W20JF_086_B06_54407.pdf
w e a lth m a nagemen t
Insurance
A silver lining Like many countries around the world, Portugal is faced with an ageing population. With a new economic approach and emphasis on financial literacy, though, Portugal can turn this daunting challenge into a multibillion-dollar opportunity Growing old together
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| Winter 2020
Fig 1
GDP per capita USD
60,000 50,000 40,000 30,000 20,000 10,000
SOURCE: OECD
UK
GERMANY
SPAIN
ESTONIA
0 LITHUANIA
In recent years, Portugal has become an attractive place to live, work and invest. Between 2015 and 2018, the annual number of greenfield foreign direct investment projects in the country grew by 161 percent, according to data published by the Financial Times. This was partly thanks to Portugal’s open attitude towards foreigners – the Iberian nation offers tax breaks to skilled professionals and five-year residencies to nonEU citizens who buy property worth €500,000 ($553,140). What’s more, Portugal’s politically stable climate and low crime rate make it a haven for those looking to avoid the economic downturn and political tension caused by Brexit and the US-China trade war. But this hasn’t always been the case: six years ago, Portugal’s economy was on its knees. Amid the country’s worst recession in almost 40 years, unemployment climbed above 17 percent and hundreds of thousands of workers – many of whom were young and highly skilled – emigrated in search of jobs overseas. Today, though, Portugal’s economy is booming: unemployment has more than halved to 6.6 percent; two thirds of the 500,000 people who left the country during the crisis have returned; and strong performances in the tourism, export and housing markets have contributed to an economic resurgence that many have deemed miraculous. Still, there is plenty of work to be done. Portugal is growing slower than Spain, and in recent years has been overtaken by Estonia, Lithuania and Slovakia in terms of GDP per capita (see Fig 1). If Portugal is to make the most of the good times, it needs to address some of its chronic issues.
SLOVAKIA
CEO OF LIFE, PENSIONS AND BANCASSURANCE, AGEAS PORTUGAL GROUP
PORTUGAL
Nelson Machado
Portugal boasts a warm Mediterranean climate, beautiful landscapes – from mountain ranges to idyllic coastlines – and a high quality of life for the people who call it home. It’s no wonder that it is the destination of choice for millions of tourists every year. However, Portugal isn’t just known as a tourist hotspot: it has also garnered a reputation in Europe for its ageing population. In its 2019 World Population Prospects report, the UN outlined the scale of the planet’s demographic crisis: by 2050, 16 percent of the global population will be over the age of 65, up from nine percent in 2019. As life expectancy increases in many developed countries, fertility rates are on the decline. Consequently, the working-age population is shrinking, which will have potentially huge repercussions for economic activity. Portugal is in no way exempt from this global trend. As a result of the country’s deep recession, many of the young people who didn’t emigrate chose instead to delay starting a family, causing Portugal’s birth rate to plummet. In fact, the Portuguese National Statistics Institute predicts that by 2060, the country
GREECE
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will be home to just 8.6 million people, down from 10.5 million in 2012. In the same window of time, the working population – those aged between 15 and 64 – will drop from almost seven million to just over 4.5 million. As well as potentially slashing Portugal’s productivity, this could put significant strain on the country’s public services. Although people in Portugal Proportion of the global tend to live to the age population expected to be of around 80 – the aged over 65 in 2050 average for European countries – they also experience health problems for most of their old age. This compares unfavourably with people in other European countries, such as Denmark. With an older population, Portugal could face spiralling health costs.
16%
A window of opportunity Although the situation seems alarming, it could present a new opportunity for Portugal. Increasingly, policymakers and economists are recognising that older workers and retirees can fuel economic activity, rather than impede it. As the World Economic Forum has pointed out, the elderly are no longer as financially dependent on their families as they used to be. Furthermore, they have the potential to be both important participants in the labour market and big spenders in the economy. Through consumer goods and services, older citizens inject huge amounts of money into the ‘silver’ or ‘longevity’ economy, which the American Association of Retired Persons defines as “the sum of all economic activity driven by the needs of people aged 50 and older... [including] both products and services they purchase directly and the further economic activity this spending generates”. A 2018 study by the European Commission valued Europe’s longevity economy at €3.7trn ($4.09trn) in 2015 and suggested it could be worth as much as €5.7trn ($6.31trn) by 2025. Instead of seeing Portugal’s ageing population as a burden, we should see it as an untapped opportunity. The sheer size of this market should not be underestimated: in terms of scale, it is on par with discovering the econom-