Donate
X

Upcoming Activities

Let's Be Friends

Macedonia’s population in 2100: The incredible shrinking country

By Tuesday November 20th, 2018Announcements

After peaking in 2023, Macedonia’s population will shrink to 1.5 million by 2100: a 30 per cent reduction on 2018. The population will also be much older in 2100; more than half the population will be over 65 years. Without significant policy changes Macedonia faces a future of lower economic growth and budget difficulties.

While the world grows, Macedonia and Europe shrink

According to the UN’s 2017 population projections, the World’s population will increase by 47 per cent between 2018 and 2100 reaching 11 billion. Leading the way are Africa (247 per cent), Oceania (74 per cent), and Northern America (37 per cent). Europe is the only continent where the population is projected to be lower in 2100 compared to 2018 (-12 per cent).

Macedonia’s projected population decline of -30 per cent to 2100 matches the story for most of Europe (graph 1). The decline is even starker for many of Macedonia’s near neighbors. Between 2018 and 2100, Bulgaria’s population will fall by -45 per cent, Albania’s by -44 per cent, Serbia’s by -38 per cent, Bosnia by -37 per cent and Greece by -33 per cent. While the world grows, Macedonia and Europe shrink.

Graph 1:

Not all of Europe is shrinking however, Northern Europe’s population is projected to grow by 21 per cent; of note is the UK (22 per cent), Sweden (34 per cent), Ireland (33 per cent), and Norway (52 per cent). In Western Europe, France (14 per cent), Belgium (13 per cent), and Switzerland (23 per cent) also have projected increases to 2100. Germany (-14 per cent) and Russia (-14 per cent) are both projected to decrease.

An ageing population

Most countries in the world are also facing rapidly ageing populations (graph 2). “China will get old before it gets rich”[1]. Even Africa with its large expected population growth will have a quadrupling in the number of aged relative to working age.

Graph 2:

[1] FTSE Russel (2019) ‘Understanding China’s Economic and Market Developments:Managing China’s Transition Into Global Benchmarks’, P14: https://www.ftserussell.com/sites/default/files/ftse_russell_understanding_chinas_economic_and_market_developments_sept.pdf

 

Macedonia is no exception to the aging trend: the percentage of elderly to working age is expected to increase from 20 per cent in 2018 to 56 per cent in 2100. Graph 3 below shows the percentage of old people to the total population. Interestingly by 2025 Macedonia will have more old people than young people.

Graph 3:

Less children, immigration, and longer life expectancies

Population growth is mathematics not a mystery. Less children and negative net migration will result in a decreasing population. This cause and effect can be seen in graphs 4 and 5 below for Macedonia. Total fertility rates typically decrease as incomes rise, education rates rise, and infant mortality decreases. Couples get married later, start having children later, and have less children overall. Similarly, slowing population growth and increasing life expectancies will result in an ageing population.

Graph 4:

 

Graph 5:

Why is a declining and ageing population a problem?

An ageing and decreasing population will slow and even reverse economic growth. Less people means less workers and less GDP.

An ageing population combined with negative economic growth will also put government budgets under increasing pressure. Going forward, the government will face increasing medical and pension expenditure with decreasing income and consumption tax revenue. Macedonia’s current fiscal position and public debt is already significant (though not alarming). Between 1993 and 2017, Macedonia averaged a budget deficit of -2.3 per cent of GDP[1]. Public debt is currently 49.1 per cent of GDP[2]. These are likely to increase as the population ages.

What can Macedonia do?

There are three main approaches Macedonia can take to address the double challenge of a decreasing and ageing population. First Macedonia needs to slow the rate of population decrease and dare to increase it. Secondly, Macedonia needs to increase the productivity per worker through better education and investment. Third, Macedonia needs to better engage the aged and women in the workforce.

