Emerging Europe is facing a demographic crisis. Half a dozen countries in Central, Eastern and Southeast Europe is set to lose two out of five of its citizens by the end of this century and a few counties will lose half their population, as the 90s demographic dip hits the population curve across the entire region.

Fast population growth in Central Asia combined with dwindling populations in Central, Southeast and Eastern Europe will see the Eurasian nations outstrip other parts of the post-communist space before the end of this century — in population terms at least. 

This has knock on effects for their relative economic performance as well. Hampered by bureaucracy and corruption, the Eurasian countries will struggle to mobilise their burgeoning populations to create solid economic gains, but at the same time population decline, especially of working age groups, is already becoming a serious constraint on growth in Central and Southeast Europe. 

To get an idea of the scale of the seismic population changes coming up in the next few decades, long-term forecasts compiled by the UN show that no less than six East European nations — Albania, Bulgaria, Croatia, Latvia, Moldova and Poland — are set to loose 40% or more of their populations by the end of this century.

Every country in Central, Eastern and Southeast Europe will lose a substantial share of their populations to a combination of emigration and natural decline, with the share ranging from 52% in Moldova, the world’s fastest shrinking country, to Russia, where it will fall by just 14%. 

Russia is a bit of an anomaly. It has experienced a natural population decline and is by far the largest economy that spans the Eastern Europe and Eurasia region, but it has also received large numbers of immigrants, mainly from the post-Communist states such as Armenia, Kyrgyzstan, Tajikistan, Moldova, Uzbekistan and Ukraine. As other East European countries get overtaken in population terms by Central Asian states, Russia is projected to maintain the largest population in the region, though it is still expected to drop from 144mn in 2017 to 124mn in 2100. 

By contrast, the populations of the majority Muslim states of Central Asia, plus Mongolia, are set to rise considerably by the end of this century, with the fastest growth anticipated in the wider region’s least developed economy Tajikistan, where the population will more than double over the next 81 years. 

In 2017, the total population of the eastern EU member states amounted to 103.1mn, considerably higher than the 74.8mn in Central Asia and Mongolia. By the end of this century those figures will be turned on their head, with Central Asia and Mongolia having a combined population of 85.6mn, over 20mn higher than the eastern EU member states, which by that time will have seen their populations shrink to just 64.4mn. 

Most states from the wider region followed a similar pattern in the early years of the transition period. Typically populations peaked in 1989 (or 1991 for the post-Soviet states) before suddenly plunging in the early 90s as birth-rates faltered and death rates skyrocketed amid the economic and social breakdown of the early transition years. This was combined with large-scale migration both within and out of the region. 

Yet since then the west and east of the post-communist space have diverged. People marry younger and families are bigger in the majority Muslim Eurasian states, which has enabled their populations to grow even as large-scale emigration continues from some countries.

Meanwhile, birth-rates remain low in Eastern Europe and as these countries have joined the EU — or at least been given liberalised visa regimes by Brussels — their nationals have left in droves to seek higher salaries and better lives in the west. 

This isn’t just an economically driven phenomenon, as outlined in a bne IntelliNews blog, “Wooing back Southeast Europe’s diaspora”. “The drivers for emigration go beyond poverty and lack of jobs to “a sense of being stuck … of having no way of going up on the social scale or building a better future for their children”, says Andrei Tarnea, the then director of the Bucharest branch of international non-profit the Aspen Institute, in an interview with bne IntelliNews in 2017. 

“It’s not just money and a job, they discover a better governed society with functional administrations. Specifically, they find they don’t have to bribe somebody to get a hospital bed, their children are well taken care of in school, trains and buses run on time… this makes it more difficult for them to return,” Tarnea added. 

While it's still early to be sure, officials in Armenia claim that since the velvet revolution of spring 2018, migration has halted. By contrast, a number of participants in the anti-corruption protests in Romania in 2017 and 2018 told bne IntelliNews reporters they were losing hope in their home country, and were considering emigrating. 

According to a 2016 International Monetary Fund (IMF) report, in the previous 25 years, nearly 20mn people left Central, Eastern and Southern Europe (CESEE), amounting to the 5% of the region’s population. 

The emigration has been dominated by educated and young workers, whose exodus has sharply accentuated the already adverse demographic trends in the region, lowered productivity and slowed economic growth of sending countries.

