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Demography is Destiny

Georgia’s demographic headwinds

Georgia’s demographic headwinds

by Marcus Roberts | September 22, 2018

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Georgia (the country and not the state) is a small country with an unpredictable and potentially aggressive larger neighbour. In this respect it has some similarities to Taiwan, a country we discussed a few weeks ago. It also, like Taiwan, suffers some fairly severe demographic headwinds. These headwinds, according to the Brookings Institution, are blowing steadily against economic progress that the country is trying to make.

In an effort to grow and modernise its economy, Georgia has tried to root out systemic corruption and has succeeded in placing itself near the top of the World Bank’s Doing Business category. However, while growth rate has been very good (at around five per cent GDP growth per year), Georgia still faces some structural concerns. Its education system is not high-quality and its local public administration and judicial system are not as efficient as they could be.

On top of these concerns, and probably overshadowing all, is the country’s demographic trajectory. Georgia, like many other countries, is suffering demographic decline and relies upon immigration to prop up its population or at least soften its population decline. However, unlike most other countries in this situation. Georgia is not a high income country. It is instead “a rare example of a lower middle-income country…which is experiencing a secular decline in population”. Since the early 1990s the Georgian population has been shrinking and its working age population is also on way down. This is due to its below replacement fertility rate (of 1.8 children per woman) and its high migration levels – over a tenth of the population left the country in the first decade of the twenty-first century.

From a peak of 4.5 million people, the current population is less than 3.8 million. Without relatively large immigration, the working aged population is projected to softly sink from 67 per cent of the population today to 60 per cent by 2050. To keep the dependency ratio (working aged population vs young and old dependents) at around the current level of 50 per cent, Georgia will need to import over 40,000 immigrants of working age population every year. A less socially disruptive course would be to entice skilled Georgians living abroad to come home and to encourage young Georgians to stay in the land of their birth. But of course, to do that would require there to be opportunities for Georgians to come home to and perhaps for its Russian neighbour to be guaranteed to be quiescent. These are not easy conditions to fill. Once again, we are seeing that a country’s economic future is heavily affected by its demographic future.

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