Portal de Periódicos da CAPES

Republic of Poland: Selected Issues

2017; International Monetary Fund; Volume: 17; Issue: 221 Linguagem: Inglês

10.5089/9781484310311.002

2227-8907

International Monetary Fund,

Fiscal Policies and Political Economy

Adverse demographics will weigh on the long-term growth prospects.To address the challenge of declining working age population, policies should not only aim to support fertility, but also to increase labor force participation rate, to improve labor allocation across sectors and to encourage net immigration.However, with some recent measures going in the opposite direction, even such mitigating policies may not fully offset the demographic headwinds. A. Stylized Facts and Trends 1.Poland faces profound demographic changes.The decline of fertility rate and growing life expectancy, mostly driven by longevity of older cohorts, will significantly change the demographic landscape.As of now, Poland is still a relatively young population by the European Union (EU) standards, with the share of seniors (aged 65+ years) at 15 percent of total population, 3 percentage points below EU average.However, adverse demographics is at work, with the old-age ratio projected to more than double by 2050, surpassing EU levels.Projections 2 envisage that, despite some uptick in fertility rate, the age pyramid will become skewed toward old-age cohorts, while the share of working age groups will diminish dramatically (Figure 1). 2.Decline in working age population has already begun.Following years of growth, the working age population has been trending down since 2012.Demographic projections suggest that this process will go on for decades, yielding some ¼ decline in the number of working age persons by 2050, 3 one of the largest declines in the EU.While other EU countries are also facing demographic problems, the downward trend in Polish working age population will be much steeper (Figure 2).Under the constant productivity assumption, such a decline in the share of working age population would lower GDP per capita by almost one-fifth. 4 3.Demographics may soon pose a barrier for growth.The historical expansion of working age population appears to have been only partly utilized to boost potential growth, with increased unemployment and declined labor force participation rates dampening potential gains.This has changed in recent years, as declining unemployment and rising participation supported employment growth despite diminishing working age population (Figure 3).However, unemployment rate may be below the natural rate already, and further gains in activity could be 1 Prepared by Krzysztof Krogulski and Robert Sierhej.2 Unless noted otherwise, demographic outlook is based on the Eurostat population projections (Europop 2015).3 Unless noted otherwise, working age population is defined as persons aged 15-64 years, not including temporary migrants. 4GDP per capita could be written as GDP/POP=(GDP/WAP)*(WAP/POP) where POP and WAP are total and working age population, respectively.Assuming constant productivity, the projected decline in WAP/POP from 70 to 57 percent would imply a 19 percent lower GDP per capita.