Weekly Economic Briefing

Age is not (just) a number

18 November 2014

Global Overview

  • Global population growth has slowed over recent decades and is expected to moderate further as we move through this century. At the same time, we are seeing a marked ageing in populations.
  • These trends create a number of challenges. Deteriorating demographics will weigh on potential growth rates in parts of the world, while ageing populations will have to deal with increased demand for healthcare and public pensions.
  • The Eurozone labour force has already started to decline as populations age rapidly. This has been a well-documented problem in Japan and both regions will need to take aggressive action to support growth and debt sustainability.
  • While the UK and US continue to enjoy population growth they are also seeing their demographics deteriorate. To manage this transition, tough decisions will need to be made on entitlement programmes.
  • Demographic trends differ markedly in the emerging world. China’s one child policy means that its demographic dividend has passed. Other countries are still to reap the benefits of strong population growth.
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US

The US is ageing more slowly than most developed countries, although labour market policies and major entitlement programmes need to be reformed to better manage the demographic transition.

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UK

While the UK demographic outlook is not as worrying as it is for some of its European neighbours, governments will need to make tough spending and tax decisions as the population ages.

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Europe

The Eurozone’s working-age population is shrinking as the population ages. This creates challenges in a region struggling for growth and racked with debt sustainability fears.

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Japan

Japan’s Q3 growth shock appears to explain a series of peculiar policy announcements in recent weeks. However, it also rams home just how perilous Japan’s predicament is.

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Emerging Markets

Favourable demographics have long influenced emerging markets’ growth. As China faces an ageing population, India and Africa are placed to reap the benefits of their ‘demographic dividend’.

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Standard Life Investments’ Global Strategy team provide regular analysis of the key economic data that has been influencing financial markets.

Available on a weekly basis, the Weekly Economic Briefing takes a detailed look at the global economic issues that have been impacting our investment strategy. The regional approach aims to provide an easy-to-navigate guide to the most recent developments in the global economy.

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