Transition Report 2025-26

Foreword

A grey wave is 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. At the other extreme, some argue that artificial intelligence (AI) and robots will soon conduct nearly all economically significant activities, making demographic concerns irrelevant. The reality is more complex. New technologies hold promise, but they will not fully compensate for a shrinking workforce. Demographic pressures are powerful, and their effects will weigh heavily on growth and living standards unless they are addressed using smart and proactive policies.

This report revisits demographic change and its profound implications, highlighting the challenges faced by rapidly ageing economies, as well as those with young, fast-growing populations.

Emerging Europe is ageing. Low fertility and a shrinking workforce will increasingly weigh on its growth prospects. Part of this effect can be offset by raising the pension age to prolong productive working lives, increasing the labour-force participation of women, and leveraging migration, innovation and technology to sustain prosperity.

None of these levers are straightforward, however. Raising the pension age is politically unpopular, and migration at the level required to offset demographic decline would be politically contentious. Increasing innovation is far from trivial, and while advances in AI may help some workers to become much more productive, others may be displaced and need to retrain.

For younger economies, the challenge is different, but no less urgent. Many economies in Central Asia, the southern and eastern Mediterranean and sub-Saharan Africa benefit from youthful populations that can sustain near-term growth. But this window of opportunity will be short lived. Turning a growing labour force into a genuine demographic dividend requires the rapid creation of high-quality jobs, the strengthening of education and effective initiatives to foster entrepreneurship. Without such policies, demographic advantage risks turning into social and economic strain and a missed opportunity as fertility continues to fall and ageing eventually arrives.

As populations age, so do electorates and political leaders. Older voters, with their higher election participation rates, are increasingly shaping policy priorities, often favouring healthcare, pensions and, in some contexts, military spending, while showing less support for immigration, education and risk-taking in pursuit of economic growth. The world’s leaders are also ageing, particularly in autocratic political systems. The greying of politics may ultimately prove an even bigger constraint than the greying of populations, narrowing the political space for changes such as pension reform, labour-market adjustments or large-scale migration policies. Rebalancing this dynamic will require not only daring reforms, but also efforts to mobilise younger voters, whose voices risk being drowned out as their numbers decline.

Yet demography is not destiny. Early and well-communicated reforms – from pension adjustments and migration frameworks to support for healthy ageing and investment in age-friendly jobs and the adoption of AI – can ease demographic pressures and shape long-term prosperity. Meeting this challenge will require courage. Politicians must be brave – willing to communicate difficult trade-offs, resist short-term pressures and act before demographic realities close off options. Only those who are willing to embrace bold reforms today and bring younger voters into the debate will secure shared prosperity for generations to come.

Beata Javorcik

EBRD Chief Economist

Executive summary

The Transition Report 2025-26 looks at the implications of demographic change for rapidly ageing economies, as well as economies with young, fast-growing populations. It outlines recent demographic trends, including declining fertility rates, and presents strategies that policymakers could deploy in response. These centre on prolonging productive working lives, boosting automation and facilitating labour mobility. The analysis focuses on artificial intelligence (AI) and migration policies in the EBRD regions and beyond, as well as ways in which demographic change shapes policy preferences and societal beliefs.

In emerging Europe, low fertility, ageing populations and shrinking workforces are increasingly weighing on economic growth. Combining greater migration, the use of technology to boost productivity growth and higher labour-force participation among older adults and women could offset some of these pressures. Parts of Central Asia and the southern and eastern Mediterranean (SEMED) region benefit from younger populations that can support near-term growth, yet they will soon experience similar ageing-related headwinds. While fertility rates in sub-Saharan Africa (SSA) are also declining rapidly, its young populations position its economies well to capture a demographic dividend over the next generation, provided they can absorb a rapidly growing labour force.

Fertility rates have fallen across EBRD economies, with many now well below the replacement rate of 2.1 children per woman, though the pace of decline and its underlying drivers vary. Delayed childbearing, shifting marriage patterns and economic circumstances combine to influence fertility outcomes, often resulting in families having fewer children than they would ideally like. Policies aimed at raising fertility range from cash transfers to enhanced childcare provision; however, their impact has been limited.

Demographic change is reshaping labour markets across the EBRD regions. In economies with ageing populations, work is gradually shifting towards more “age-friendly” jobs that reduce physical strain on the body and help older workers to stay active for longer, with such employment being especially attractive to women. As AI technology has advanced, younger, talent-rich companies have tended to be at the forefront of its adoption, expanding their workforces. While workers in some occupations are set to benefit from higher productivity thanks to AI, others face more pressure to reskill. In ageing economies, migration can help to mitigate labour shortages. In younger regions, supporting high-growth entrepreneurship is vital to creating enough good jobs for labour-market entrants.

As populations age and fertility rates decline, governments will need to respond with reforms that increase immigration, extend working lives, restructure pensions and harness technological innovation to boost productivity. Public support for these measures varies from economy to economy and is often weak – particularly among older individuals, who increasingly dominate both electorates and leadership positions. As societies age, they tend to become more conservative and less accepting of pension reforms and risk-taking in pursuit of economic growth. While cohort turnover has helped to offset some of ageing’s effects on public opinion to date, views have become more polarised. Addressing these challenges will require early, inclusive and well-communicated reforms that consider economy-specific circumstances, as well as generational and geographical divides.