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Analysis
From red to grey
A World Bank report has found that the countries of Eastern Europe and the former Soviet Union are
experiencing a third transition, a transition that overlaps with their
recent political and economic transitions. In 2025, more than one in
five Bulgarians will be more than 65 years old—up from just 13 percent
in 1990. Ukraine’s population will shrink by a fifth between the
years 2000 and 2025. And the average Slovene will be 47.4 years old
in 2025—among the oldest in the world.
This third transition—from red to gray—is unique. Populations
have been aging quite rapidly in many countries; by 2010, populations
will start decreasing in such industrial countries as France, Italy, and
Japan. Yet the unique conjunction of rapidly aging and relatively poor
populations exists only in this region. Indeed, between 2000 and 2005,
the only countries in the world with population declines of more than
5,000 people were 16 countries in Eastern Europe and the former
Soviet Union—led by the Russian Federation, Ukraine, Romania,
Belarus, and Bulgaria. No aging country is as poor as Georgia—set to
lose 800,000 people over the next two decades and with a per capita
gross national income of just US$1,060 in 2004. And no other countries
in the world face the dual challenges of a rapidly aging population
and an incomplete transition to mature market institutions to deal
with the adverse economic consequences of aging.
This report examines the possible impact of this third transition. It
analyzes projections and policy outlooks for a whole range of issues,
from labor markets to pension policies, from health care to savings
and capital markets. It concludes that although aging in the region is occurring
in the context of unprecedentedly weak institutional development, countries
can avoid severe economic consequences if they accelerate their economic
transition and undertake longer-term policies to meet the aging challenge.
The report sends two central messages, which are analyzed against
the different patterns of aging across the region:
• Red light to green light: Growing older does not have to
mean growing slower. Aging is not a stop sign for growth—if
countries enact policies that boost productivity and labor force
participation.
• Red ink to black ink: Waging sensible policies can ease
aging’s spending impact. The policies needed to manage much
of the expected jump in public spending—especially the impacts
on pensions and on health care—are well known. They need only
to be enacted and implemented.
