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The baby bust intensifies: How bad could it get?

  • The decline in birth rates accelerated in 2023…
  • …increasing the chance of an earlier drop in populations…
  • …and more intense policy headaches

Births keep falling

Back in 2022, we suggested that if nothing changes, the world’s population could be on course to halve by the end of this century. Birth rates had been dropping by 3% per year in many economies and that trend was showing no signs of stopping despite policymakers trying to stem the tide.

However, the data for 2023 suggest that things have gotten worse. Much worse. The aftermath of the COVID-19 pandemic was expected to see a rebound in birth rates across the world – but the opposite is happening. As we outlined in our previous analysis of the baby bust, the causes are manifold.

Some of it is economic – with younger people unable to afford homes in which to start or grow families, as well as the broader cost of raising a family being too prohibitive. Some of this is social – younger generations opting not to have children due to prioritising careers or travel, or because of concerns about the world they would be raising children into. Health also matters. As many delay marriages and look to start families later in life, medical issues can put limitations on family size, too.

The combination of these factors is really taking hold across the world. In 2023, births in Korea fell by 8.5%, in Germany they fell by roughly 6%, in mainland China by 5.6% and across the economies where we have timely data, births fell by roughly 4.5%.

Fall in births in Korea in 2024 (HSBC, based on national data)
Fall in births in Germany in 2023 (HSBC, based on national data)

As things stand, we’re on a path of the world’s population to start shrinking before 2040, with developed markets already on a path to dramatic population decline over the course of the next few decades. This may, of course, change, if some of these factors turn around, but there’s nothing in the data to suggest that they will.

For many, the notion of fewer people is good news: taking the strain off the planet’s resources or public infrastructure. But, with populations ageing rapidly, too, these drops in births pose some pressing fiscal issues down the road.

In a busy election year, the nature of fiscal policy looks set to come more into focus. Demographic change, which is now happening rapidly, looks likely to impose new constraints on the choices governments make about taxation and spending in the years to come.

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