Wednesday, November 2, 2011

The demographic challenge in Brazil

OECD has just published its 'Economic Surveys' on Brazil (thanks Leo for the tip). According to the report, the aging of the population is a major challenge in Brazil. This is not big news, but they say it in a concise manner:

"Like many emerging-market economies, Brazil’s population is going to age rapidly in the coming decade (Figure 1). The share of the elderly population is expected to double in less than 20 years, a transition that took around three times as long for today’s advanced economies. These demographic changes will alter the  macroeconomic environment. Assuming no policy changes, lower working-age population growth could lower potential output growth significantly by the middle of the century. This fall will most probably be partially compensated by the effect of the Growth Acceleration Programme (PAC) on productivity growth, but that impact is hard to estimate. Ageing is also likely to increase savings through life-cycle dynamics, although in Brazil’s case prospects for aggregate savings will depend on the effectiveness of social and labour-market policies in continuing to lower the share of poor households, who traditionally save less. Ageing will also tilt public spending toward greater outlays on old-age pensions and health and long-term care and less on education, but the aggregate impact on public finance is likely to be negative."

Figure 1.  The speed of population ageing*
*Number of years for the share of population 65+ to double from around 10% to around 20%
Note: United Nations population projections have been used. Numbers for France and the United Kingdom correspond to an increase from 12% to around 20%.
Source: OECD calculations