Forget currency crises and financial meltdowns. The greatest threat to emerging markets is growing old
"To protect the population dynamics is not an ethical but a strategic aim for us," recently said Ahmet Davutoğlu, Turkey’s prime minister. Having resigned last week after less than two years in the job, Davutoğlu did not last long enough to carry out his mission. His successor, an ally of president Recep Tayyip Erdogan, seems more interested in extending the political life of his benefactor than solving Turkey’s demographic issues (he supports constitutional changes that would boost the president’s powers).
Yet it won’t be long before the ageing problem comes back on the country’s radar. The country currently ranks 66th among 167 nations by number of elderly people - over-65s - as a proportion of the population. For a supposedly young country, that’s not great – but it will soon get much worse: Turkey's elderly are expected to account for 10.2 percent of the populace in 2022, up from about 8 percent now. The ratio is projected to hit 20 percent before 2050.
Turkey's plight is hardly unique. Global life expectancy is set to increase from 48 in 1950 to 77.1 in 2050, according to Bank of America Merril Lynch (BofA). While the world's population is expected to rise 3.7 times over the same period, the number of 60-plus is predicted to grow tenfold. Those over 80 should increase 26 times.
Much of the boom will be accounted for by developing nations. By 2050, BofA says, emerging markets "will be as old as Japan today". More than 27 percent of China's population will be aged 60-plus in three decades, as will 22.8 percent of Brazilians and 20.9 percent of Russians. That compares with 22.9 percent in today's Japan, currently deemed the world's greyest country.
Rising life expectancy should be celebrated as one of humanity's greatest achievements. But ageing populations will present emerging markets with a hefty problem: governments, required to provide healthcare and distribute pensions to a growing share of the population, will rely on a shrinking workforce to pay for both. In the absence of policy changes, Standard & Poor's reckons such costs will help push average emerging market debt from 42 percent of GDP to 136 percent in 2050.
The IMF echoed this view in March, when it said that the fiscal pressure created by age-related spending would be unmanageable unless something is done about it. Emerging markets are indeed ageing much faster than developed nations did in their time: while it took 115 years for France to double its proportion of 65-plus, BofA says, South Korea should achieve the same in only 18 years, Brazil in 21 and China in 23.
Encouraging families to have more kids is the most obvious remedy, and a number of countries are already putting together incentives to boost the fertility rate. These should be complemented by policies that allow for a greater participation of the elderly in the workforce as well as a more welcoming stance towards migrants - which tend to enlarge the labour pool and prove more fertile than locals.
This would be especially beneficial to Turkey, which keeps on receiving waves of refugees as the Syrian conflict continues to rage. But families, local or foreign, won't make more babies until they live in a place that offers both political stability and economic prospects. "One or two children means bankruptcy. Three children mean we are not improving but not receding either," Erdogan said in 2013. The president has the right diagnosis - but for Turkey to hit the magic number, he needs to do more thinking outside the pram.