“Asia remains the growth champion of the world,” the International Monetary Fund (IMF) said last week, but in the medium term there’s a large grey cloud on the horizon. Asia is fast getting old and the harsh reality is that it could do so before it gets rich. Policymakers across the region will have to contend with these demographic challenges. “Institutional support is not yet in place to respond to the rapid rise in ageing. Pension systems remain unsustainable despite recent policy reforms,” analysts at Standard Chartered have written. Last week’s IMF regional economic outlook for Asia-Pacific addressed the ageing question, noting that “in past decades Asia has benefited significantly from demographic trends, along with strong policies” and had gained economically from a “demographic dividend” deriving from the fact that the size of the labour pool had grown faster than the number of dependents. But it said “this dividend is about to end for many Asian economies” and “in a global context, Asia is shifting from being the biggest contributor to the global working-age population to subtracting hundreds of millions of people from it”. “East Asia, in particular, is projected to be the world’s fastest-ageing region in the coming decades, with its old-age dependency ratio roughly tripling by 2050,” the IMF wrote. As both China and Hong Kong are adjudged by the IMF to be economies that are “post-dividend” in a demographic sense, both will face challenges. Japan is the world’s most aged country with an old-age dependency ratio of 43.3 per cent at the end of 2015, forecast to rise to 70.9 per cent by 2050. That ratio is defined as a measure of the size of the population 65 years of age and older as a share of the working-age population, itself defined as comprising those aged 15 to 64. For Hong Kong the figure for the end of 2015 was 20.6 per cent but is forecast by the IMF to rise to 64.6 per cent in 2050, while for China the equivalent figures are 13.1 per cent and 46.7 per cent respectively. Both economies are going grey. In its favour, Hong Kong does benefit from material working-age immigration. As a consequence the IMF estimates that between 2020 and 2050, without immigration, the predicted demographic trend in Hong Kong would negatively impact real growth in gross domestic product by about 1.5 per cent but the effect would be reduced to minus 0.6 per cent with immigration inflows. For China, where the IMF calculates net migration is relatively small, and where it expects a decline in absolute terms of 170 million in China’s working-age population over the next 35 years, the estimate for the impact of the demographic trend on real GDP growth in the period 2020-50 is minus 0.6 per cent. But this is only part of the story. It is the pace of population ageing in Asia that really stands out. While it took more than half a century for the old-age dependency ratio in the United States to rise to 20 per cent from 15, and 26 years for Europe, Hong Kong made the transition in less than 20 years, and the IMF expects China to take less than a decade. That means both that “countries in Asia will have less time to adapt policies to a more aged society than many advanced economies had”, the IMF wrote, and that “some countries in Asia are getting old before becoming rich or, to put it differently, they are likely to face the challenges of high fiscal costs of ageing and demographic headwinds to growth at relatively low per capita income levels”. Asia’s policymakers will have to address these issues. “Encouraging foreign workers, including through guest worker programmes that target specific skills”, is one area the IMF focuses on, noting that, among others, the case of Hong Kong shows “that immigration can prolong the demographic dividend or soften the negative impact of rapid ageing”. Other policy options cited by the fund for China, Hong Kong and indeed Asia as a whole include raising the participation of women and the elderly in the labour force. That might necessitate the expansion of child-care facilities or promoting flexible working arrangements. The IMF also points out the need for Asia to strengthen its pension systems to accommodate the consequences of rapid ageing and the attendant fiscal costs. These are big issues, but the demographic trends in Asia will not go away. Asia’s ageing is enough to give policymakers grey hairs.