“The drain of skilled labour has lowered productivity growth and pushed up wages, undermining competitiveness,” the IMF said in the report. “Empirical analysis suggests that in 2012, cumulative real GDP growth would have been 7 percentage points higher on average in CESEE in the absence of emigration during 1995-2012, with skilled emigration playing a key contributing factor,” the IMF notes. The report estimates that migration shaved off 0.6-0.9 percentage points of annual growth rates in some countries in South-East Europe (Albania, Montenegro, and Romania) and the Baltics (Latvia and Lithuania).  

Going forward, population decline is expected to become an even greater constraint on growth. The Vienna Institute for International Economic Studies (wiiw) identified demographics as the first of a list of longer-term issues facing the region. In a webinar in March, wiiw economist Richard Grieveson described the projections from the UN and Eurostat for the region as “pretty dire, especially for the working age population”. 

“This kind of demographic decline has never been seen before in peacetime or outside of major famines,” said Grieveson. 

While not looking at all the Central Asian countries, wiiw’s latest medium-term economic projections include Kazakhstan and Turkey, both of which have growing populations, in contrast to the rest of the region. Population growth “is part of the reason why for those countries our forecasts to 2021 are quite positive compared to much of the region,” according to Grieveson. 

“Countries where population growth is set to continue well into the future do tend to be fastest growing economies in overall GDP, though not necessarily in per capita terms,” Grieveson added “Demographics are good for GDP but not per capita GDP.” 

Indeed, the countries expected to see population growth until the end of the century are typically the least developed of the post-socialist countries, though some have considerable oil, gas and mineral wealth. And while their workforces are growing, there is no immediate prospect of persuading factory operators and other investors to move from the largely stable, well connected EU member states in Central Europe to remote frontier markets like Tajikistan, which face myriad obstacles from poor transport infrastructure, to bureaucracy to very high levels of corruption. 

And there is a chance for the more developed countries of Central Europe in particular to maintain their economic lead, by investing into technology.  “By closing the digital gap with Northern and Western Europe, CEE could earn up to €200bn in additional GDP by 2025 — a gain almost the size of Portugal’s entire economy in 2017,” projected a 2018 report from consultancy McKinsey. Companies active in the region are already investing into new technologies, including digitisation and robotisation in response to growing labour shortages. 

In a sign of the scale of the problem, respondents to a European Council on Foreign Relations (ECFR) survey from Poland, Romania and even Hungary were among those saying they were more worried about emigration than immigration — a perhaps surprising revelation given the right wing Hungarian government’s obsessive anti-immigration stance. Meanwhile governments from the region are looking to stem the demographic decline either by encouraging their citizens to have more babies, by encouraging migration (in some countries at least with a clear preference for migrants from fellow Christian countries) and trying with various degrees of success to persuade their emigres to come home. 

Yet such steps are unlikely to reverse the demographic catastrophe unfolding in the region, or to prevent East European states being overtaken by the growing populations of Central Asia, as the latest revision of the UN World Population Prospects shows. 

Uzbekistan to overtake Ukraine in 2039 

bne has long speculated that Uzbekistan’s large population will fuel consumer led growth and could even lead to the arrival of large investors in search of a low cost workforce. Yet so far incomes have remained too low for consumption led growth on any significant scale, and under former president Islam Karimov foreign foreign investment was stymied by laws such as that banning repatriation of profits, not to mention investors being at the mercy of a rapacious local elite with the late president’s eldest daughter Gulnara Karimova — dubbed the “robber baron” in a leaked US embassy cable — being a prime example. As a result it was oil and mineral rich Kazakhstan, rather than more populous Uzbekistan, that shot ahead of its neighbours during the transition period. 

^{Young Uzbek women at the spices and silk festival in the historic city of Bukhara. Source: http://veton.picq.fr}

Where human capital was concerned, Tashkent was doing the opposite of investing into its people, interrupting their education and sending schoolchildren, students and teachers off to the cotton fields as effective slave labour for up to a couple of months every autumn. By the end of the Karimov era, it had become evident that Tashkent’s social welfare and education systems were unable to keep up with the rapid population growth in the country, said a 2016 comment from the Carnegie Endowment for International Peace. Analysts from Stratfor more recently pointed to the “poor socio-economic conditions caused by low global energy prices and rapid population growth”, which have become a contributor to growing militancy. 

