on economic growth could be severe. Annual growth is expected to fall by almost half a percent in the next 5 years- and then by double that amount starting 5 years out. And Moody's projects that growth in the working-age population of the world during 2015-30 will only be half that of the growth during the previous 15 years. So just as a bigger slice of the population gets older, there are fewer people to support them. By 2050-in developed countries there are expected to be two working adults for every adult over 65, four working adults for every adult over 65 in developing countries. SOUNDBITE: ANNE VAN PRAAGH, MANAGING DIRECTOR FOR THE SOVEREIGN RISK GROUP, MOODY'S (ENGLISH) SAYING: "We have known about labor force shrinkage in places like Russia and Japan and Germany. We've known about labor force or labor force participation declining in the US. The fact is, this is not just a developing market, a developed market problem, it's a developing and emerging market problem, as well. So countries like China and Chile over time will start to see declines in labor supply." Fewer young workers relative to older dependents cuts economic growth- and savings rates fall- cutting investments. Governments are now under pressure to mitigate the problem- by changing policies- adjusting incentives for things like retirement ages and using technology to boost productivity for those that are working.

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Economic aches and pains of global aging

Thursday, August 07, 2014 - 02:06