Demographic Change in Uruguay

Uruguay’s population is slowly aging, driven by the demographic transition that started early in the20th century. While this reflects significant improvements in mortality and fertility trends, it also createsimportant challenges for the fiscal sustainability of some social policies and for sustaining medium- andlong-term economic growth. Uruguay is going through the “demographic dividend” stage of this processas the proportion of the population ages 15–65 peaks. This temporary situation creates the possibility ofincreasing the endowment of capital and the labor force and sparking sustained economic growth. Forthis to happen, institutional, financial, and fiscal conditions are needed that promote larger savingsand investment. Demographic Change in Uruguay: Economic Opportunities and Challenges studies the opportunities andchallenges that the demographic transition poses for Uruguay’s economy. Once the demographic dividendhas passed, population aging will have a significant impact on fiscal accounts, especially in social protectionexpenditures. This is a serious policy challenge, demanding reforms to adapt the institutions and systems toa new demographic context. The main challenge in the next few decades will be to maintain economicgrowth on a solid path as the working-age population declines. This will require that labor force participationrates increase, particularly among women and older people, but will also require that those in the labormarket increase their productivity. This will be achieved only through sustained growth of the capital perworker ratio and the incorporation of innovations and technological developments that facilitate increasedproduction of goods and services for the entire population.