Cost of aging population seen ‘modest’

THE COST to the Philippine government of services for the aged should remain manageable up to 2050, Standard & Poor’s (S&P) said in a country study released earlier this week.

The paper, which formed part of a larger study covering 49 economies, said the Philippines is expected to experience less budgetary burden from state services for the elderly than many of the other economies.

Specifically, the study projected that the country’s working age population would rise from 62.2% of the estimated 93.6-million population this year to 66.6% of 141.9 million in 2045 and 66.3% of 146.2 million in 2050. The elderly, aged at least 65 years, are projected to rise from 4.4% of the total population this year to 12.6% in 2050. These data show a moderate rise of “old-age dependency”, which the study defined as the ratio of the number of elderly divided by the number of people aged 15-64 years old.

“In our view, an aging population will likely have a modest impact on public finances, given the Philippines’ currently favorable demographic profile in comparison to faster-aging developed nations,” S&P said.

Still, demand for state health care and pensions “could increase somewhat,” the study noted.

S&P projected that total age-related state spending in the Philippines could rise to an equivalent of 4.5% of gross domestic product (GDP) in 2050 from 2.5% this year.

But that projected two percentage point increase, it said, is “moderate” when compared to the expected median of 7.8 point rise among all 49 economies.

“We expect the bulk of the Philippines’ age-related spending to go toward health-care outlays, followed by pension expenditures,” the study read.

Extrapolating further, S&P projected that the country’s “favorable demographic profile” and expected fiscal reforms could cut government net debt — or total financial obligations less total financial assets — to an equivalent of 11% of GDP by 2050 from 36% this year, against the 49-economy median of 245% of GDP in 40 years.