The Impact of Ageing Population on Malaysian Economic Growth

Abstract

An ageing population is a worldwide phenomenon, as the results of improvement in mortality rates and drops in fertility rate over the past century. Previously, this trend was focused among the developed countries of Europe and North America but over the past 20 years, the ageing population has started to grow in the developing countries, especially countries of Southeast Asia such as Malaysia. Given changes in fertility and improving life expectancy, the figure is expected to increase significantly. According to the Department of Statistics Malaysia, it is estimated that 6.5% of the total population is aged 65 and above in 2018 and this figure is expected to increase to 14.5% in 2040. With the current changes in the demographic trend, it is expected that there will be changes in the amount of savings and this could also lead to changes in the economic performances in the future. Thus, the main objective of this study is to examine the impact of the ageing population on economic growth in Malaysia by using annual data from the year 1985 to 2016. Total fertility rates, life expectancy, labour force participation rate and old-dependency ratio are variables that are used in the study. These data were analysed using Multiple Linear Regression Model and the results indicate that Malaysia is expected to experience the ageing population in the future and that it gives effect towards Malaysian's economic growth. Keywords: ageing population; economic growth; life expectancy; labour force participation; old-dependency ratio; fertility rates