Demographic pressures and the sustainability of social security in Emerging Europe and Central Asia

This paper investigates the long-term effects of population ageing in a number of ECE emerging market economies. The latest revision of the UN World Population Prospects implies that all of the countries of Eastern Europe, Caucasus and Central Asia (EECCA) and South-Eastern Europe (SEE) will experience population ageing over the period 2010-2050. In most of them, the ageing process will be associated with rising dependency ratios as the share of the working-age groups in the total population shrinks. In these economies, the combination of an ageing and declining population is likely to reduce the effective labor supply, threatening to undermine the sustainability of their public pension and health systems. The analysis of available demographic and economic data confirms the severity of the demographic crisis' consequences for fiscal sustainability. Further, the results provide compelling evidence on the necessity for most of the countries in the region to undergo wide reaching policy reforms with a particular focus on pension systems and labor markets. Ageing is one of the significant cost factors, but not the only one, that will impact health spending in SEE and EECCA countries. The public health sector needs to be reformed with a view to increasing its efficiency.