The demographic challenge of Eastern Europe and potential policy options

Eastern Europe’s economic convergence toward the West has come at a high cost. Outward migration to Western Europe was a key driver, and negative demographic trends are increasingly becoming a major socioeconomic challenge. Population projections foresee a drop in the number of inhabitants of Eastern European countries of about 5 per cent to 15 per cent over the next three decades. The available policy options to counter these demographic trends include: increasing productivity, scaling up immigration, raising activity rates or elevating fertility rates. However, the room for more female employment is rather limited in the region; the level of labour-saving robotization is still quite low, when compared to Western Europe; and most countries in the region are not well prepared for the digital economy. Successfully implementing new policies to counter adverse demographic trends also depends on the functioning of institutions. Unfortunately, recent years have seen a rise of authoritarianism and state capture in Eastern Europe, with an anti-immigration stance and negative implications for institutional quality.