KYIV, June 22, 2007 – The population of Ukraine is aging rapidly and its policies and institutions are ill-equipped to deal with the economic and social consequences of this development. This is the conclusion of the new World Bank report From Red to Gray: The “Third Transition” of Aging Populations in Eastern Europe and the former Soviet Union presented in Kyiv today.
The report looks at demographic developments and their consequences across all the countries of Eastern Europe and the former Soviet Union, showing that Ukraine shares the challenge of aging with many other countries in the region. The Report examines the possible impact of demographic change on labor markets, pension systems, health care as well as national savings and capital markets.
The populations of all Eastern European and former Soviet countries grew over the past 50 years, but most of them will shrink between 2000 and 2025. According to the report Ukraine’s population will shrink by a fifth between the years 2000 and 2025, the most in the region. The demographic transition occurs at a time when the region is still struggling with the aftermath of the political and economic changes at the beginning of the 1990s.
The Report urges an acceleration of economic reforms in a number of areas ranging from social security systems and the provision of health care and care for the aged to contain potentially exploding public expenditures to the functioning of labor and capital markets to mitigate the potential consequences of aging on growth.
“Ukraine is likely to face significantly higher expenditures in health care, elderly care, and public pension payments" - says Paul Bermingham, World Bank Director for Ukraine, Belarus and Moldova. - "These needs can only be met if Ukraine reforms the way social assistance and social services are provided to increase their quality and make them more efficient, as well as to encourage private initiative.”
Ukraine is projected to experience declines in the working age population of 16% in the period 2005 to 2020. The Report argues that this can be compensated through measures that stimulate labor supply and increase labor productivity. Increasing labor supply will require reforms in social security systems to reduce labor taxes, including pension reform, and measures to increase employment rates through better health care and de-institutionalization of disabled people. Increasing productivity will require reforms in health care, education and lifelong learning, as well as continued progress in economic restructuring and the improvement of the investment and business environment.
Aging is an inevitable demographic trend. However, the Report argues, there is no reason to be alarmed by this development. Through greater awareness of the associated policy challenges and early reform action, countries can effectively deal with the consequences of the “Third Transition”. “But”, as Paul Bermingham emphasizes, “to be well prepared means acting now.”
Additional information:
FROM RED TO GRAY: The “Third Transition” of Aging Populations in Eastern Europe and the Former Soviet Union - PDF
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