'Over the next 25 years, demographic change is expected to become a drag on Colombia, reducing GDP by 10 basis points per year.'

Demographic change is taking a growing toll on the world's economies every day, but especially on those with very low per capita income, such as Colombia, where its population is aging rapidly and its birth rate is one of the lowest in the region: 1.1 percent by 2024, a level that has been very difficult to reverse, even for more developed countries.

"No country that has fallen below a fertility rate of 1.9 percent has managed to return to replacement level, even after implementing large public spending programs to support families," warns Anu Madgavkar, partner at the McKinsey Global Institute (MGI), the economic research arm of McKinsey & Company, who will be present at the 10th Colombian Business Congress CEC 2025, organized by Andi in Cartagena and invited by said company.

Madgavkar agreed to answer a questionnaire from EL TIEMPO, prior to his speech at the aforementioned Congress, to discuss the implications of demographic change and the possible solutions the country could take to mitigate the impact of this situation.

Their responses are full of alternatives and recommendations that Colombia can follow to try to counteract the negative effects of aggressive demographic change, which could begin to cost Colombia several percentage points of GDP in a very short time if it isn't prepared.

The world's population is aging, and birth rates are steadily declining. In Colombia, according to the UN (United Nations), the birth rate has fallen from more than six children per family in 1960 to three in 1990 and just 1.6 today. However, Colombia's National Department of Statistics (DANE) paints a much bleaker picture, with birth rates per family expected to fall to 1.1 by 2024.

Reversing this trend has proven extremely difficult for other countries. No country that has fallen below a fertility rate of 1.9 has managed to return to replacement levels, even after implementing large public spending programs to support families.

As birth rates decline, the proportion of the working-age population peaks and then declines. Advanced economies passed this “tipping point” a decade ago, but Latin America is on the cusp of it. The working-age population in Colombia peaked at 70 percent in 2023 and is now declining, and will peak in 2030 in the region as a whole. This will increase the challenges for growth and pension systems with each passing year.

The good news is that change is predictable, and this foresight gives us the opportunity to respond with thoughtful policies and planning. There is a challenge ahead, but there is time to react.

Latin America, including Colombia, is aging faster than many realize. The region has only 22 years before its support ratio—the number of working-age people per elderly person—falls to the level seen today in advanced economies and China.

Colombia has only 19 years until this demographic benchmark is reached, yet its GDP per capita remains at just 15 percent of the average for countries in the first wave of aging. Therefore, it is in a race to "get richer before you get old."

Over the past 25 years, demographic change contributed 60 basis points annually to per capita GDP growth in Colombia. But over the next 25 years, it is expected to become a drag, subtracting 10 basis points annually.

Studies for Latin America show that aging will add an additional 3.5 percentage points to government pension spending as a percentage of GDP by 2050. This will put additional stress on public finances, and countries will need to implement reforms to adjust to this new reality.

Reducing informal employment (and increasing the availability of high-quality jobs in the formal sector) is crucial to broadening the tax base and ensuring adequate funding for pensions and social programs.

Many high-income countries have struggled with pension reforms and declining birth rates, and Colombia can learn from their successes and failures. Colombia should use this foresight to design adaptable and sustainable long-term pension policies.

Although Colombia has made progress over the past 15 years in reducing labor informality from 68 percent in 2015 to 56 percent in 2023, it is still above the average for Latin American countries and countries with similar per capita incomes. If Colombia could reduce informality to the levels of countries with similar per capita incomes, it could generate additional contributions to pension and health systems that could help offset the economic burden due to aging.

It's also crucial to note that Colombia's working-age population peaked at 70 percent this decade and is now declining, which will reduce the size of the labor force relative to dependents.

Therefore, increasing productivity is essential to maintaining economic growth—but this is more difficult in informal sectors, which lack the scale to drive efficiency and innovation.

At McKinsey, we leave policymaking to the experts in Congress. However, from our technical perspective, achieving economic growth under demographic pressure will require a coordinated approach that includes boosting productivity, increasing participation and hours worked, and changing the age mix through effective skills-based migration policies.

Furthermore, to improve growth and productivity, Colombia could benefit from the changing global trade landscape by becoming more prominent in global value chains, having more sophisticated manufacturing exports, and growing through trade in services.

Our Demography report found that, to mitigate these types of risks, the country could promote innovation, technology adoption, and training that can sustain or increase productivity. It will also be crucial to create incentives for formalization and private investment, ensuring that reforms do not hinder business dynamics.

The role of generative AI (Artificial Intelligence) in shaping the labor and productivity dynamics of countries cannot be ignored and, in fact, should be embraced through reskilling. These technologies can increase productivity growth and help offset demographic changes.

Prioritize productivity growth through investments in both businesses and human capital—this includes adopting new technologies and improving education, nutrition, and skills development.

Position the country and the region as an attractive hub for highly skilled talent and work to increase participation in the formal labor market, especially among women and older adults.

Ensure that pension reforms are fiscally sustainable and aligned with growth objectives—for example, by providing incentives for greater labor force participation.