Mitigating the Economic Impact of an Aging Population : Options for Bulgaria

Bulgaria is undergoing a profound socio-economic transformation brought about by extraordinary demographic change. Between 1950 and 1990, Bulgaria’s population grew from 7.3 million to 8.8 million and then declined to 7.5 million by 2010. Low birth rates and high mortality rates combined with an emigration rate of 40 percent explain the steep decline. This radically changed Bulgaria’s age structure, resulting in the third-highest median age in the EU, surpassed only by Germany and Italy. As a result, Bulgaria is now heading for the steepest decline in working-aging population of any country. Until 2007, Bulgaria’s working-age population grew relative to the total population and constituted its largest share. The subsequent decline has meant that fewer and fewer working Bulgarians will have to support more and more children and especially people over 64. By 2050, one in three Bulgarians is projected to be older than 65 and only one in two Bulgarians will be of working-age. This report analyzes the economic impact of ageing, focusing on budgetary, social (education and health), labor, and growth effects. The objective is to quantify, to the extent possible, realistic and alternative impact scenarios depending on various policy options available to Bulgarian policymakers. The sectoral impact analyses were combined into a consistent overall, long-term projection of Bulgaria’s public finances in order to highlight key policy trade-offs