The Lithuanian Economy - May 2016
Greying Lithuania – policy action required on all fronts
  • Population of Lithuania is ageing rapidly
  • Challenges to public finance and economy, but also new business opportunities
  • Higher employment rates and immigration would yield positive results, but innovation is crucial

Population of Lithuania is ageing rapidly

The share of elderly in population has almost doubled since Lithuania regained independence. By 2040 almost one third of Lithuania's population will be over 65 and the median age of the population will increase by more than five years. The main reasons behind ageing population have been increased life expectancy, low fertility and negative net migration.

Higher taxes, shortage of workers, less innovation

With rising dependency ratios it will become harder to meet rising pension and health care commitments - this may require higher taxes on current shrinking work force. Due to population ageing a shortage of workers may become even more pronounced. This may create disincentives to work and invest, innovation will be harmed. Businesses related to the young and middle-aged people might suffer, while the demand for goods and services for the elderly will increase.

Policy action is required on all fronts

Bringing the elderly back to the labour market, as well as including more of the young would alleviate the negative effects on the economy. Life expectancy will continue to increase, so should the duration of the working life. It remains unsure whether government policies for increasing the birth rates would yield any results, but the government can do a lot by increasing immigration. However, moving up the value chain is of utmost importance.

PDF The Lithuanian Economy - May 2016

For more information about this report, please contact Mrs. Laura Galdikienė, +370 5 258 2275, Laura.Galdikiene@swedbank.lt

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