Flash News

Gunfire at the Lake Dam in Tirana

Accident in Kukës-Krumë, three injured after two cars collide

The continuation of the constitutive session of the Kosovo Assembly is postponed until tomorrow

They risked their lives on an expedition without a guide, 7 Spanish tourists are rescued in Peshtura

Knife fight in Kurbin!, three people injure a 30-year-old man

E-TJERA

BoA: Shrinkage and aging of the population threaten the future of the economy, a reaction is needed

Politiko 2025-04-08 08:34:07

BoA: Shrinkage and aging of the population threaten the future of the economy, a

The decline in the overall population and its aging have important implications for economic development, so a response is needed through reforms and development policies.

An IMF study, cited by the Bank of Albania in its annual report, highlights three main channels through which these demographic trends threaten economic development.

First, population decline is accompanied by a shrinking labour force. Second, population ageing has fiscal implications, in the form of increased relative expenditure on the health sector and, potentially, on the pension scheme. Third, population ageing is usually associated with slower growth in labour productivity and overall productivity. All three of these factors, in themselves and in interaction with each other, tend to slow down the pace of economic growth and the pace of convergence of average per capita income with that of the European Union.

By analyzing demographic trends, the Bank of Albania concludes that these phenomena are also present in Albania, although with a relatively low intensity. According to the latest census data, the decline in the population has been accompanied by a decline in the working-age population (15-64 years old). This category has decreased from 1.93 million in 2001, to 1.9 million in 2011 and 1.55 million in 2023.

However, the decline in the working-age population has not, so far, affected the Albanian economy's ability to generate new jobs. On the contrary, according to INSTAT data, the number of employed people has increased from 1.14 million people in 2012 to 1.33 million people in 2023. However, the impact of the shrinking and aging population will be an increasingly limiting factor on the labor market in the long term.

At the same time, public spending on health has been relatively constant during this period, fluctuating in the range of 9-10% of total spending. Meanwhile, the deficit of social security schemes, of which the pension system constitutes the main pillar, remains close to the level

2% of GDP for 2024-2025, showing a slight downward trend over the last three years. However, as with employment indicators, unfavorable demographic trends suggest a possible increase in this deficit, in the absence of interventions.

The Albanian economy has shown productivity growth, mainly in response to the shift of labor from low-value-added sectors to higher-value-added sectors, and has made progress in per capita convergence with European Union countries.

However, both of these indicators still remain far from the European Union average and unfavorable demographic trends make the path to their fulfillment more difficult.

According to the Bank of Albania, this preliminary analysis suggests that public authorities and the private sector should carefully monitor demographic developments, identify their potential consequences in a timely manner, and address these consequences with structural reforms and appropriate development policies. Among other things, these reforms should aim to curb the decline in the labor force, by discouraging emigration, increasing the labor force participation rate and, where necessary, attracting foreign workers.

Reforms should also aim to increase productivity, through improving education and training, encouraging investments in more efficient machinery, equipment and technological processes. The Bank of Albania also suggests prioritizing the implementation of the pension system reform, in the interest of increasing fiscal sustainability./ Monitor

Latest news