Europe’s population is projected to peak as soon as 2029, after which a sustained long-term decline will begin, according to the European Commission.
Moody’s has warned that fewer workers and rising costs from aging populations will place significant strain on public finances across Western economies.
The U.S. Census Bureau does not expect the American population to peak until 2080 under its main projection, or until 2043 under its low-immigration scenario.
Excluding immigration’s impact entirely, population decline in the United States has already begun, making demographic pressures a present reality rather than a distant concern.
Moody’s emphasizes that fiscal pressures from aging emerge long before populations actually start shrinking, meaning governments face mounting challenges well ahead of any headline population peak.
G7 economies currently have about three working-age people for every person over 65, a ratio expected to fall to around two by 2050, according to Moody’s.
Olivier Chemla, vice president of credit strategy and standards at Moody’s, told CNBC’s “Squawk Box Europe” that aging populations affect economies through slower growth, greater pension and care costs, changing consumer demand, and shifts in sovereign yields.
In a report published last week, Moody’s forecasts that aging populations will have fundamental impacts on the global economy and force difficult policy decisions across governments.
“Fewer workers will limit productive capacity, while fewer households and consumers will weaken demand. As a result, countries will have to rely more on productivity to sustain growth,” the report states.
While population growth has long acted as a tailwind for creditworthiness, falling fertility rates and an unprecedented speed of changing age structures are now reversing that dynamic.
AI and increased productivity can only partially offset the long-term challenge of an aging workforce, Chemla said, cautioning against viewing technology as a complete solution.
“This is a partial mitigant because you can certainly replace and enhance the supply side of the economy in factories and in services, but at the same time, robots do not consume – at least not yet – and so on the demand side, you will still be having that gap, which will slow growth,” he added.
The demographic challenge extends well beyond Europe and the United States, with emerging economies aging rapidly and facing unique vulnerabilities.
China’s share of people aged 65 and over has doubled from 7% to 14% over the past two decades, with Brazil, Thailand, and Turkiye on similar trajectories, according to Moody’s.
These countries will face the costs of aging at much lower income levels than the advanced economies that aged before them, compounding the difficulty of funding adequate pensions and healthcare systems.
