Economic analyst: Transition to the defined contribution pension system will be costly and painful
Belarus is doomed to transition to the defined contribution pension system, however, it has been tardy in implementing it. In relatively prosperous times, it would have been cheaper to do that.
Now the reform will cost the country a 2-3% GDP deficit over 10 years. This is about 17-18 billion dollars, i.e., more expensive than a nuclear power plant. This calculation was given by the economist Lev Lvovsky in Aleksandr Knyrovich’s authoring program.
“This transition will be rather painful and costly. We are now at a moment where a large generation, still Soviet one, will start leaving the labour market, and it will be replaced by a small generation of the 90s”, Lev Lvovsky explained.
The process of replacing these generations is already underway and will peak around 2050.
Is it better not to reform anything then?
“If we don’t do this, right now it will be a little easier for us, but starting from 2040 we will enter a permanent deficit of this magnitude [2-3% of GDP]. We can’t leave pensioners on the street. Accordingly, if the system is not reformed, we will always have to throw more and more money into this furnace”, the economist explained.