It is no easy task to slow or turn around a decreasing population. Demographics have momentum. Changing fertility rates is very difficult without extreme measures, and as China shows such measures have many unforeseen consequences. Macedonia has had some success in encouraging women to have more children through government policy. The last two national strategy documents for addressing the demographic development of Macedonia (2008 to2015[3] and 2015 to 2024[4]) have had a positive impact on the fertility rate. The national strategies set out good policy goals for improving the preconditions for couples to marry and have children, and for providing financial and child-care support for couples once they do have children. These policies have helped increase the total fertility rate (since 2013). The UN expects this growth to increase into the future and this helps to explain why Macedonia’s demographics will be slightly better than its near neighbors. Despite this growth, Total Fertility is not expected to reach replacement level again in the foreseeable future. Macedonia must look elsewhere for solutions to its declining and ageing population.

The countries in Northern Europe and Western Europe who are projected to have larger populations in 2100 are achieving this largely through positive net migration. None of them have fertility rates above the replacement rate but they all have positive net migration and are projected to have so in the future (graph 6). Macedonia needs to address its negative net migration.

How does a country like Macedonia with a long history of net migration become a receiving country? The answer is economic growth and macroeconomic stability. Ireland is the role model here. For much of the past 200 years Ireland has been exporting people to the new world. However, with the Good Friday Agreement in 1997 and higher economic growth in the 1990’s, 2000’s, and 2010’s Ireland went from being a sending nation to a receiving nation (graph 7). Not only did more people migrate to Ireland but also less people left. Macedonia needs to focus on stability and sustained economic growth. When economic prosperity comes to Macedonia, Macedonia will become a hub in the Balkans.

In particular, and as recognized by the Government’s national strategies for development, the diaspora represents a key target group for migrants to Macedonia. Compiling better statistics on the diaspora remains a first priority.

Graph 6:

[1] World Bank (2018)’ World Development Indicators’, http://databank.worldbank.org/data/reports.aspx?source=world-development-indicators.

[2] World Bank (2018), ‘Western Balkans Regular Economic Report, No. 14’, p57: http://pubdocs.worldbank.org/en/194301538650996304/rev2-WBRER14-WQ-web-ENG.pdf

[3] The Ministry of Labor and Social Policy for the Republic of Macedonia (2008), ‘Strategy for Demographic and Development: 2008 to 2015’, http://mtsp.gov.mk/WBStorage/Files/strategija_demografska.doc

[4] The Ministry of Labor and Social Policy for the Republic of Macedonia (2015), ‘Strategy for Demographic and Development: 2015 to 2024’, http://www.mtsp.gov.mk/content/pdf/dokumenti/9.5_%D0%A1%D0%A2%D0%A0%D0%90%D0%A2%D0%95%D0%93%D0%98%D0%88%D0%90%20%D0%97%D0%90%20%D0%94%D0%95%D0%9C%D0%9E%D0%93%D0%A0%D0%90%D0%A4%D0%A1%D0%9A%D0%98%20%D0%9F%D0%9E%D0%9B%D0%98%D0%A2%D0%98%D0%9A%D0%98%20%D0%9D%D0%90%20%D0%A0%D0%9C%202015-2024.pdf

 

Graph 7:

The second approach for addressing Macedonia’s ageing and projected decreasing population is to increase the productivity of individual workers. With a declining number of workers Macedonia will need more from each worker. To increase the productivity of workers requires increased education and capital intensity.

Judging by the last set of results from the 2015 PISA education scores, Macedonia has room to improve its education. Out of 73 countries sampled, Macedonia ranked 70th for Science, 69th for maths, and 70th[1] for reading[2]. Macedonia’s mean scores fell in all three areas from the previous results.

In terms of capital intensity, Macedonia is ranked 80 out of 174 countries using a 10-year average (2005 to 2014) of the ratio of capital stock (PPP 2011 USD) to the number of people employed in the workforce[3]. Thus, there is also room to improve in terms of productivity.

Continued investment in manufacturing and mining will help increase average capital intensity. Manufacturing and mining are typically among the most capital-intensive sectors. In recent years FDI has helped these sectors grow and more FDI will be needed in the future to continue this growth.

There are also productivity gains to be had in agriculture as land parcels are consolidated to allow greater efficiencies. On average farms are under 2 hectares in size and are spread across 4 to 5 parcels. This makes mechanization difficult[4]. The Government has been working with the FAO (UN’s Food and Agriculture Organization) since 2014 to address this.

