LONG-TERM FISCAL IMPLICATIONS OF AGING: THE CASE OF MOLDOVA

Authors

DOI:

https://doi.org/10.36004/nier.es.2024.1-08

Keywords:

demographic aging, national transfer accounts, inter-generational economy, fiscal sustainability.

Abstract

Moldova’s population is shrinking and aging rapidly. From the current 2.5 million, its population is expected to reach 2.2 million by the year 2030 and 1.7 million by 2040. The share of the population aged 65+ is set to rise from 16% in 2023 to 21% in 2030 and 24% in 2040. According to Moldova’s National Transfer Accounts, the elderly aged 60+ account for about 40% of the total budgetary transfers outflows and contribute 20% to the budgetary inflows. If the 2019-2022 age-specific trends in public flows prevail in the next one-and-half decade (baseline scenario), this may lead to severely negative consequences for the Moldovan public finance, with the debt-to-GDP ratio exceeding 80% by 2040. The alternative scenario, in which the deb-to-GDP ratio is allowed to rise only up to the level aligned to Maastricht convergence criteria (60%), requires a gradual growth in fiscal burden, from the current 30% to about 36% by 2040. However, considering the permanent changes in the demographic structure, maintaining debt below the sustainability threshold would involve recurrent increases in the fiscal burden, which is not economically and politically feasible. Additional gains in labor productivity and in labor participation of the working age population are therefore required to ensure long-term fiscal sustainability without eroding the economy’s competitiveness.

Downloads

Download data is not yet available.

References

Groupoftwenty. (2019). Macroeconomics of Aging and Policy Implications. International Monetary Fund / G20. https://www.imf.org/external/np/g20/pdf/2019/060519a.pdf

Bloom, D., Canning, D., & Fink, G. (2011). Implications of Population Aging for Economic Growth. National Bureau of Economic Research. https://doi.org/10.3386/w16705

Borsch-Supan, A. (2013). Myths, scientific evidence and economic policy in an aging world. The Journal of the Economics of Aging, 1-2, 3-15. https://doi.org/10.1016/j.jeoa.2013.06.001

Breyer, F., Costa-Fond, J., & Felder, S. (2010). Aging, health and healt care. Oxford Review of Economic Policy, 26(4), 674-690. http://www.jstor.org/stable/43664650

Center for Demographic Research. (2024). Demographic projection 2024-2040. Chisinau: National Instutute for Economic Research.

European Council. (2024). Excessive deficit procedure. Retrieved from https://www.consilium.europa.eu/en/policies/excessive-deficit-procedure/

Gagauz, O., & Prohnitchi, V. (2022). Gender profile of income and consumption: evidence from the National Transfer Accounts of Moldova. Economy and Sociology(1), 87-99. https://doi.org/10.36004/nier.es.2022.1-08

German Economic Team. (2023). Accelerating growth in Moldova: opportunities and constraints. German Economic Team. https://www.german-economic-team.com/en/newsletter/accelerating-growth-in-moldova-opportunities-and-constraints/

International Monetary Fund. (2023). Republic of Moldova: Debt Sustainability Analysis. IMF.

Lee, R., & Mason, A. (2011). Population Aging and the Generational Economy: A Global Perspective. Chesire: Edward Elgar.

Lindh, T., & Malmberg, B. (1999). Age structure effects and growth in the OECD, 1950-1990. Journal of Population Economics(12), 431-449.

National Bureau of Statistics of Moldova. (2024). Households Budget Survey 2019-2022 microdata.

National Bureau of Statistics of Moldova. (2024). NEET group, aged 15-24 years old by Level of education, Statistical regions, Area, Years and Sex.

National Bureau of Statistics of Moldova. (2024). Databank on population and demographic processes. Chisinau. Retrieved June 6, 2024, from https://statbank.statistica.md/PxWeb/pxweb/ro/20%20Populatia%20si%20procesele%20demografice/20%20Populatia%20si%20procesele%20demografice__POP070/?rxid=b2ff27d7-0b96-43c9-934b-42e1a2a9a774

OECD. (2013). Pensions at a Glance 2013: OECD and G20 indicators. OECD Publishing.

Pena, W. (2019). Population Aging and Public Finances: Evidence from El Salvador. NATIONAL TRANSFER ACCOUNTS NETWORK.

Prohnițchi, V. (2023). Conturile Naționale de Transfer ale Republicii Moldova: metodologie, rezultate, aplicatii. Chișinău: ASEM, INCE. https://doi.org/10.36004/nier.2023.ccdvp1

United Nations. (2013). National Transfer Accounts Manual: Measuring and Analysing the Generational Economy. New York.

World Bank. (2013). Mitigating the economic impact of an aging population : options for Bulgaria . Washington, D.C.: World Bank Group.

Downloads


Abstract views: 119

Published

24-07-2024

How to Cite

Prohnițchi, V. (2024). LONG-TERM FISCAL IMPLICATIONS OF AGING: THE CASE OF MOLDOVA. Economy and Sociology, (1), 79–89. https://doi.org/10.36004/nier.es.2024.1-08