Friday,
22 September 2017
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Sword of demographic Damocles

 

A demographic specter is haunting Ukraine – the population is shrinking, having lost 145,000 citizens in 2011 alone, and the median age is high at 39 years. And so, according to theory, Ukraine should transition to the equilibrium capitalism model, like all developed countries, Tatyana Ochymovska wrote in the last issue of KW.

Ukraine has fallen into a paradoxical situation: the people are old but not wealthy, and so cannot allow itself to slow its quantitative growth. “Ukraine must now maintain an average annual growth rate of at least 7-8%. This should suffice for the country to nearly double its GDP growth over 10-15 years. Of course, even at such growth rates, the country cannot catch up to the consumption level in developed countries. But at least we will get somewhat closer to this indicator as enjoyed in the newest EU members, such as the Baltic states, Poland and others,” Director of Economic Programs at the Razumkov Center Vasyl Yurchyshyn told KW.

The rapid aging of the population will not have as serious consequences for Ukraine, oddly, as it will for Western countries because, sadly, of the lower life expectancy. In Japan people can expect to live 82 years, in Switzerland – 80, Austria – 79, and in Spain – 76, while in Ukraine this indicator is all of 68 years. This “advantage” will lower the state’s pension risk. For example, when the number-crunchers factor in the average 62-year average life expectancy of a Ukrainian man, by raising the retirement age to 65 years the government should have to pay a whole lot less to those who make it over the demographic hump.

“Ukraine will be forced to maintain and finance a steadily growing number of pensioners at the expense of state coffers. Moreover, public investments into economic development will be cut. In the end, the revenue side of the budget will not be able to keep up with the growing expenditures, and the country’s leadership will be forced to raise the national debt, which will become more and more difficult to service,” chief economist at Dragon Capital Olena Belan predicts.

The paradox is that considering the miserable life expectancy in Ukraine, the rapidly aging population is not the nation’s problem, the article concludes.

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