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News Article

Demographic Changes Might Become a Threat To Economic Growth

By Alessa Flores | Mon, 08/24/2020 - 10:21

According to the World Trade Organization (WTO), changes in demographics can affect trade, as this has an impact on countries' comparative advantages and import demand. In other words, the aging of the population could translate into negative impacts on the future of international trade. Even though all countries are experiencing this transition, not all of them are doing so at the same speed.  At the global level, the UN revealed that the number of older adults in the world will increase from 962 million in 2017 to 2.1 billion in 2050. By 2100 it will reach 3.1 billion, which means that by 2050 the number of people in the world aged 60 and over will double and by 2100 it will triple. 

In comparison, Mexico in 2017 had an older adult population (65 years or older) of just over 8 million people. According to CONAPO projections, it is estimated that by 2050 this population will increase to 24.4 million. In relative terms, the proportion of this age group will grow from 7.2 to 16.2 percent. Therefore, Mexico is one of the countries in full demographic transition because it is experiencing an intense and accelerated process of population aging, according to the State Population Council (COESPO).

The WTO and other international bodies have mentioned the importance of the dynamics of population ageing and their comparative advantages with other countries in international trade. For example, according to WTO, “a country with slower population growth becomes relatively capital-intensive, while a country with faster population growth becomes relatively labour-intensive.” This results in some countries specializing in capital-intensive products and the second in labor-intensive ones. 

The main challenge for a country with an aging population is productivity and long-term quality of life because everyone's standard of living depends on how successfully the working-age population responds to that transition. In particular, the population supporting this transition has to fulfill three main responsibilities, according to ECLAC. The first is that they must meet their own material needs. The second is to finance public and private transfers to minors and older adults and the third is to save what is necessary to cover their needs for retirement. It should not be forgotten that governments and other important actors in public life must contribute to creating the best conditions for people to take charge of these social responsibilities.

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Alessa Flores Alessa Flores Senior Journalist and Industry Analyst