Report says Albania, Eastern Europe threatened from aging population

TIRANA, June 20 – A report from the World Bank included Albania, among other Eastern European countries, that are threatened by an aging population.
The report said that by 2025, many countries in Eastern Europe and the former Soviet Union will have populations that are among the oldest in the world, posing a threat to the region’s recent economic success, if pension and health care reforms are not adequately tackled and policies are not put in place to promote population growth.
The precise reforms will vary by country – from a combination of both measures in Lithuania and the Slovak Republic, to mostly focusing on lower retirement ages for Albania, Romania, Serbia and Turkey.
Across the world, aging societies run the risks of severe economic consequences. Still, Eastern Europe and the former Soviet Union, comprising some 28 countries from Russia to Albania, is the only region in the world facing the combined challenges of rapid aging, relatively poor populations and an incomplete transition to mature market economies, according to a new World Bank report.
For these countries, the problem are heightened by their need to simultaneously accelerate their economic transition and to urgently undertake longer-term reforms addressing demographic consequences, says the World Bank report, titled ‘From Red to Gray: The “Third Transition” of Aging Populations in Eastern Europe and the Former Soviet Union.’
“Wealthier and more developed countries such as France, Italy, and Japan, are in much better shape to meet the challenges of aging than the aging countries in Eastern Europe and the former Soviet Union,” explains Arup Banerji, Human Development Economics Manager at the World Bank and co-author of the report.
“No aging country anywhere is as poor as Georgia. With a per capita gross national income of just over $1000, it is set to lose almost a fifth of its population over the next two decades. And broader institutional development is still lagging in many countries, even in those that have joined the European Union. It is this interaction of the three transitions – demographic, economic, and political – that makes the region, and its challenges, unique.”
This region is projected to see its total population shrink by almost 24 million over the next two decades. By 2025, between one fifth and one quarter of the population in nine Eastern European and former Soviet countries – ranging from Azerbaijan to the Slovak Republic – will be 65 and older.
The most difficult challenges stem from concerns that the aging populations will exert new pressures on public spending, especially for pensions and long-term care for the elderly, while financing for these systems is already inadequate.
Pension cost pressures are bound to rise as population’s age, but the report finds that in all countries where detailed projections were carried out, these costs could be largely offset by changes in policy.
The best way to do this would be by increasing retirement ages, which tend to be very low in the region, but savings can also result from changing formulas for how benefit rates are calculated.
Aging populations would shrink the labor force, and older people would save less – both in turn lowering the labor and capital needed for the region’s countries to maintain their rapid rates of growth.
This will require reforms to deepen financial markets, which will increase saving and investment, and to make labor markets more flexible. Finally, better education and a commitment to lifelong learning and innovation are necessary for the region’s countries to make the most out of their shrinking human resources.