Population aging in Saudi Arabia
POPULATION AGING IN SAUDI ARABIA
Saudi Arabian Monetary Agency (SAMA) Working Paper: February 2015 By
Hussain I. Abusaaq
Economic Research Department -Saudi Arabian Monetary Agency
JEL Classifications: J10, J11, J13, J14, J18.
Abstract
The proportion of people in Saudi Arabia aged 60 or more is predicted to be 25 percent of the total population of 40 million by the end of 2050. Moreover, the number of people aged 80 or more is expected to reach 1.6 million, or 4 percent of the total population in the same period.
This paper analyzes the impact of population aging on the economy of Saudi Arabia. Its main contribution is that population aging has a number of tough but manageable challenges. The dependency ratio in the Saudi economy will increase to 52 percent in 2050 compared with 46 percent in 2015. Moreover, the number of people claiming pension benefits will rise and working people will be charged more to pay for the extra pension costs in that period. Health expenditures are expected to increase during 2015 and 2050 due to the increase in the elderly rate from 5.4 percent (1.6 Million) to 25 percent (10 million) but the public expenses on education will drop in the same period as the youth dependency ratio decreases from 41 percent to 24 percent. Increased health expenditures and a reduction in public expenses on education are expected to offset each other.
Economic growth calculations suggest that the average annual growth rate in real per-capita GDP was 1.24 percent for the period 1970 to 2010. However taking the new age structure into account expected economic growth will be 1.74 percent per year for the period 2010 to 2050. Thus, the potential economic consequences of the increase in LFTP (due to the increase in the elderly population) for growth in real income per capita are positive.
Keywords: population aging, dependency ratio, growth rate.
