Singapore will need a whopping S$13b more to support ageing population by 2025: Study

Singapore to post the fastest growth in the number of senior citizens.

Costs primarily associated with an ageing population are estimated to require the Singaporean government to spend an additional $13 billion (2.3 percent of GDP) to fund public services[2] by 2025, according to a new report by Accenture (NYSE:ACN), Delivering Public Service for the Future: Navigating the Shifts.

Accenture asked Oxford Economics to project total government spending on public services[3] through 2025 in 10 countries—Australia, Brazil, Canada, France, Germany, India, Italy, Singapore, the United Kingdom and the United States. The Singapore cost is projected to total $72 billion, 12 percent of GDP, by 2025. Oxford analysed the impacts of projected economic and demographic changes on the costs of delivering all public services, including all government spending (except debt interest payments and unemployment-related benefits).

Ageing Population

The primary driver of the projected expenditure increase is an ageing Singapore population. The population aged 65 years or older is projected to increase by almost 2.5 times (or 146 percent) between 2010 and 2025, the largest percentage increase of the 10 countries studied, and therefore account for 17 percent of total population by 2025 – in 2010 the share was just 8 percent. In addition, Singaporeans have one of the highest life-expectancies in the world, ranking fourth in a study of 221 countries.[4] Government spending on healthcare has already increased from $2.7 billion in 2008[5] to $4.1 billion in 2011.[6] Other factors in the analysis included wealth effects[7]— assumptions based on historical evidence that as countries get richer, governments spend proportionally more per person on public services.

Expenditure Gap

Demand-driven spending estimates were compared against the current trajectory of public sector spending to identify the ‘expenditure gap’ in each country by 2025, along with its percent of GDP.

The current trajectory for public service delivery expenditure reflects government spending and economic growth, which considers existing and planned austerity measures and assumes that governments revert to a more sustainable level of spending relative to GDP by 2025.

Closing the Expenditure Gap

With the looming expenditure gap, the demand to improve public sector efficiency has never been greater. To close the expenditure gap, Singapore public sector efficiency would need to increase by 1.4 percent annually through 2025.

“In face of the challenges posed by the ageing population and rising expectation for public services, improving public sector productivity is imperative to drive and sustain Singapore’s economic growth. With the study, we aim to help lay the groundwork for this journey of historic demographic change especially in Singapore,” said Teo Lay Lim, Managing Director, Accenture Singapore and ASEAN.