Since Karimov’s death, things have slowly been beginning to change. His replacement Shavkat Mirziyoyev has embarked on a gradual reopening of the one-time hermit state, with the launch of its successful debut eurobond, and plans for a new wave of privatisations. Recognising this, in little more than a year since Karimov’s death the World Bank had Uzbekistan as one of the world’s top 10 most active reformers. Still, it’s early days to say how deep the reforms will go and to what extent they will lead to greater opportunities for the Uzbek people. 

Population growth in the Central Asian country is expected to continue for the coming decades, eventually peaking at around 41.5mn in 2061, before dropping back to 38.1mn by the end of the century. 

Ukraine’s still relatively large population compared to its western neighbours should in theory mean it could follow in the footsteps of the smaller Visegrad countries in attracting FDI, taking advantage of the labour squeeze in nearby states like Poland and Slovakia with its much larger working age population. But investments like these are the exception rather than the rule. The country’s tumultuous politics and official corruption are deterring investment, as highlighted by the slump in production at the Eurocar plant close to the Slovakian and Hungarian borders after two economic crisis, a change of government and a war with Russia, as reported by bne IntelliNews’ Fabrice Deprez last year. 

^{Millions of Ukrainians have left their country, at least temporarily, to work in Poland and other EU member states.} 

Instead, incomes well below those in CEE — Ukraine slipped behind Moldova to become Europe’s poorest nation according to the IMF — and the failure to deliver on the Maidan promises of a better standard of life for ordinary Ukrainians, not to mention the war in the East, have led to the working age population leaving in their millions to seek a better life in nearby EU countries, a process that snowballed after President Petro Poroshenko won a much-desired visa-free travel deal between Ukraine and the EU in November 2016. It’s not entirely clear how many Ukrainians have left the country, several million people are estimated to have left for Poland, at least temporarily. Not only that, but Russia recently started looking to Russian speakers in Ukraine and other ex-Soviet countries to move to Russia and revive its own flagging demographics. 

Ukraine’s politics are so turbulent it’s hard to see far into the future, but this weekend's presidential election offers hope to many Ukrainians, as comic and outsider Volodymyr Zelenskiy swept to a crushing victory over unpopular oligarch Petro Poroshenko. However, whether Zelenskiy will manage to make real reforms, and, criticially, if his party can win enough seats in the autumn general election, remains to be seen. Longer term, unless there are radical reforms and a change for the better in terms of living conditions, the exodus from Ukraine won’t be reversed, and this comes on top of the natural decline seen across Eastern Europe.

Turkmenistan to overtake Hungary in 2055

Turkmenistan is the true basket case of the post-socialist countries. The desert nation has the world’s fourth largest gas reserves, which with a population of only around 5mn should mean prosperity. But the bizarre regime of current President Gurbanguly Berdymukhammedov and even more so his predecessor Saparmurat Niyazov have driven the country close to bankruptcy with economic mismanagement and lavish prestige projects if reports coming out of Ashgabat are correct. 

^{The Turkmen government has spent billions on presteige projects in Ashgabat but many people outside the capital are believed to be living in poverty. Source: mil.ru.}

Turkmenistan remains in the midst of an economic crisis. The country’s budget was drained after the oil price shocks of 2015-2016 rocked the hydrocarbon export-dependent economy and Russia stopped buying Turkmen gas. The remote, tightly controlled nation has embarked on an attempt to diversify its economy, such as with petrochemical production facilities, and introduce some reforms, mostly based on recommendations from the IMF. The pace and scope of the reforms, however, has not been significant.

In December, Berdimuhamedov said that Turkmenistan needs to adopt a “new economic model” for the years through to 2025, but did not elaborate what the model would entail. He has also ordered the government to control the prices of essential groceries, merchandise and social services as it scrambles to balance the public’s growing discontent and its own cost-cutting measures. Last year, there were reports of passport-based bread rationing in the remote nation.

Even accurate data on population and migration is hard to come by from the secretive desert state, but reports that tens of thousands of Turkmens have been placed on a blacklist and banned from leaving the country indicates Ashgabat is worried about losing educated, working age people in particular. 

Turkmenistan’s population is at least growing strongly, which is not the case in Hungary, whose population is expected to dwindle from over 9.7mn today to just 6.4mn in 2100, dropping below Turkmenistan’s around the 8mn mark in 2055. 

