Vietnam’s demographic dividend is fast turning into a handicap.

For decades, working-age Vietnamese made up an expanding share of the population, boosting economic growth and helping to keep retirement and health spending in check.

That changed in 2013. While the southeast Asian nation’s population of 92 million is still relatively young (the median age is 26), it is graying quickly. Birth rates are falling, and life expectancy is rising. This phenomenon is by no means unique to Vietnam. The problem is that it’s happening much faster there, and at a much earlier stage of development.

In other words, as the Chart of the Week shows, Vietnam is at risk of growing old before it grows rich. And it will have less time to adapt to the challenges of an older society than many advanced economies had.

What are the implications for Vietnam’s economy? The decline in the share of working age people will probably be a drag on per capita growth between 2020 and 2050. Because so many Vietnamese workers are engaged in physically taxing occupations like farming or forestry (as opposed to law or medicine) overall labor productivity is likely to decline. An aging population also means more spending on pensions and health care and less tax revenue from workers, putting a strain on the state budget.

Read full content here: IMF Blog