Country Insights: Demography
The most recent update of our Country Insights model places several African countries at the top of the Demography factor ranking, including Zambia, Uganda, Tanzania and others. In contrast, some European countries such as Croatia, Italy and Greece rank at the bottom of the list.
The demography factor assesses the extent to which a country's demographic structure is supportive of economic growth. The graph below reflects how northern-hemisphere countries are struggling with demographic changes according to our latest Country Insights model update corresponding to the fourth quarter of 2023 (here). In Europe, the challenges derived from this issue have been studied and documented. For instance, the European Commission (here) highlights that some of these include i) pressure on labour markets and welfare states, ii) increase the old-age dependency ratio, iii) raises the per-capita burden of public debt.
Source: Continuum Economics
Population ageing is a significant and ongoing trend in Europe, characterized by a growing proportion of older individuals alongside a declining share of the working-age population. This demographic shift is primarily driven by consistently low birth rates and increasing life expectancy. By January 2023, the EU's population reached 448.8 million, with children (0-14 years) comprising 14.9%, working-age individuals (15-64 years) making up 63.8%, and older people (65 years and over) accounting for 21.3% - as per data from Eurostat. The old-age dependency ratio, standing at 33.4%, reflects the challenges posed by an ageing population, with notable variations across EU Member States.
To tackle these demographic challenges, the European Commission (here) has put forth an approach structured around four key pillars. Firstly, efforts to assist parents in balancing work and family life include initiatives to ensure access to quality childcare and promote work-life balance. Secondly, empowering younger generations entails facilitating skill development, improving labour market opportunities, and advocating for affordable housing. Thirdly, sustaining the welfare of older generations involves implementing reforms and appropriate labour market policies. Lastly, managing labour shortages through controlled legal migration is suggested when needed, complementing internal talent sourcing efforts.
On the other hand, Africa stands on the cusp of a demographic shift that could fuel significant economic growth, provided certain challenges are addressed. With World Bank’s projections (here) indicating a burgeoning population of young people, particularly those aged 15-24, reaching 500 million by 2080, there lies a substantial opportunity for economic acceleration. However, to fully exploit this potential, investments in education, healthcare, and skill development are imperative – as well as striving for political stability. Despite this demographic dividend, Africa grapples with a learning crisis, with millions of children out of school and those in school often lagging in key learning indicators. Additionally, the continent faces the challenge of transitioning its workforce into more productive sectors, such as services, to capitalize on its human capital and resources. In this regard, while the services sector has seen growth, Africa's productivity remains significantly lower compared to other regions. Addressing these hurdles, including improving education quality, enhancing labour productivity, and boosting agricultural and industrial productivity, will be crucial for Africa to harness its demographic dividend and foster sustainable economic growth.