Aging Western populations set to strain public finances

Key Points:

• Moody's warns that aging populations in Western countries will strain public finances due to fewer workers and higher healthcare and pension costs, with Europe facing the sharpest demographic decline starting around 2029.
• The ratio of working-age people to those over 65 in G7 economies is projected to drop from three to two by 2050, increasing pressure on economic growth and public services.
• Aging populations lead to slower economic growth, increased public spending, changing consumer demand, and shifts in interest rates, requiring countries to rely more on productivity gains to sustain growth.
• While AI and productivity improvements can help mitigate some effects, they cannot fully compensate for reduced consumer demand caused by fewer working-age individuals.
• Emerging economies like China, Brazil, Thailand, and Turkiye are also aging rapidly but will face these demographic challenges at lower income levels and over shorter timeframes compared to advanced economies.