The third approach Macedonia can take to address its projected declining and ageing population is to increase participation in the workforce particularly among the aged and women.

Macedonia’s participation rate for those aged over 65 years (2.6 per cent) is the fourth lowest in Europe and more than four times lower than Serbia’s (10.9 per cent) (graph 8). Countries like Iceland, Israel, and Sweden leading the way.

Iceland’s policies on engaging the aged in the workforce can be a model for Macedonia. First, lifelong learning in Iceland is more than double the EU average. The main contributors to this is that the cost of continuing education is covered in most labor agreements, and that many social organizations have come together to provide continuing education[5]. Second, in Iceland there is no pension for early retirement and for each year an individual delays retirement up until 73, they receive a 5 per cent increase to their pension[6].

Macedonia can also increase the percentage of women in employment. The ratio of women in employment to men for Macedonia in 2018 is 0.636 women to one man[7]. For Southern Europe the ratio is 0.727 women per man, 0.73 for Upper-Middle Income countries, and 0.777 for Eastern Europe. Macedonia is behind many of its neighbors and comparable countries. Efforts to increase women in the workforce must continue and will help mitigate the effects of the ageing population on the economy.

Graph 8:

[1] Note only 72 countries were sampled for reading.

[2] OECD(2016) ‘PISA 2015 Results: Volume I’, https://www.oecd-ilibrary.org/docserver/9789264266490-en.pdf?expires=1538991060&id=id&accname=guest&checksum=C1AF61487B6CEE5F92097E286136D414

[3] University of Groningen (2018) ‘Penn World Tables version 9.0’, https://www.rug.nl/ggdc/productivity/pwt/

[4] FAO (2015), ‘The former Yugoslav Republic of Macedonia and FAO, Partnering to achieve sustainable agricultural and rural development’, http://www.fao.org/3/a-au081e.pdf

[5] Danish Technological Institute, (2011), ‘Assessment of the Labour Market in Iceland’, p62, http://thjodmalastofnun.hi.is/sites/thjodmalastofnun.hi.is/files/assessment_of_the_labour_market_in_iceland_2011-andersen_hougaard_and_olafsson_0.pdf

[6] Ibid, p69

[7] ILO (2018) ‘Employment to Population Ratios – ILO Modelled Estimates, May 2018’, https://www.ilo.org/ilostat/faces/oracle/webcenter/portalapp/pagehierarchy/Page3.jspx;ILOSTATCOOKIE=FEB3AvY_HsyHD6WFnjwJ-QekTOwS1kGgZ9oXxq0G1F_tnxDqITVM!1254440622?MBI_ID=7&_afrLoop=2655985160688909&_afrWindowMode=0&_afrWindowId=d2m9tbf8x_1#!%40%40%3F_afrWindowId%3Dd2m9tbf8x_1%26_afrLoop%3D2655985160688909%26MBI_ID%3D7%26_afrWindowMode%3D0%26_adf.ctrl-state%3Dd2m9tbf8x_57

 

Conclusion

Demographics will weigh against Macedonia’s future economic growth and will cause fiscal difficulties. Macedonia’s population is projected to peak in 2023 and will be 30 per cent smaller by 2100. The population is also getting older: the percentage of aged to working age is expected to increase from 20 per cent in 2018 to 56 per cent in 2100. Macedonia is not alone in these challenges, as most of Central, Eastern and Southern Europe are experiencing a similar or worse demographic decline. Northern Europe with countries like Ireland are Norway, however, show that immigration can turn the decline around. Stable and protracted economic growth would help Macedonia retain its young people while attracting people from the diaspora and beyond.

To ensure continued economic growth in the face of a shrinking workforce, Macedonia must better engage the aged and women in the workforce, and increase productivity per worker. Increased investment in more capital intensive industries is one way; FDI has helped here in recent years and can continue to play a role in changing the face of Macedonian industry. There are also gains to be had in agriculture, particularly through land consolidation. An improved education system also promises a huge dividend. Industries of the future will need well-trained and innovative workers. Improvements in the education system need to be an utmost priority. If Macedonia is to be smaller then it must also be smarter.

Article by Brendan Filipovski, Research Manager

Go back