In an attempt to address what is seen as the country’s demographic crisis, Prime Minister Viktor Orban announced a seven-point family protection action plan in his state of the nation address, seen as the start of his campaign for the May European Parliament elections, in February. 

Hungary’s population is decreasing by 40,000-50,000 each year, putting it among the fastest shrinking nations in the world along with other Central and Southeast European countries. Although the increase in family support has helped fertility rate rise from 1.2 to 1.5 in the last eight years, the percentage of women of reproductive age will be significantly lower in the future, which makes it a mounting challenge to overcome the demographic trap.

Orban's fiercely anti-immigration stance rules out using immigrants to address the labour shortage. Instead, he has sought to boost Hungary's birthrate, as he seeks to present his country as the last bastion of Christian values. Even though the cabinet's family support schemes favour the upper-middle class families with at least three children, they are backed by around 80% of the population, surveys have shown. The generous handouts also helped the government led by Orban's Fidesz party win its third supermajority at the last election in April.

Tajikistan to overtake Romania in 2058 

Central Asia’s poorest economy Tajikistan is forecast to experience the fastest growth across the post-socialist space by the end of this century, more than doubling to over 18mn by 2100. The government has drawn up a national development strategy, aimed at turning Tajikistan into a modern industrial state. It aims to increase GDP to 2.6 times the current level by 2030, and to diversify the economy, in particular through industrialisation. 

Yet the signs so far are that Tajikistan will struggle even to feed its fast growing population, let alone take advantage of the growth in its working age population to boost the economy. 

^{More than one in 10 Tajiks are estimated to have left the country to find work due to the poverty and lack of opportunities at home.} 

Already an estimated 1mn of its 9mn population are in Russia working at any one time, with smaller numbers heading for other countries such as Kazakhstan. Tajikistan (along with neighbouring Kyrgyzstan) is among the most remittance-dependent countries in the world. As a tiny nation on China’s western border, perhaps inevitably the economy has become increasingly dependent on Chinese money, but reports from Tajikistan say this has had little impact on employment as major Chinese contractors typically bring their own workers with them. Tajikistan has been identified as one of eight countries at risk of debt distress due to its borrowing from China — a potential problem for future generations. 

Three quarters of Tajikistan’s populations live in rural areas, putting it among the world’s least urbanised countries; as populations grow, heavier migration to Dushanbe and other urban centres can be expected, as well as abroad. While agriculture is an important part of the economy, Tajikistan has a food deficit, that is only likely to worsen as the population — many of whom are engaged in subsistence farming — grows. “The small, mountainous, landlocked country often faces natural disasters and threats to food security, which negatively affect human development and economic growth,” says a report from the International Federation of Red Cross And Red Crescent Societies. “”Nutrition indicators for the country are the worst in Central Asia, and chronic malnutrition is of significant concern.”

As Tajikistan's population grows, Southeast Europe’s most populous country and largest economy, Romania will see numbers decline by 39% by the end of this century. The country has already seen a mass exodus of working age Romanians to seek better opportunities in other EU member states, in particular Italy and Spain, since it joined the EU in 2007.

^{Anti-government protests in Bucharest in early 2017. Many of those on the streets were young, educated Romanians who are deeply fed up with official undermining of the country's anti-corruption efforts.} 

Like the major CEE economies, Romania has benefitted from considerable inward investment, initially into low value manufacturing, but increasingly now into high tech sectors. The country has emerged as a centre for the IT and outsourcing sector, with companies looking increasingly to smaller university towns to meet demand for workers. But Romania now faces a critical skills shortage, with more than four out of five employers in the country are facing difficulties in finding employees with the skills they need, a 2018 survey from international recruiter ManpowerGroup showed. This puts Romania among the greatest sufferers from the global talent shortage identified by Manpower. With emigration set to continue — especially as the once vibrant anti-corruption fight is undermined by the government — this will only increase. 

 

Mongolia to overtake Bulgaria in 2076

 

Mongolia is already experiencing rapid urbanisation that has left the capital Ulan Bataar struggling to cope. The hills around the capital, a largely communist built city now with with many new builds added, are densely dotted with traditional felt yurts, now forming massive shanty towns whose population has doubled that of the inner capital. Utilities and infrastructure simply can’t keep up, and as a result residents of the yurt shanties are burning wood or whatever solid fuels they can find during winters in the world’s coldest capital. This means Ulan Bataar is also one of the most polluted cities in the world, with the government extending school holidays this winter so children could avoid the foetid air that is causing serious heart and respiratory illnesses. 

