IMF says better investment in health programs could boost global economic growth and productivity

Brendan Shaw

“The analysis reveals that although population aging poses challenges such as slower growth and increased fiscal pressures, healthier ageing trends offer a silver lining by boosting labour force participation, extending working lives, and enhancing productivity.”

-          International Monetary Fund, World Economic Outlook, April 2025

The International Monetary Fund (IMF) has just released its latest World Economic Outlook report, looking at prospects for the world economy. Behind the headlines about short-term disruption, there is a longer-term picture that demonstrates the economic benefits of investing in healthcare.

This report includes a special chapter on the impact of population ageing on global economic growth and it provides some interesting insights into the value of investing in health care. It contains a lot of fascinating analysis about the trends and economic impact of an ageing population at global level, as well as on a country-by-country basis.

Impact of population ageing on global economic growth

The world’s population is getting older. As has been observed by many, the IMF notes that without planning and action an ageing population risks imposing significant financial costs on society. The proportion of people aged 65 and over is rising rapidly and, while a testament to the success we've had in extending life expectancy, this could lead to significant economic costs for younger generations both in terms of economic growth and public finances.

The IMF says that under current policies average annual global economic growth is projected to decline by 1.1 percentage points over the period 2025 to 2050, compared with the 2016–18 average. Demographic trends account for almost 75% of this decline. This fall in the global growth rate comes despite existing improvements in the human capital of older people resulting from existing policies and current healthy ageing trends.

In fact, the IMF's forecasts show that the current baseline projections of a 1.1 percentage point fall in annual world economic growth over the next 25 years would likely have been 1.5 percentage points per annum were it not for the healthy ageing trends we are already seeing. That is, healthy ageing is already projected to contribute 0.4 percentage points per annum to world economic growth over the next 25 years in the base case.

People are already living longer, healthier, more active lives into old age than at any other time in human history. This is a good thing and it's already contributing to higher economic growth.

On various measures across a suite of countries, today people aged 65 and older are living longer, living healthier, and are living more engaging, active and productive lives. Whether it’s life expectancy, physical agility and strength, or cognitive abilities, in today’s world older people are more active and, from an economic standpoint, are able to continue working and contributing to global economic activity.

This trend is not uniform across all countries. Countries like India, Spain and Australia will gain the most in economic growth over the next 25 years from healthy ageing. Even out to 2075 there will still be improvements in national and global economic growth under existing policies and trends. After 2050 these benefits will be lower because of the large cohorts of older people finally ageing, retiring and, I guess, passing on, as it were.

Shawview Consulting chart. Source: IMF, World Economic Outlook, April 2025, Chapter 2: The Rise of the Silver Economy: Global Implications of Population Aging, Figure 2.11, https://www.imf.org/-/media/Files/Publications/WEO/2025/April/English/ch2.ashx, accessed 29/4/2025.

However, this is not enough to offset the overall decline in global economic growth due to an ageing population. The costs for society from an ageing population are just too great. Despite this good news, it’s not enough. Under existing policy settings, the IMF still estimates that global economic growth will decline by 1.1% per year for the next 25 years out to 2050 despite these improvements just by the sheer weight of numbers.

The bottom line is that over the next 20 to 30 years, many of the world’s largest countries are going to reach the ‘demographic turning point’ where the proportion of the population aged 65 years and older outweighs the proportion of the population of younger working age. This has enormous implications for things like health costs, sustainable public finances, and broader economic growth.

There’s just too many of us oldies around.

Policy package to offset demographic growth drag

There’s a lot more countries can do to improve workforce productivity and participation. Better health policies can drive economic growth and productivity through things like helping ensure that more people in the 55 – 64-year-old age bracket work to existing retirement age of 65 years and also help people 65 years and older postpone retirement.

This is good news for those of us waking up one morning and suddenly finding ourselves in these age brackets.

