Alarm bells ring as birthrate hits record low

Vietnam’s birth rate sank to a record low in 2024, with the total fertility rate falling to 1.91 children per woman. This marked the third consecutive year the figure remained below the replacement level of 2.1 — and it’s happening against the background of a booming economy.

The country’s population currently hovers around 100 million people. The Vietnam News Agency cited Pham Vu Hoang, deputy director of the health ministry’s population authority, as saying that the population could begin to decline by mid-century.

Urban centers are already feeling the impact. Ho Chi Minh City, the country’s southern economic hub, saw its fertility rate plummet from 1.39 children per woman in 2022 to just 1.32 in 2023, and likely deep again last year, according to Vietnamese news agencies.

In response, the city’s People’s Council recently implemented measures to encourage higher birth rates, including grants for women under 35 with two children and small stipends for prenatal and neonatal screenings for low-income families. They’ve recently announced plans to boost the effort, hoping to get the fertility rate to 1.6 by 2030.

Vietnam positioned to benefit from US-China tensions

Same state-run media have previously warned of a “demographic time bomb.” Separately, the Generation Myths & Realities 2024 report by Ipsos, a market research firm, highlighted the economic impact of the looming population crisis, saying it presented “both challenges and opportunities for brands and businesses.”

Vietnam is the darling of Western investors seeking to diversify from China, but Western business so far appear unconcerned by the news. The South Asian country is continuing is rapid rise, boasting a 7% GDP hike last year. And while foreign investment dipped by 3% year-on-year to $38 billion (€36,7 billion), Vietnam is positioned to take a good deal of Western capital if the US and China escalate trade tensions under President Donald Trump.

Industry experts say that the Vietnamese government needs to focus on the bread-and-butter issues of economic reform if the country is to continue attracting investors. 

“Demographics are part of the equation but only part,” said Dan Martin, Senior Associate of International Business Advisory at Dezan Shira & Associates, a consultancy firm.

Martin told DW that other factors influencing investors include  “Vietnam’s strong economic growth, its integration into trade agreements, its role in regional supply chains — all of which continue to make it an attractive destination.”

End of the ‘demographic dividend’?

In 1986, when Vietnam launched its free-market reforms after decades of a disastrous command economy, nearly 40% of the population was under 16. Vietnam’s demographic dividend — the economic growth spurred by a young and abundant workforce — was the cornerstone of its development. 

Now, it is the world’s 32nd-largest economy. But children account for only about a fifth of the population today, and its percentage of 15-64 years olds is projected to fall to 63% by 2050, down from 69% in 2020.

‘Super-aged’ in less than 25 years

In 2020, those aged 65 and over accounted for 8.4% of the population. But Vietnam is predicted to become an “aged” society— defined as having 14% of its population aged 65 or olde r— by 2034 and a “super-aged” society by 2049, when the proportion exceeds 20%.

Experts warn that a shrinking labor pool is likely to lower productivity and slow economic growth. An aging population will also inevitably place a heavier burden on state resources while the number of tax-paying workers shrinks.

A 2022 World Bank study projected that Vietnam’s pension expenditure could rise from the current 2% of GDP to 3.6% by 2050 and 5.6% by 2080. Under this baseline scenario, the country’s pension surpluses could be depleted by the 2040s.

Vietnam still far behind Thailand

As early as 2017, the International Monetary Fund warned that Vietnam is at risk of “growing old before it grows rich.” Its population problems might not be as serious as in some of the nearby nations, but Vietnam is also running out of time to catch up in economic terms before 2034, when its society is projected to become “aged.”

Thailand became an “aged” society in 2020 — when GDP per capita stood at around $7,000. In the far more wealthy Singapore, GDP per capita was $61,000 when it became an “aged” society in 2017.

For comparison, Vietnam’s GDP per capita was just $4,300 in 2023.

What can Hanoi do?

For decades, Vietnam has practiced a rather complex two-child policy, in which some employees for the state or state-owned enterprises could face dismissal for having a third child. Members of the ruling Communist Party also faced expulsion for having more than two children.

The communist government has debated rescinding this prohibition since the mid-2010s.

The Vietnamese government is now drafting a population law set to be presented to the National Assembly this year. This legislation is expected to include measures to encourage childbirth and potentially remove penalties for families having a third child.

Chris Humphrey, executive director of the EU-ASEAN Business Council, told DW that he has not heard of European companies being wary of investing in Vietnam based on its demographic problems.

However, he expects Hanoi to “take action now in areas like retirement planning, advancing productivity and moves towards advancing the use of automation in manufacturing and investments in its healthcare system to cope with an aging society in the future.”

Edited by: Darko Janjevic