ADBI: Ageing population tests govts’ ability to maintain fiscal sustainability

KUALA LUMPUR: The fast spread of Covid-19 has caused public health turbulence and disruption to the fiscal balance as governments are dealing with the social and economic impacts, said the Asian Development Bank Institute (ADBI).

The pandemic has also threatened people’s lives particularly those in vulnerable groups, with the elderly being the most affected group, especially those who are still working in the informal sector, it said in a blog post, Asia Pathways.

“They are likely to become more vulnerable if they need aged care or stay in a nursing home.

In parallel, this also implies that healthcare expenditure will increase in an ageing society.

“It is unfortunate to say that longer lives may increase the costs of the pandemic,” said the Asian think-tank which focuses on identifying effective development strategies for Asia and the Pacific.

Therefore, the ADBI said efforts to protect the older population and maintain fiscal sustainability in the face of the pandemic are needed but challenging.

It emphasised that protection and prevention as well as infection control protocols must be in place to ensure safety for older people, particularly those in need of age-related care.

In fact, it is important to equip family members and caregivers with knowledge of health services, sanitation, and humanitarian support.

Additionally, promoting care and support across the life cycle is essential by investing in healthcare coverage and expanding the coverage of social pensions and protection schemes to aged groups.

“A valuable lesson learned from this pandemic for all governments is that it is necessary and mandatory to prepare the required fiscal space for these kinds of unprecedented circumstances,” ADBI said.

The think-tank also highlighted that Asia is advancing toward becoming a gray society and decreasing trend in fertility rates across the region.

The global number of persons above 65 years old will double to over 1.5 billion, with the largest increase projected to occur in East and Southeast Asia to reach 573 million by 2050, it said, citing the United Nations 2019 forecasts.

To deal with these challenges and achieve fiscal sustainability, the ADBI has suggested policymakers to manage revenue and spending together.

“Policies can be adopted to maintain the tax payer base, for example, enhancing the participation of female and senior workers in the labour market,” it said, adding that the other option is a shift in the tax mix. — Bernama