(The author is Finance and Markets Editor at Reuters News. All opinions expressed here are his own)
LONDON, Jan 8 (Reuters) – By further lowering global birth rates and population projections, the still-raging pandemic could also hurt economies’ ability to pull themselves out of the additional piles of debt that COVID-19 imposed on them.
A report from HSBC this week said the impact of the pandemic on falling birth rates could weaken the pace of global population growth far more than the death toll of 1.87million to date – prompting them to advancing their predicted peak in world population by up to a decade to the early 2050s.
Peak population, once a distant prospect for future generations, would then fall within the term of a 40-year bond.
HSBC economist James Pomeroy’s report builds on a slew of work indicating the pandemic could cause a ‘baby bust’, as Washington think tank Brookings dubbed it at the end of the year. last, rather than the procreation boom that some had initially assumed would follow months. strict confinements.
For starters, the pandemic continues to spread like wildfire despite the deployment of vaccines and the death toll will almost certainly far exceed 2 million in 2021, alongside the many serious long-term illnesses it also creates.
But that barely fits into demographic trends per se – that grim total is 0.03% of the total population and the disease accounts for just over 3% of total deaths last year.
The potential impact on birth rates is up to 10 times greater.
Brookings updated its estimates last month and expects at least 300,000 fewer births this year as a result of the COVID hit – a drop of more than 5.5% from 2019 from models that see a 1% drop in the birth rate for every one percentage point increase in unemployment and an additional 1-3% linked to historical evidence from the 1918 Spanish flu.
Another US study from October – by demographers Joshua Wilde, Wei Chen and Sophie Lohmann – used Google keyword searches for pregnancy-related issues.
“Our analysis suggests that between November 2020 and February 2021, monthly births in the United States will drop sharply by approximately 15%,” he concluded. “That would be a drop 50% larger than that which followed the Great Recession of 2008-2009, and of a similar magnitude to the declines following the Spanish flu pandemic of 1918-1919 and the Great Depression.”
The US Congressional Budget Office also cut its birth rate projection due to the pandemic and last year expected the US population to peak at 374 million in 2046, 10 million lower than the predictions he made in 2018.
BABY BUST
HSBC’s Pomeroy cited a range of potential hits to birth rates already falling due to the pandemic – job losses, financial stresses and uncertainties, difficult childcare and schooling in lockdowns, relationship stress and less couples meeting in person in the first place. Britain, for example, saw 73,600 weddings postponed between March and July.
But is it just a blip that will be quickly fixed with a return to “normal”?
Unlike the mini-baby booms seen after short, region-specific shocks in the past, the pandemic has lasted longer, is global in nature and with a potentially much longer lasting legacy on household finances and behaviors, said HSBC.
The 2008 recession, for example, led to a 9% drop in births over the following four years.
Pomeroy said HSBC’s future demographic scenarios all assumed a 15% drop in global births last year and some rebound in 2021 – but the more likely outcome was that long-term birth rates would only represent than 75% of the United Nations baseline forecast.
This leads to an earlier forecast of a ‘population peak’ in the 2050s of between 8 and 9 billion, with populations in developed countries already falling over the next decade to less than 1 billion by 2100 – in the absence of massive immigration.
“This generation has now been through the two most damaging recessions in peacetime,” the HSBC report says. “It will further deepen generational inequality and reinforce the perception and reality that having children is simply too expensive for many in a generation struggling to leave the parental home.”
For those who see demographics as the dominant force in potential growth rates, savings and investment, this outlook is alarming – especially for those who hope economies will grow rapidly or swell out of the upswing. skyrocketing debt to businesses and workers during repeated shutdowns. .
The already dramatic impact of falling fertility rates on the age and savings behavior of the population will only be greater – even if you believe the arguments that greater wage bargaining leverage for smaller cohorts of workers will increase inflation even as technology makes almost as many jobs obsolete in parallel.
Short of getting people to have more babies quickly — which countries have tried with uneven results — Pomeroy believes governments will just have to look more at taxation or retirement ages to control the piles of debt. And, of course, interest rates aren’t going anywhere fast in this environment either if debt is to remain sustainable.
by Mike Dolan, Twitter: @reutersMikeD Editing by Susan Fenton
