President Ma Ying-jeou’s (馬英九) second term, secured in his election win on Saturday, might be one of the nation’s last opportunities to address the consequences of something unmentioned on the campaign trail: the world’s fastest-aging society.
While the nation’s top planning body predicts its population will start falling in 11 years, coping with an aging society and low birth rate were absent from the debate because the challenge is intractable, said Chuang Meng-han (莊孟翰), an industrial economics professor at Tamkang University in Taipei.
Failure to tackle the change, by reducing the cost of raising families or allowing immigration, will leave the nation’s labor force shrinking, putting pressure on growth and asset prices. The economy’s trend rate of expansion is poised to fall to about 3.5 percent annually in the next decade, down from 5.1 percent in the 20 years through 2010, according to DBS Bank.
“The impact will be huge,” said Chuang, who has analyzed the housing market. “Most people aren’t well-prepared for the aging society. The later the government faces the consequences, the more difficult they will be to deal with.”
The total fertility rate in 2010 was 0.9 babies per woman, according to baseline estimates compiled by the Council for Economic Planning and Development. That is less than in the 196 other countries and territories tracked by the UN. The nation’s 23 million population will fall to less than 19 million by 2060, according to the council.
By 2050, Taiwan will have an aging index of almost 413 percent, compared with Japan’s 339 percent, the council estimates. That makes the nation the most rapidly aging society, said Lo Yu-mei, a council researcher.
The index is defined as the number of people aged 65 and over per 100 young people under age 15.
“Taiwan is heading the way of Japan, whose population is shrinking,” said Tim Condon, chief Asia economist at ING in Singapore, who previously worked at the World Bank. “Taiwan’s stock market resembles Japan’s Nikkei in that both have been in a bear market since asset bubbles burst in 1990.”
Japan has struggled to overcome an aging and declining population, leading to two decades of depressed economic growth. The Nikkei 225 is down 78 percent, the most in the world, since a peak in December 1989. The TAIEX is down 25 percent in the same period, the third-worst performance in the world.
Ma, 61, has put in place a monthly childcare stipend of NT$2,500 (US$83) for newborns, payable to certain households earning an annual net income below NT$1.13 million until the child is two, to try and turn the birth rate around.
During the election, neither he nor his rival, Democratic Progressive Party Chairperson Tsai Ing-wen (蔡英文), recommended greater immigration to boost the population. The council has said the nation has the world’s second-densest population among territories with more than 10 million people, limiting political scope for such a policy.
Aging raises the risk of substantial future decline to home prices, said Laura Ho, an economist at Grand Cathay Services in Taipei.
Property prices “are disproportionately high” and “older people are investing in property they won’t be able to find buyers for in years to come,” she said.
Ma has vowed to consider imposing new taxes to rein in property costs. Housing prices in Taipei have more than doubled since 2000 and reached a record last year.
“Young people are discouraged from getting married because they can’t afford to buy a home,” Chuang said.
Costly real estate and stagnant wages combined with the risk of recession to stir voter discontent. GDP fell 0.15 percent in the third quarter from the previous three months, as Europe’s fiscal crisis damped overseas sales.
Household income adjusted for inflation was lower in 2010 than in 2000. Joblessness, at 4.3 percent, compares with less than 2 percent three decades ago.
Ma says detente with China, Taiwan’s largest trading partner, will help bolster the nation’s US$430 billion economy. He has relaxed trade, tourism and investment restrictions. Tsai has said Ma’s policy risks giving China too much sway over Taiwan.
China’s economy expanded 8.9 percent in the fourth quarter from a year earlier, a report showed today. One consequence of closer economic ties to the nation has been an exodus of factories to the lower-cost China, crimping job opportunities at home.
About 800,000 Taiwanese live in China, according to the Mainland Affairs Council. Some of them might be counted as part of the population depending on their periods of continuous residence in Taiwan, the statistics bureau said.
“Rapid aging means declining labor input and, in the long term, suggests the population will fall, which will slow the economy,” said Ma Tieying (馬鐵英), an economist at DBS Bank in Singapore. “The savings rate will drop too, as older people usually have to spend their savings. That will be negative for investment.”
Taiwan’s predicament echoes a trend across Asia, signaling increased regional pension and healthcare burdens. Asia will account for 62 percent of the global elderly population by 2050, up from 44 percent in 1950, the Asian Development Bank said in a 2009 report.
While this year, the Year of the Dragon, might boost Taiwan’s birth rate temporarily as it’s considered an auspicious period, population decline is inevitable, according to the council.
“The economy isn’t in good shape,” Chuang said. “But you need to have a stable income and feel secure about your job to have children.”
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