How ASEAN's Demographics Will Pay Big Dividends

If it's true that demography is destiny, then the Association of Southeast Asian Nations has a lot to look forward to.

The world's biggest demographic shift in history is happening right now. And there will be winners and losers because of it.

Many African countries are expected to see huge growth in their populations, although this may not necessarily translate into strong economic growth. But Europe and Japan are already feeling the effects of a rapidly aging population.

The ASEAN region, meanwhile, has a large, young workforce that should drive economic growth for decades. (ASEAN is a 10-member regional grouping that aims to promote trade and political cooperation among its members. It includes countries like Malaysia, Singapore, Vietnam, Indonesia and Thailand.)

Demographics is key to economic growth. Simply put, two factors affect economic growth: more people (and hours) being worked and higher productivity. Countries with a growing, productive workforce are more likely to see strong economic growth.

Outside of ASEAN, Asia's overall demographics are mixed.

Japan has horrible demographics: The population is getting older, and it has a low fertility rate. Plus, Japan continues to flirt with deflation and has too much debt, so its economy will struggle for years.

China's population is also forecast to fall. It could be 2% lower by 2050, at 1.3 billion people. More concerning is that China's working age population (people between the ages of 16 and 59) is also projected to fall. According to the World Economic Forum, China's working age population could fall to 700 million by 2050, down from 925 million in 2011.

This means that a shrinking pool of workers will have to support a growing number of nonworking elderly, either directly or through taxation. This will affect China's economic growth because it will mean less money being spent on consumption or investment in the economy.

But it's a different story for Southeast Asia. Unlike other parts of Asia, ASEAN's demographics could help its members' economies for decades.

The Demographic Dividend

The ASEAN region has a combined GDP of $2.43 trillion. This would make it the sixth-largest economy in the world. (If the European Union is counted as one economy, ASEAN would then be the fifth-largest economy.)

It's also home to more than 600 million people, more than the population of either North America or the EU. The size of its workforce is third to only China and India. This large population of potential workers is playing a large role in the region's rapid economic development.

From now until 2030, ASEAN will likely have an above-average proportion of working age adults. According to one estimate, 68% of ASEAN's total population will be of working age by 2025. In 1990, the figure was 60%.

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