Page 164 - HA Convention 2016 [Full Version]

HOSPITAL AUTHORITY CONVENTION 2016 Special Topics

T9.1 Impact of Ageing Population 10:45 Convention Hall A

Long-term Fiscal Sustainability – Impact of Ageing Population
Leung E
Financial Services and the Treasury Bureau, The Government of the Hong Kong Special Administrative Region

Fiscal Challenge from Ageing Population

The population of Hong Kong is ageing fast. Our latest population projections indicate that the number and share of persons
aged 65 or above would increase substantially from 0.98 million (13.7%) in 2012 to 2.58 million (33%) in 2064. Our elderly
dependency ratio would correspondingly increase from 18.3% to 56.7%. On the one hand, with an ageing population, labour
force is set to shrink, slowing down the growth of an already mature economy and government revenue. On the other hand,
an ageing population is expected to pose substantial and increasing pressure on government expenditure particularly on
social welfare and health.

Need for timely and resolute measures to ensure fiscal sustainability

According to the long-term fiscal projections compiled by the Government-appointed Working Group on Long-term Fiscal
Planning released in March 2014, the Government’s overall fiscal position in short to medium term remains healthy. However,
if government expenditure keeps growing at a faster pace than that of government revenue and the Gross Domestic Product
(GDP), a structural deficit is projected to surface within a decade or so even if public services are to be maintained at the then
existing levels.

Of the Government’s recurrent expenditure on health, 90% is for providing recurrent subvention to the Hospital Authority. The
above long-term fiscal projections reveal that with ageing population, even if no enhancement is to be made to all existing
services, our recurrent health expenditure, after taking into account demographic and price changes, is projected to increase
by 6.5% per annum during the period up to 2041-42, which exceeds the projected growth of nominal GDP at 4.4% per
annum. This is clearly not sustainable.

There is a need for timely and effective measures to ensure long-term fiscal sustainability so as to cope with the increasing
pressure on recurrent government expenditure arising from ageing population. Apart from boosting economic growth, the
Government has been taking a series of fiscal measures, which mainly include containing the government expenditure
growth through greater efforts in re-engineering and re-prioritisation, setting up the Future Fund within the fiscal reserves for
achieving higher investment returns in longer term, conducting sustainability assessment on new major funding initiatives,
and building up the Housing Reserve to earmark adequate funding for the public housing programme.

Wednesday, 4 May T9.2 Impact of Ageing Population 10:45 Convention Hall A

The Economic and Social Implications of Population Ageing
Lui F
Centre for Economic Development, The University of Science and Technology, Hong Kong

Hong Kong has one of the world’s lowest total fertility rates and highest life expectancies. As such, Hong Kong’s demographic
structure seems to be following the path of Japan to move into the phase of inverted pyramid. This phenomenon will create
enormous financial challenges for the Government and society in general. The presentation will discuss how the limited
budgetary resources of the Government should be optimally allocated so that the most difficult issues caused by population
ageing can be addressed in a balanced way.

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