Countries of the region are increasingly focused on their extremely unfavorable demographic processes. This week, there were worrying news from Croatia, most recently the Bloomberg news agency presented the sad story of Estonia and Latvia. Meanwhile, in Hungary, the government wants to focus on the need for a demographic change.
There are countless striking predictions of the demographic prospects of the Eastern European region, Bloomberg is now on the spot, this time in Estonia and Latvia. According to the United Nations Population Projection, nine out of the 10 fastest growing population in the world are in this region. The open borders within the European Union and the prospect of greater opportunities in the western countries are emigrating, while populism that is sweeping across the continent makes it almost impossible for African and Middle East immigrants to settle in the area.
Vjaceslavs Dombrovskis, former Latvian economy minister, currently head of the Certus research firm, compared the emigration of young people to the industrial revolution when people moved from villages to towns. In these Eastern European countries, there is a risk that they will be vacant as a rural settlement, where people can rest for a weekend or weekend.
The negative demographic trend is spectacular in the Baltic countries. Latvia has lost 25% of its population since the end of Soviet surveillance in 1991, currently 1.96 million people are living here. According to the United Nations forecast, a further 22% decline in population by 2050 and a total of 41% by 2100. Ukraine and Moldova may suffer even more serious losses.
According to Bloomberg, a number of factors play a role in the decline of the population of the region, and in Latvia, all of them can be observed: lower prosperity than developed EU Member States, inadequate economic growth and strong anti-immigration.
Mostly young and skilled workers have left the country, which reduces the number of working people in the country and thus fewer people are able to finance retirement benefits. Mihails Hazans has become demographically new to every third 25-34 year-old in 2014 and at the same time every fourth of the population lived abroad. People from the protective parts of Latvia move away, they do not set up a family, they do not buy houses, the school system is gradually being built, and the population is getting older. There are local young people (who have worked abroad) who expressed the opinion that some settlements disappear after 40 years and are depopulated. Ten years ago, emigration was more of an exotic decision, but nowadays it has become commonplace, 90% of the Latvians have friends or relatives who have moved abroad.
Nevertheless, the Latvian Government has an optimistic vision, and it is expected that by 2022 the rate of emigration will decrease considerably, as average wages in Latvia can reach the minimum wage level in the target countries.
Dombrovskis’s former Minister of Economic Affairs has put Ireland as a successful example. Latvia is just like Ireland in the 80s. The Irish economic miracle was due to the favorable tax environment that later attracted the tech companies. There are opinions that Latvia could be a really good place for tech companies and the country offers favorable conditions for businesses. However, the biggest barrier to the establishment of foreign companies is the lack of skilled workers. That is, it is a vicious cycle that is very difficult to overcome. Foreign investors should be convinced that the country can handle the problem of emigration.
Bloomberg’s article notes that Latvia may be a good example of Estonia, the home of Skype. Estonia has long been a digital paradise for foreign investors. Allan Puur’s Estonian demographer, in this regard, notes that the country’s more favorable position also follows from close ties with Finland. Many just walk through Helsinki to work from Tallin. Among the international investors who choose Estonia are the robot manufacturer ABB, Swedbank, SEB and Nordea banks. Regardless of this, Estonia’s long-term demographic prospects are horrific as well.
portfolio.hu / Photo: World Bank Group