West’s aging population may hurt Asian economies

SINGAPORE (AFP) – The rapidly aging population in the developed world could hurt Asian economies as precious funds are being used to finance bulging pension budgets, a US specialist warned yesterday.

How European countries and the United States especially respond to the challenges arising from their aging populations will impact on the rest of the world including Asia, Richard Jackson, from the US-based Center for Strategic and International Studies said.

"If the affluent economies fail to confront their own aging challenge, the crisis could engulf the rest of the world," Jackson told a forum on aging organized by a Singapore think-tank, the Institute of Policy Studies.

"The course they choose will shape not only their own destinies but East Asia’s as well," he said.

"East Asia may experience widespread capital shortages as funds are diverted from financing productive investments in Hong Kong and Singapore to financing pension deficits in Berlin and Washington."

This would result in shrinking Asian exports to the developed economies which would lead to slower growth in Asia, Jackson said.

He told the forum the world cannot avoid the challenge of an aging population, caused essentially by lower fertility rates and higher life expectancy.

"The world stands on the threshold of a great demographic revolution. It’s called global aging and it is about to turn the world on its head," he said.

"Over the next few decades, the rapid aging of the developed world population will impose vast new costs on public budgets, bankrupting any government that fails to prepare."

Failure to respond adequately would also have a huge impact on the global economy and the established world order, he said.

"It threatens to usher in widespread labor shortages and slower economic growth," Jackson said.

"It could destabilize global financial markets and it may even overturn the geopolitical order."

Jackson warned that time was running out for policymakers to deal with the issue.