Demographics is gradually turning into the biggest issue of the Latvian and the global economy. If we compare the demographic situation to traffic lights, the red light is flashing in Latvia. The yellow one is currently on in Russia and it is about to turn on also in the rest of Europe, says Alexander Pankov, Rietumu bank president.

Alexander Pankov

“The problem is already evident in Europe and Latvia. It is also on Russia’s agenda. Neither will China escape demographic issues resulting from its one family one child policy.”

Pankov stresses that the classic demographic model has a trapezoidal shape. “It is based on workers. Children come next, while retired people are on the very top. Such a model is still practiced in Brazil, Argentina and African countries. In Europe and Russia the shape now resembles a rectangle in which the number of pensioners is approaching the number of workers. This is having a direct impact on the economy.”

“The situation is turning into an inverted trapezium in Latvia, as the number of pensioners is rising faster than the number of employed people. Official statistics show that Latvia has the smallest number of children per woman of childbearing age – 1.3. At the same time, the figure sticks to 2.0 in France, Great Britain and Switzerland,” Pankov says.

He believes that the most realistic and quickest method to resolve the problem is immigration, but it brings along risks that Europe is already facing. Issues range from immigrants’ inability and unwillingness to work to ethnic, religious and cultural conflicts.

Rietumu bank president adds that in practice each country is looking for its own way to tackle the issue, but, unfortunately, Latvia has not found it yet.

“Currently, Latvia spends 100 000 – 120 000 euro per a child’s first 18 years of life. Instead, it would be wise to pay 5 000 euro for the first child, 10 000 euro for the second and 15 000 euro for the third one. It would indeed boost birth rates. I am sure that it would be the best investment program Latvia could come up with,” he says.

Ref: 102.105.105.1466