The Covid-19 baby bust — marked by falls of up to a fifth in December 2020 birth rates — was shortlived. But a reversion to pre-pandemic trends still leaves about half the world’s population below the replacement rate of fertility. The economic consequences are a big issue for politicians and portfolio managers alike.
For equity investors, ageing populations present opportunities as well as risks. Rising demand for healthcare and automation should benefit companies such as Japan’s Fanuc and Germany’s Siemens. Even nappy manufacturers like Japan’s Daio Paper, Nippon Paper and Unicharm can adapt to demographic trends. Sales of adult diapers in Japan have exceeded those for babies since 2011, says Jefferies.
Sovereign bond investors are increasingly mindful of demographic risks. Rapidly ageing populations increase public spending on health, social care and pensions, while the tax burden is spread over fewer workers. Rating agency Fitch calculates that the impact of ageing costs on sovereign ratings could result in a 10.5-notch downgrade for Slovakia, the most extreme case, by 2070 assuming no policy changes.