Crucially, what the IMF has also modelled is what would happen if countries adopted a combined package of policy measures to improve labour supply in the context of an ageing population:

1. Healthy ageing policies – a range of policy measures to improve the health of older people

2. Increasing the effective retirement age – measures to have people retiring at an older age that, notably, may not necessarily be statutory measures, and

3. Closing gender-based labour force participation gaps – overcoming the barriers for women to work longer and provide encouragement and incentives for older women to stay in the workforce.

The IMF estimates that this combined policy package in these 3 areas would boost annual average growth in the global economy by 0.3 percentage points over the 75 years between 2025 and 2100, and 0.6 percentage points in the shorter 25-year time span between 2025 and 2050.

To non-economists this might not sound like much, but the IMF says that the 0.6 percentage point increase in 2025 to 2050 could offset almost three-quarters of the drag on economic growth resulting from demographics over this period.

Shawview Consulting chart. Source: IMF, World Economic Outlook, April 2025, Chapter 2: The Rise of the Silver Economy: Global Implications of Population Aging, Figure 2.11, https://www.imf.org/-/media/Files/Publications/WEO/2025/April/English/ch2.ashx, accessed 29/4/2025.

Judging by these figures, perhaps one of the biggest contributors to global economic growth over the next 25 years is going to be achieving gender equality in the workforce for women in India and keeping them healthy and happy into old age. Introducing healthy ageing policies in China and the United States will help too.

The role of health policy in supporting economic growth

Now, here’s the really interesting bit for health economists and policy wonks. The report notes that:

“Targeted health policies and other initiatives can enable older workers to increase their labour force participation rates”

and says that:

“… the significant increase in the global median participation rate between 2000 and 2024 in the 55–64 age group is encouraging, but there is significant room for further narrowing the participation gap with respect to prime age workers.”

Setting aside for a moment the measures to increase retirement age and address gender gaps in the workforce, the IMF finds that global average annual GDP growth over 2025–2100 would be about 0.2 percentage points higher, and 0.3 percentage points higher over 2025–2050 just because of healthy ageing policies.

So, ‘What are these policies?’, I hear you ask.

The IMF says:

“Measures that tackle behavioural risk factors throughout the course of life—such as tobacco smoking, harmful alcohol use, physical inactivity, and unhealthy diets—and other risk factors related to the environment and mental health can decrease the incidence of chronic diseases and health inequalities … Examples include immunisation, regular health checks, screenings for chronic diseases, campaigns to prevent substance abuse, taxation (for example, on tobacco and unhealthy food), regulations (for example, those to promote smoke-free environments), and providing access to mental health resources.”

So, things like adult vaccination programs, population-level screening, addressing air pollution, anti-tobacco policies and mental health treatment could all play a role here.

It is worth remembering that these findings and arguments here are not being made by social workers, public health advocates or health sector lobbyists. These findings come from IMF economists looking at how to boost global economic growth in the context of an ageing population. They find that programs like these could provide governments substantial fiscal dividends, boost economic growth, and contribute various non-economic social benefits to society. These types of programs don’t always cost a lot of money and, perhaps depending on the evaluation assumptions made, are usually very cost-effective.

As the IMF notes, however, prevention programs and proactive investments in preventative health care typically represent very low shares of health budgets in countries. OECD figures back this up. Moreover, typically preventative health programs are often the first programs to be cut during economic downturns.

Preventative health programs could form part of a strong economic agenda for the future.

There is also perhaps a need to think more creatively about how to fund preventative health programs to help protect such programs from short-term budget cuts. This may involve having two separate budgets in government health portfolios: a first budget to treat disease and injury – what the normal health budgets currently do, plus (not instead of) a separate second budget to prevent these things happening in the first place. It may also require us to look at our economic evaluation assumptions when reviewing the economic cost-effectiveness of these types of policies and programs.

The economic payoffs from this for future generations are too big to ignore.

#globalhealth #economics #demographics #ageing #productivity