The Czech Republic is grappling with a demographic crisis that threatens to create a pension system deficit for decades, according to a report by the National Budget Council on the long-term sustainability of public finances. The report examines various demographic scenarios and their financial implications.
One scenario envisions a sharp rise in the fertility rate from the current 1.45 children per woman of reproductive age to 2.46, matching the high birth rates of the 1970s. However, even this optimistic scenario would not stabilize the pension system in the long term.
The council predicts that the pension deficit would only begin to shrink after 2050, when the children born under this scenario enter the workforce. Until then, the deficit would worsen and place additional strain on other areas, such as education and healthcare, further increasing public debt.
“This makes sense. There would be initial costs, for example, for childcare facilities or social benefits, but the positive effects wouldn’t be felt for about 25 years, when these children reach working age,” explained Tomáš Fiala, a demographer at the University of Economics in Prague.
Paradoxically, even in the pension sector, an increase in the birth rate could lead to slightly higher expenses, such as for disability pensions or benefits for orphans. These additional costs would amount to roughly 0.1% annually until the late 2050s.
The report underscores the complexity of addressing the demographic and financial challenges facing the Czech pension system, highlighting that solutions require both immediate investment and long-term vision.
