Albania has officially entered the era of negative demographic dividend. The European Bank for Reconstruction and Development has sounded the alarm in its Transition report. According to the EBRD, by 2023, Albania will have benefited from a young population as the demographic dividend, as a result of the increase in the workforce, has contributed to additional growth in Gross Domestic Product.
But this year, the tipping point was reached, and population has now become a factor inhibiting the country's economic growth, even serving as a major obstacle.
"The baseline scenario predicts that for the period 2024-2050, the cost of population aging in GDP is calculated at -0.23 percentage points per year. While for the period 2050-2100, population aging will reduce Albania's economic growth by 0.53 percentage points per year," the report states.
Population estimates on economic growth
But this is the baseline forecast. The situation could worsen if the country faces a decline in fertility. According to the EBRD, in the most pessimistic scenario, population aging could reduce the country's economic growth by 1.25 percentage points per year. This places Albania in the country with the highest negative record of population aging among the EBRD economies.
Dramatic projection for Albania
In no other economy will the decline in population have such major negative effects as in Albania, according to EBRD forecasts.
"Fertility paths are highly uncertain and projected long-term growth paths vary under alternative fertility projections," the EBRD notes.
But the aging and shrinking working-age population could also have broader economic consequences beyond GDP growth.
"For example, while weaker aggregate demand can generate deflationary pressure, labor shortages, caused by a shrinking labor force, can push up wages and prices," the report said.
To mitigate these strong negative effects of population aging, Albania will need a net migration flow of 1 percent of the existing population per year, the transition report calculates.
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