Moody's has highlighted the impending strain on public finances due to aging populations, particularly in Europe, where the EU's population is expected to peak by 2029. The credit rating agency notes that G7 economies currently have about three working-age individuals for every person over 65, a ratio projected to drop to two by 2050.
This demographic change will pressure economic growth and public finances, especially healthcare systems, as fewer workers will limit productive capacity and consumer demand. Olivier Chemla, vice president of credit strategy at Moody's, emphasized that while advancements in AI and productivity could help mitigate some effects, they cannot fully address the demand gap created by an aging workforce.
The report also points out that emerging economies like China, Brazil, and Turkey are experiencing rapid aging, facing similar challenges at lower income levels than their advanced counterparts. Overall, the shift in population dynamics is expected to lead to difficult policy decisions as countries adapt to these changes