^{Cranes tower above a yurt shanty town in the Mongolian capital Ulan Bataar.} 

Nor is life too easy out in the steppes, where overgrazing has degraded an estimated 70% of pastureland, with some now turning into desert. This is a vicious circle says the WWF: “The consequences of changing livestock herding techniques and the over-exploitation of land and plant resources, coupled with effects of climate change lead to decline of animal and plant habitat areas and loss of resources”. Climate change is further causing problems for herders, with the extreme cold winters known as “dzuds”, that result in the deaths of millions of livestock, becoming more severe, in turn driving more Mongolians in to the cities. 

Economically Mongolia was riding high, becoming one of the fastest growing economies in the world during the 2000s thanks to the exploitation of its vast mineral wealth, mostly destined for the Chinese market. But this failed to result, so far, in wider and more sustainable growth and a fall in commodities prices plunged Mongolia plunged into a recession from which it is only now recovering following a $5.5bn IMF-led bailout in 2017. 

Bulgaria has the dubious distinction of being projected as the world’s fastest shrinking nation in the first half of this century, the UN data shows. Its population has already declined by 2mn since it peaked at just under 9mn in 1989, and is forecast to almost halve to just 3.7mn by the end of the century. 

Living in the EU’s poorest nation, Bulgarians — including young, educated Bulgarians — have left the country in droves since it joined the bloc in 2007, leaving behind them deserted villages and unfilled workplaces. As in Romania, the country has been unable to stem rampant corruption, failing even to get a serious anti-corruption drive off the ground. Case in point: at this moment a massive corruption scandal concerning apartments cheaply sold to top officials (including the head of the anti-corruption agency) is still unfolding. Efforts to develop emerging sectors such as IT are stymied by the ongoing brain drain from the country.

 

Kazakhstan to overtake Poland in 2079

Kazakhstan’s population has undergone more of an ethnic shift than an increase over the last three decades. It took a hit after the collapse of the Soviet Union, to a large extent because of the exodus of ethnic Slavs and Germans, as well as the negative impact of the transition on demographics seem across the post-Soviet space. At the time of the breakup of the Soviet Union, Kazakhs were a minority in their new country, but by 2018 they made up around two-thirds of the population. And population growth was rapid during the boom years of the early and mid 2000s, so by 2011, the overall size of the Kazakh population had already exceeded that in the Soviet era. At the same time, Kazakhstan was developing its massive hydrocarbon and mineral resources, so per capita GDP soared. Looking ahead, growth isn’t expected to be as fast as in fellow Central Asian states, especially Tajikistan, but a steady increase is anticipated for the rest of this century. 

In terms of providing for and nurturing the population, Kazakhstan has a pretty good record so far of investing some of its oil and gas wealth into education, first with the Bolashak Programme under which thousands of students were sent to foreign universities, and later with the opening of the Nazarbayev University in the capital, newly renamed Nur-Sultan. 

But there is a patchy record in freeing up businesses from bureaucracy to allow them to grow and provide workplaces for the growing population; corruption, nepotism and the high degree of state ownership are all issues that the authorities will have to tackle, not least to maintain political stability. At present, there is some uncertainty about Kazakhstan’s future course as the country’s long-standing president Nursultan Nazarbayev stepped down in March after three decades in power. A snap election is due to take place in June, which may provide some more clarity. 

Breed like rabbits, was the message from a video from Poland’s health ministry, released on YouTube in 2017, at a time when it was becoming evident that Poland’s population was falling steadily despite rising wages and living conditions in Central Europe’s largest country. 

Continuing the current decline, the population is due to fall behind that of Central Asia’s economic powerhouse in 2079 at around 25mn people, after which it will continue the decline to 21.2mn by the end of the century. 

Poland’s dwindling population has increasingly become a constraint on growth, as unemployment has dropped to a post-Soviet low and wages risen to record levels. The answer in the staunchly Catholic country, ruled since 2015 by the ultra conservative Law and Justice (PiS) has been to encourage Poles to have more babies. Meanwhile, restrictions on abortion sparked mass protests in the Central European country. Like neighbouring Hungary, Poland, which has clashed with the EU over migrant quotas. Warsaw has a strong anti-migration stance, though it has been happy to take in fellow Christians from Ukraine to fill vacant workplaces.