Demographic dividend in danger?

Demographic dividend in danger? | Daily Tribune

The Philippine Statistics Authority (PSA) reported that the TFP of the Philippines fell to 1.71 in 2025. By itself, that does mean much until you consider that it was at 2.0 at the start of the decade.

To be fair, fertility rates across the globe have been falling over the past few decades. But for the Philippines, the fall is much sharper than one would expect over such a short period — without a policy intervention or war.

Another interesting point is that we are the odd man out in Southeast Asia in the sense that our TFR is falling faster than our peers and while our GDP growth is faltering. Some might say maybe Covid-19 accounted for the faster decline. But since our fertility rate is falling faster than our peers then it is dependent on our policy response.

Given the slowdown in GDP, falling fertility rates would mean our productivity gains from human capital is limited. This is the conclusion of the World Bank Philippines report entitled “Running Uphill; Growth, Jobs and the Quest for Productivity” released in 2025.

In the WB report, the contribution to growth by total factor productivity (TFP), which is the economic measure of productivity from both fixed and human capital, has been constrained with human capital contributions considered negligible. Over 90 percent of the growth came from capital accumulation (investment and wealth).

For regular Filipinos, this means we have fewer Filipinos being born, and theoretically there will be a bigger share of the economic pie for them in the future. However, that pie is currently not growing fast enough.

If Filipinos are happy with their current income and lifestyle status, then that is probably our future. But if Filipinos want more income and a better lifestyle, that economic pie needs to grow faster.

Each generation of Filipinos needs to be significantly more productive than the last. That puts the burden of increased productivity on the succeeding generations.

One of the key points we need to understand is that in the cases of Singapore, China, South Korea and Japan, it is not easy to bring up fertility rates.

China has already removed its one-child policy and Singapore and Japan have tried tax incentives for additional children. Their fertility rates have not been improving and are significantly below the replacement level.

Getting the fertility rate up is not as simple as offering more money. Desire is an equal counterpoint to greed. In the animal world, desire is a function of pheromones, genetics, and mating rituals. Unlike money, those are difficult to manufacture at scale. Nevertheless, a desire to have kids is an ingredient in growing families or households.

On this front, the data is not supportive of fertility rate stability. In the PSA data on national demographic health, the percentage of women with no children but who want to have kids declined and those who want to delay it by two or more years increased from 2022 to 2025. The desire to have more kids falls off sharply after having two children.

The PSA also reported that the average household size has declined from 4.1 in 2020 to 3.8 in 2024. This decline can be partly explained by the decline in the fertility rate numbers if we assume a household would have two parents, children, and possibly a third member of the household. Smaller families would have implications for housing, transportation, and overall consumption demand.

Fertility rates are long-run targets, which means we have around one or two generations to make the necessary adjustments. We often market our demographic dividend to investors citing our young population and robust consumption. However, the data shows this dividend may not last forever.

Filipinos and their leaders need to think longer than the six-year window to the next election and begin to ask the big questions that matter 50 to 100 years from now that will be asked by our babies before they become babies.

Jose Mari Lacson is the director and head of Macroeconomics and Impact Investing in ATR Asset Management. He has a PhD in Economics from De La Salle University.