Fertility rates have fallen sharply and populations are ageing across most economies where the European Bank for Reconstruction and Development (EBRD) invests, pushing demographic pressures to the forefront of economic policymaking, the bank said in its latest Transition Report published on November 25.

The “Transition Report 2025-26: Brave Old World" argues that demographic change has become “a defining challenge for long-term growth”, with countries in Emerging Europe already facing labour shortages, rising pension costs and declining working-age populations. In many cases, the bank warns, “economies are getting old before they get rich”.

“Demography is not destiny – how economies respond is a matter of choice,” said EBRD chief economist Beata Javorcik, as quoted in an EBRD press release. “Ageing societies can encourage individuals to work longer, attract and integrate migrant workers, and harness technology to sustain growth. Younger economies can invest in education and entrepreneurship to turn their demographic potential into a lasting advantage.”

Falling fertility

Across the EBRD regions, fertility levels have dropped well below the replacement rate of 2.1 births per woman. The report attributes this shift to later family formation, changing social norms, affordability pressures, and evolving marital patterns.

Despite government attempts to reverse the trend — including “cash transfers, subsidised childcare and extended parental leave” — the EBRD found that such measures have had little durable effect. “Even generous policies often yield only temporary increases in birth rates,” the report concludes.

More than two-thirds of the world now lives in countries with sub-replacement fertility. That includes almost all post-communist economies, where family size has fallen despite comparatively modest income levels. “Fertility rates in post-communist economies have dropped below replacement levels, while GDP per capita has remained relatively low,” the report says.

Previously, population growth surged in the 20th century as mortality fell and fertility remained high. Global population growth peaked at more than 2% during the 1960s, fuelling fears of overpopulation. But that momentum has reversed.

“Today … fertility is falling fast in both high- and low-income countries,” the report notes. Meanwhile, life expectancy climbed globally from 48 years in 1960 to 73 in 2023. That combination has accelerated ageing worldwide.

The EBRD estimates that shrinking working-age populations will cut annual per capita GDP growth in emerging Europe by almost 0.4 of a percentage point (pp) between 2024 and 2050.

Economic impact

“Emerging Europe is ageing. Low fertility and a shrinking workforce will increasingly weigh on its growth prospects,” Javorcik said in her foreword to the report.

The report highlights broad consequences: labour scarcity, rising wage pressures, increased fiscal strain and slower innovation. It warns that multiple policy interventions will be needed simultaneously.

“Raising the pension age is politically unpopular, and migration at the level required to offset demographic decline would be politically contentious,” Javorcik cautioned. “Increasing innovation is far from trivial, and while advances in AI may help some workers become much more productive, others may be displaced and need to retrain.”

Some countries are already seeing populations shrink not only because births are declining, but because deaths now outnumber births. Bulgaria, Hungary, Latvia, Serbia and Ukraine have all recorded negative natural population change.

In others, migration is amplifying demographic decline. Bosnia & Herzegovina, Georgia and Moldova have each lost around 30% of their populations since 1990, almost entirely due to emigration, the EBRD said.

Reshaping labour markets

The demographic shift is already visible in job structures and skills demand. Employment is moving toward “age-friendly” roles with lower physical demands and greater flexibility, helping older workers stay active longer.

Meanwhile, technological disruption is gaining momentum. “Artificial intelligence can boost productivity in some occupations, but it may displace workers in others,” the report says, highlighting the need for “continuous reskilling and lifelong learning”.

Javorcik described the situation as a "grey wave” reshaping the global economy. “Fewer births, more retirees and fewer workers to shoulder the fiscal burden of pensions and healthcare have prompted warnings about the economic consequences of ageing … New technologies hold promise, but they will not fully compensate for a shrinking workforce.”

Younger regions

While Emerging Europe wrestles with shrinking labour supply, other EBRD regions — particularly Central Asia and the Southern and Eastern Mediterranean (SEMED) — currently benefit from larger youth cohorts.

“Younger economies… benefit from youthful populations that can sustain near-term growth,” Javorcik said. But she warned the opportunity may close quickly.

“This window of opportunity will be short lived,” she said. “Turning a growing labour force into a genuine demographic dividend requires the rapid creation of high-quality jobs, the strengthening of education and initiatives to foster entrepreneurship.”

Sub-Saharan Africa, where fertility remains higher, could see the largest gains — a boost of nearly 0.4pp to annual GDP per capita growth, assuming labour absorption succeeds.

Migration is one of the few mechanisms that can partially reverse ageing and workforce shrinkage, but the bank warns expectations must be realistic.

The report states: “Offsetting population ageing through migration alone would require unprecedented inflows of migrant workers.”

In younger economies, improving access to finance and supporting new businesses will be essential to create jobs for expanding labour forces.

Political challenges

Beyond economic pressures, demographic change is altering politics, public spending priorities and social attitudes.

“As populations age, older generations increasingly dominate electorates and leadership positions,” the report states, noting that older voters tend to prioritise pensions and healthcare, while younger citizens push for education, affordable housing and climate investment.

Because older people vote at higher rates, their preferences disproportionately shape policy.

“The global median voter is now approaching the age of 44,” the report notes, warning that political systems risk becoming “locked in” against needed reforms.

The study concludes that demographic shifts will define economic strategy for decades. Without sustained action, population ageing “will weigh heavily on growth and living standards”.

But the EBRD report says the outcome is not predetermined: “Governments that act early and implement inclusive, well-designed reforms can turn demographic headwinds into opportunities — sustaining growth, safeguarding fiscal stability and advancing prosperity in this ‘brave old world’.”