More than a year since the global pandemic struck, its damage to population growth is starting to become starkly clear, and not just because of the grim death toll.

Major economies from Italy to Singapore, already afflicted by dire demographics, are seeing that phenomenon accelerate after measures limiting social contacts and the worst growth crisis in generations combined to prevent or dissuade people from having babies.

While workplace closures and forced isolation might have encouraged couples to spend time together productively, the number of newborns has been dwarfed by plunging fertility emerging in national data for 2020. They range from France’s lowest birth rate since World War II, to Chinese authorities receiving 15% fewer registrations for babies.

Asia Baby Bust
That points to a potentially ruinous legacy of the crisis. Not only have governments racked up enormous borrowings to fund economic aid, but the supply of future taxpayers to service that debt and fund public pension systems now looks even thinner than it was. Such a blow would be particularly crippling in parts of Asia and Europe with aging populations.

“The longer and more severe the recession, the steeper the fall in birth rates, and the more likely it is that a fall in birth rates becomes a permanent change in family planning,” said HSBC Holdings Plc economist James Pomeroy. If his forecasts pan out, “it’s going to lower potential growth rates and it makes high levels of debt less sustainable in the long term.”

Within two decades, 10% to 15% fewer adults may join the workforce, according to Pomeroy’s calculations. He reckons a recent projection by demographers at the Lancet journal for the world’s population to start shrinking in the 2060s already risks looking obsolete, with an inflection a decade sooner.

A dropping birth rate is particularly evident in Italy, one of the first outbreak hotspots. Births in 15 cities there plummeted 22% in December, exactly nine months after the pandemic struck. Comparable effects are appearing elsewhere: Japan saw the fewest newborns on record in 2020, while Taiwan’s fertility rate fell below one child per woman for the first time.

Record Low
Fiscally speaking, such outcomes are ominous. In the U.S. for example, even without the effects of the pandemic, retirees are due to outnumber children by the 2030s.

In the European Union, the ratio of people over 65 to those aged 15-64, a key metric on the affordability of social services for the old, will probably deteriorate. That would exacerbate a situation that was already worsening, with pension spending rising by nearly a third between 2008 and 2016.

“The fiscal impact can be a double whammy,” said Sonal Varma, an economist at Nomura Holdings Inc. “Falling population growth will hurt potential growth (as the labor force falls), hurting tax revenues. And this will occur concurrently with increased spending on public pensions and healthcare.”

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