ageing populations — Ageing populations are increasingly recognised as a ticking time bomb for GDP growth, according to the European Bank for Reconstruction and Development (EBRD). In its annual report released on Tuesday, the bank emphasised the urgent need for countries to address the slowing population growth to safeguard their long-term economic prospects.
- Recognising the urgency of the situation, she particularly urged the need to inform younger voters, as they will ultimately bear the burden of pay-as-you-go pension systems.
The report highlights that ageing demographics have already begun to adversely affect economic growth in certain nations. Specifically, in emerging Europe, a decline in the share of working-age individuals is expected to reduce annual per capita GDP growth by nearly 0.4 percentage points each year from 2024 to 2050. This trend poses a significant challenge for the region’s economic future.
“Already today, demography is eroding growth in living standards, and it is going to be a headwind for GDP growth in the future,” stated EBRD Chief Economist Beata Javorcik in an interview with Reuters. She noted that post-communist countries are facing a unique dilemma, as they are “getting old before getting rich.” The median age in these nations has reached 37, while the average GDP per capita stands at $10,000, a stark contrast to the situation faced by advanced economies in the 1990s, when they experienced similar median ages but with much higher GDP per capita.
The report identifies several factors contributing to the declining birth rate, including evolving social norms and the impact of motherhood on women’s career earnings. Despite the presence of various incentives across EBRD nations aimed at encouraging higher birth rates, Javorcik observed that these measures have not resulted in any significant, sustained changes.
Compounding the issue, the report indicates that political resistance to necessary migration levels has made it difficult to counterbalance the falling birth rates. Furthermore, many citizens remain “ambivalent” towards increasing artificial intelligence (AI) use to enhance productivity, which could provide some relief to the economic challenges posed by an ageing population.
Javorcik emphasised the importance of encouraging longer working lives as a crucial strategy for addressing these demographic issues, suggesting that such an approach would likely require retraining and potential reforms to pension schemes. “What we need is to have an adult conversation with the voters about where things stand, because people actually tend to underappreciate the meaning of demographic trends,” she said.
Recognising the urgency of the situation, she particularly urged the need to inform younger voters, as they will ultimately bear the burden of pay-as-you-go pension systems.
As political leaders age, the challenge becomes more pronounced. The average global political leader is now 60 years old, which is 19 years older than the median adult. This gap has widened even further in autocratic regimes, where the age difference has increased from 19 years in 1960 to 26 years in 2023, complicating the policymaking landscape.
Javorcik also pointed out that the newest member nations of the EBRD, including younger and growing countries like Nigeria, must focus on fostering job growth and private sector expansion. “This demographic dividend they can enjoy is fleeting,” she warned, highlighting the declining birth rates in other parts of Africa. “There is only a window of opportunity; these countries have to capitalise on this,” she concluded.
