Falling Birth Rates Threaten Global Economy

Global fertility rates are falling , and the shift is increasingly being linked to fiscal and economic strain across major economies. Two-thirds of the world’s population now lives in countries where birth rates sit below the replacement benchmark of 2.1 children per woman, a level commonly associated with long-run population stability.

Projections cited by the International Monetary Fund and the Congressional Budget Office indicate that lower fertility and faster population aging are adding pressure to public finances. As the share of older residents rises, governments face higher spending needs for pensions and healthcare while the pool of working-age taxpayers grows more slowly, complicating efforts to stabilize debt levels.

In the United States, the fertility rate is projected to fall to a record low of 1.57 in 2025. That would come in below the CBO’s January 2023 projection of 1.62, underscoring how quickly expectations have shifted. The same demographic trajectory is expected to accelerate aging, with the number of Americans aged 65 and older per 100 working-age adults projected to rise from 24 in 2000 to 43 by mid-century.

Those changes are forecast to intensify pressure on Medicare and Social Security. Old-age entitlement spending is projected to increase from 6% of GDP at the turn of the century to 12.7% by 2055, according to the figures cited. Over the same broad horizon, the fiscal deficit excluding interest on debt is anticipated to reach approximately 2% of GDP by the 2040s.

Globally, the IMF projects public debt will reach 100% of world GDP by 2029, which is one year earlier than previously estimated. While the projection is global, the underlying demographic dynamics are uneven across countries, creating different combinations of slower labor-force growth, higher age-related spending, and policy trade-offs.

China is highlighted as facing one of the lowest fertility rates in the world, with aging expected to weigh on growth. Annual GDP growth is projected to slow by nearly two percentage points between 2024 and 2050 due to aging, alongside a nearly 10% increase in pension spending as a percentage of GDP. Across OECD nations, aging is predicted to lift pension and health spending by 3% of GDP.

Beyond budgets, the demographic shift is also described as a potential headwind for innovation. With smaller populations, the pool of potential innovators may shrink, and the resources available for large-scale investment could be reduced. Even with these projections, uncertainty remains around how policy changes, labor participation, and productivity trends could alter the scale and timing of the fiscal and growth impacts.