Staff Memo: The problems with an ageing population can have a greater impact on forecasts
News, Staff memo Ageing populations will hold back economic growth in many countries in the coming decades - Sweden is no exception. Demographics are already a factor in the Riksbank's forecasting, but major changes are now expected in a relatively short time. This suggests that we should focus even more on this going forward, write Caroline Flodberg and Anna Österberg at the Riksbank's Monetary Policy Department in an analysis.
People are living longer and having fewer children. This pattern is being repeated in most developed countries in the world.
In general, demographic change is slow, for example, today's birth rates will not affect labour supply for about 20 years. But the ageing population is not a challenge that will emerge in a few years - it is already here.
In Sweden, the number of people of working age is expected to continue to grow over the next decade, albeit at a slower pace than before. In countries such as Germany, Italy, Poland and China, however, the trend looks set to be more dramatic. Already in the short term, the working-age population in these countries is expected to decline. In general, an ageing population has a negative impact on GDP growth, and probably also on GDP per capita growth. This happens directly via lower labour force growth, but there are strong indications that it also happens via lower productivity growth.
“The Riksbank always takes demographics into account in its forecasting, but given the major changes that are now expected in the relatively short term, this analysis argues in favour of placing even more focus on them. Not least given the negative effects on productivity growth,” write Caroline Flodberg and Anna Österberg in their Staff Memo.