Chart of the Week: A Golden Aging for Vietnam?

IMF Blog, July 17, 2017

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Vietnam’s population is 92 million.
The median age is 26.
Vietnam’s demographic dividend began reversing in 2013.
Birth rates are falling and life expectancy is rising.
The country is “growing old before it grows rich” because aging is occurring faster and at an earlier stage of development than in many other countries.
The decline in the share of working-age people is projected to be a drag on per capita growth between 2020 and 2050.

A shrinking share of working-age people will reduce the labor supply and likely depress per capita growth between 2020 and 2050.
Many Vietnamese workers are in physically taxing, low-productivity occupations (currently, 40 percent of workers are employed on farms), which may reduce overall labor productivity as the population ages.
An aging population implies more spending on pensions and health care and less tax revenue from workers, creating fiscal strain.

Increase participation in the workforce among women and older workers, and encourage movement into higher-productivity occupations.
Raise the retirement age (currently 60 for men and 55 for women), reduce incentives for early retirement, and align indexation of benefits more closely with inflation.
End preferential access to capital and land enjoyed by state-owned enterprises to create a level playing field for private companies and shift allocation of resources to more productive uses.
Recapitalize state banks to reduce non-performing loans and increase flow of credit to the economy.

Vietnam’s high educational achievement and ongoing reallocation of labor from low-productivity agriculture to higher-productivity industry and services should help boost growth.
With appropriate policy action, Vietnam can mitigate fiscal pressures and realize longer, healthier, more productive, and more prosperous lives for its population.

Chart of the Week: A Golden Aging for Vietnam?, The Editors, July 17, 2017