Sri Lanka may have to increasingly look towards its older population to sustain economic growth, as a rapidly changing demographic profile threatens to narrow the country’s productive workforce before it achieves higher income levels, according to a new International Monetary Fund (IMF) study.
The IMF, in its latest publication Shaping the Future of Asia: Opportunities and Challenges, has highlighted the economic potential of longer working lives, arguing that healthier and more productive older workers could help economies cushion the impact of ageing populations on labour supply and growth.
The findings carry particular significance for Sri Lanka, which the IMF identifies alongside Mongolia, Myanmar and Vietnam as four Asian economies facing greater risks of growing old before becoming rich.
Under the study’s projections, the four economies would remain below the European Union’s 1998 per capita income level, highlighting the risk of demographic advantages diminishing before countries accumulate sufficient economic wealth.
For Sri Lanka, the challenge is twofold: sustaining economic growth with a changing workforce while ensuring that longer life expectancy translates into productive economic participation rather than solely greater demands on public finances.
The IMF observed that advances in healthcare, technology and education have fundamentally altered the traditional relationship between age and economic productivity, allowing people to remain economically active beyond conventional retirement ages.
It noted that higher productivity among older workers, supported by continued employment, could help economies sustain output even after their demographic dividend has weakened.
The study made a case for policies that encourage healthy ageing, lifelong skills development and more flexible employment arrangements, enabling older workers to remain in the labour market for longer.
It also highlighted the importance of age-inclusive workplaces and working arrangements that accommodate changing physical and professional needs, allowing experienced employees to continue contributing to economic activity.
The IMF’s analysis suggests that investments in preventive healthcare and improved access to long-term care could also play an economic role by helping older people remain healthy and productive.
However, the Fund cautioned against treating longer working lives as a complete solution to demographic pressures.
Its research found that healthy ageing could extend the demographic dividend window only modestly, indicating that improvements in labour participation would have to be complemented by broader reforms to lift productivity and strengthen economic efficiency.
The implications are particularly relevant to Sri Lanka’s efforts to move beyond post-crisis stabilisation towards sustained economic expansion, where the availability and productivity of labour will remain important determinants of long-term growth.
The IMF’s wider assessment shows that Asia’s demographic transition is advancing faster than in any other region, with the population aged 65 and above projected to nearly double from 450 million in 2024 to 880 million by 2050.
By then, one in five people in the region is expected to be aged 65 or older, placing increasing pressure on labour markets, pension systems, healthcare expenditure and fiscal resources.
Against this backdrop, the IMF called for a broader policy response combining greater workforce participation, productivity-enhancing investment, healthier ageing and improvements in labour market flexibility.
It also identified increased employment opportunities for women and older workers as important measures to moderate the economic drag from ageing.
For Sri Lanka, such measures could help preserve productive capacity while easing some of the longer-term pressures associated with an ageing society.
The study further pointed out the need for governments to incorporate demographic changes into economic planning, particularly as slower growth in working-age populations could constrain potential output and the tax base at a time when age-related public expenditure is expected to increase.
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