My Department has recently published two related reports that consider and identify a range of potential risks and vulnerabilities which might jeopardise the sustainability of the public finances, including those related to our future demographic profile.
The ‘Future Forty: Ireland’s Demographic Outlook’ paper, published in September, considers recent trends regarding migration and fertility at global, regional and national levels, and maps out the channels through which migration take place in Ireland. The report demonstrates how alternative scenarios for future net migration and fertility rates can affect projections for Ireland’s population and demographic profile.
The Demographic Outlook paper notes that over the past several decades, global fertility rates have sharply declined in many regions across the world; reflecting a complex interaction of social, economic and health-related factors, alongside changing cultural norms regarding family size.
The report also notes that there is mixed evidence to suggest that pro-natalist policies help to slow declines in fertility rate, citing studies by the United Nations Population Fund (2020) and the OECD (2023).
Following the Demographic Outlook report, my Department published Future Forty: A Fiscal and Economic Outlook
to 2065, in November. This report explored a wider range of key drivers of Ireland’s economy and public finances over the next forty years, on a no-policy change basis.
The two publications have highlighted how an ageing population, combined with a slowing economic growth and the cost of tackling climate change while accelerating the green transition will have considerable impacts on our public finances. In particular, the cost of health and long-term care services will rise, as will the cost of pensions, while there is a risk that Ireland will be unable to rely on exceptionally high levels corporation tax receipts in the medium-to-long term.
Key priorities to address these challenges include enhancing long-run productivity growth, particularly for domestic sectors; encouraging continued and efficient capital investment, both public and private, to address infrastructure deficits and increase the supply of housing; and taking a proactive and planned approach to digitalisation, to enhance productivity, while investing in skills to minimise potential negative impacts.
My Department has not undertaken any specific analysis with respect to reforming the Irish tax system to incentivise or support an increasing in total fertility rates. However, the Department will continue to review and assess evidence and analysis undertaken in areas relating to demographics, population ageing and fertility rates as part of its broader role in supporting evidence-based policy making.
I note that the 2024 UN World Population Prospects highlights how, following the introduction of pro-natalist interventions, Hungary has observed small, initial increases in Total Fertility Rates (TFR). However, these increases have not reached the required replacement rate of 2.1 and the TFR now appears to be falling from a peak of 1.6.
This may reflect the ‘deadweight’ risk of pro-natalist policies whereby the policies encourage those already planning to have children to have them earlier but does not incentivise additional births or births in groups who were not planning to have children. Moreover, the cost of introducing such policies is substantial, with estimates that they equate to approximately 5.5% of Hungary’s GDP annually.
