The dependency ratio, defined as the percentage of children and retirees to the working-age population, is rapidly declining in Pakistan (the current dependency ratio is 69.03%) and the rest of the developing nations of Asia and Africa. This demographic shift means that the world’s richest and most powerful nations with the largest share of working populations will no longer be in Europe and North America by 2050. Among South Asian nations, Bangladesh has already joined the list of the top 10 nations in terms of the largest share of the working-age population. India and Pakistan are expected to join it by 2050. An increasingly better-educated working-age population is expected to significantly enhance their productivity.
Shift in Share of Working Age Populations. Source: NY Times
The total dependency ratio reported for Pakistan in 2022 is 69.03%, much higher than Bangladesh’s 47.09% and India’s 47.5%, according to the World Bank. The dependency ratio for China is 44.96% but it is rapidly increasing. China’s share of the working-age population will no longer be in the top 10 by 2050 due to its aging population, according to the UN projections.
China Dependency Ratio With Aging Population. Source: Business Insider
New York Times’ visual journalist Lauren Leather by recently described this major demographic and economic shift in the following words: “The richest most powerful countries today have long had these really large working-age populations. And economists agree that that’s been a huge, huge advantage economically and geopolitically. And meanwhile, a lot of developing nations have had quite high dependency ratios having a high number of children compared to working-age people. And so, I think we know a lot of these storylines one by one, but putting it all together, it’s just like the world is going to shift really dramatically”.
Current Share of Working Age Populations. Source: NY Times
“And then I think what we see (rapidly aging population) in Japan today is only the tip of the iceberg. A lot of East Asia, China, Europe, and South Korea will be much older than Japan is today, in just you know, 20 or 30 years. Some countries will have upwards of 40% of their population that are 65 or older in just two or three decades. And meanwhile, on the other end, you have a lot of these other countries that have long been, you know, hindered economically by their age structures. And suddenly a lot of them will start to enjoy the exact same age structures that Europe and East Asia, the U.S., that a lot of those countries have historically enjoyed”, Leatherby added.
Projected Share of Working Age Populations in 2050. Source: NY Times
It is based on this demographic shift that Goldman Sachs analysts Kevin Daly and Tadas Gedminas are projecting Pakistan’s economy to grow to become the world’s sixth largest by 2075. In a research paper titled “The Path to 2075”, the authors forecast Pakistan’s GDP to rise to $12.7 trillion with a per capita income of $27,100. India’s GDP in 2075 is projected at $52.5 trillion and per capita GDP at $31,300. Bangladesh is projected to be a $6.3 trillion economy with a per capita income of $31,000. By 2075, China will be the top global economy, followed by India 2nd, US 3rd, Indonesia 4th, Nigeria 5th, and Pakistan 6th. The forecast is based primarily on changes in the size of working-age populations over the next 50 years.
GDP Ranking Changes Till 2075. Source: Goldman Sachs Investment Research
Economic Growth Rate Till 2075. Source: Goldman Sachs Investment Research
Economic Impact of Slower Population Growth:
Daly and Gedminas argue that slowing population growth in the developed world is causing their economic growth to decelerate. At the same time, the economies of developing countries are driven by their rising populations. Here are four key points made in the report:
- 1) Slower global potential growth, led by weaker population growth.
- 2) EM convergence remains intact, led by Asia’s powerhouses. Although real GDP growth has slowed in both developed and emerging economies, in relative terms EM growth continues to outstrip DM growth.
- 3) A decade of US exceptionalism that is unlikely to be repeated.
- 4) Less global inequality, more local inequality.
Goldman Sachs’ Revised GDP Projections. Source: The Path to 2075
Demographic Dividend:
With rapidly aging populations and a declining number of working-age people in North America, Europe, and East Asia, the demand for workers will increasingly be met by major labor-exporting nations like Bangladesh, China, India, Mexico, Pakistan, Russia, and Vietnam. Among these nations, Pakistan is the only major labor-exporting country where the working-age population is still rising faster than the birth rate.
Pakistan Population Youngest Among Major Asian Nations. Source: Nikkei Asia
World Population 2022. Source: Visual Capitalist
World Population 2050. Source: Visual Capitalist
Over a million Pakistani university students are currently enrolled in STEM courses. Over 10 million Pakistanis are currently working/living overseas, according to the Bureau of Emigration. Before the COVID-19 pandemic hit in 2020, more than 600,000 Pakistanis left the country to work overseas in 2019. Nearly 700,000 Pakistanis have already migrated in this calendar year as of October 2022. The average yearly outflow of Pakistani workers to OECD countries (mainly the UK and US) and the Middle East was over half a million in the last decade.
Consumer Markets in 2030. Source: WEF
World’s 7th Largest Consumer Market:
Pakistan’s share of the working-age population (15-64 years) is growing as the country’s birth rate declines, a phenomenon called demographic dividend. With its rising population of this working age group, Pakistan is projected by the World Economic Forum to become the world’s 7th largest consumer market by 2030. Nearly 60 million Pakistanis will join the consumer class (consumers spending more than $11 per day) to raise the country’s consumer market rank from 15 to 7 by 2030. WEF forecasts the world’s top 10 consumer markets of 2030 to be as follows: China, India, the United States, Indonesia, Russia, Brazil, Pakistan, Japan, Egypt, and Mexico. Global investors chasing bigger returns will almost certainly shift more of their attention and money to the biggest movers among the top 10 consumer markets, including Pakistan. Already, the year 2021 has been a banner year for investments in Pakistani technology startups.
Record Remittances From Overseas Pakistanis:
Pakistan is already seeing high levels of labor export and record remittances of over $30 billion pouring into the country. Saudi Arabia and the United Arab Emirates(UAE) are the top two sources of remittances but the biggest increase (58%) in remittances is seen this year from Pakistanis in the next two sources: the United Kingdom and the United States.
Remittances from the European Union (EU) to Pakistan soared 49.7% in FY21 and 28.3% in FY22, according to the State Bank of Pakistan. With $2.5 billion in remittances in the first 9 months (July-March) of the current fiscal year, the EU ($2.5 billion) has now surpassed North America ($2.2 billion) to become the third largest source of inflows to Pakistan after the Middle East and the United Kingdom. Remittances from the US have grown 21%, the second fastest after the EU (28.3%) in the first 9 months of the current fiscal year.
Worker Remittances as Percentage of Pakistan GDP. Source: World Bank
Pakistan ranks 6th among the top worker remittance recipient countries in the world. India and China rank first and second, followed by Mexico 3rd, the Philippines 4th, Egypt 5th, and Pakistan 6th.
Pakistan Demographics
About two million Pakistanis are entering the workforce every year. The share of the working-age population in Pakistan is increasing while the birth rate is declining. This phenomenon, known as demographic dividend, is coinciding with declines in working-age populations in developed countries. It is creating an opportunity for over half a million Pakistani workers to migrate and work overseas, and send home record remittances.
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