World Bank warns of hidden dangers from aging population in Eastern Europe and Former Soviet Union

World Bank warns of hidden dangers from aging population in Eastern Europe and former Soviet Union, considering that only urgent reforms can help mitigate long-term fiscal problems. According to a WB report, 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 productivity growth. Across the world, aging societies run the risks of severe economic consequences. Still, the Eastern Europe and 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 problems are heightened by their need to simultaneously accelerate their economic transition and to urgently undertake longer-term reforms addressing demographic consequences. This region is projected to see its total population shrink by almost 24 million over the next two decades. Russia alone is projected to lose 17 million people. These smaller populations will also be much older. 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 – and possibly unaffordable – pressures on public spending, especially for pensions and long-term care for the elderly. These concerns are underscored by the reality that in many of the former communist countries, financing for these systems is already inadequate. According to the World Bank, strong productivity will be absolutely essential if the Eastern European and former Soviet countries are to continue growing rapidly and converge to EU incomes and living standards. 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.