The project was carried out with funding by the European Union via the Structural Reform Support Programme (SRSP) and in co-operation with the European Commission’s Directorate-General for Structural Reform Support (DG REFORM). The SRSP provides tailor-made technical support to EU-countries on demand for the design and implementation of growth-enhancing reforms.
Over the last three decades Estonia’s population has contracted by 15% – to 1.33 million in 2020 – and this trend looks set to continue. This will bring fiscal challenges, through lower tax revenues, but also through higher per-capita costs in services and infrastructure delivery, not least as Estonia’s population is also ageing. These challenges will be even larger in sparsely populated remote and rural areas, not just because they already have to manage delivering services with limited economies of scale but also because they are shrinking faster than the national average. Indeed urban areas have expanded their population.
The report provides a range of recommendations across a number of policy areas that can help manage shrinking, as highlighted by Jaak Aab, Estonian Minister of Public Administration at its launch: “Valuable examples are provided regarding land use and spatial planning, provision of local services and infrastructure, local government financing and multi-level governance. In the coming years, Estonia must show the ability to respond to the shrinking and aging population, and it is necessary to act immediately and efficiently.”
Well-coordinated policy responses in a number of sectors are necessary to address these challenges. Among the recommendations in the report, the OECD underlines the need to:
- Make land use more efficient and spatial planning more coherent.
- Review multi-level governance and municipal finance to boost inter-municipal co-operation, improve the transfer system and strengthen the municipal revenue base.
- Take a closer look at education, the municipalities’ largest spending responsibility, by adapting the school network while ensuring access to high-quality education for all students.
- Consider how other public services can also apply these lessons.
Importantly, the report has lessons that are not unique to Estonia. Mario Nava, Director General of the European Commission’s DG REFORM notes that: “Depopulation in Estonia is not an isolated case. We are aware of the challenges of demographic change for all the EU Member States. So far we have supported Spain to tackle this issue and now we are supporting Estonia. The issue of depopulation is also highlighted in the 8th Report on Cohesion published last week as well as in a Report on the Impact of Demographic change and in a Green Paper on ageing and a long-term vision for rural areas. We stand ready to help other Member States in this domain.”
The OECD also identifies the issue of shrinkage and demographic change as a megatrend. Lamia Kamal-Chaoui, Director of the OECD Centre for Entrepreneurship, SMEs, Regions and Cities notes: “Shrinking is not just a problem for Estonia. By 2050, half of Europe’s remote regions and a third of the world’s cities are expected to lose population. This report sets out practical steps to help manage depopulation through “smart shrinking” – through policies on tax, land use, and governance.”
More information on OECD work on Estonia is available at www.oecd.org/publications/shrinking-smartly-in-estonia-77cfe25e-en.htm.
For OECD work on SMEs, Entrepreneurship, Cities and Regions, visit www.oecd.org/cfe.
For further information, journalists are invited to contact Shayne MacLachlan at the OECD Centre for Entrepreneurship, SMEs, Regions and Cities (+33 1 45 24 15 80).
=================================
Background
In Estonia, local decision-makers in shrinking areas face challenges such as half-empty apartment buildings, oversized technical infrastructure, and schools with declining numbers of pupils. Both national and EU resources have been used in shrinking areas to help streamline and uphold high quality public services. School networks have been re-designed both by local municipalities and by national initiatives, a network of primary health care centres has been developed, and financial support for the betterment of living environments and demolition of abandoned buildings has been obtained. Despite these efforts, coordinated multi-sectoral approaches are currently lacking.
Global trends like urbanisation, low birth rates and departure of young people mean that remote areas will continue to face population decline into the future. Many lower density regions in the OECD face shrinkage. Projections suggest that by 2050, half of European countries will have to manage population decline in remote regions and one third will need to manage decline in regions with access to a small or medium city. Inadequate policy responses to shrinkage can have profound economic, social, budgetary and environmental impacts at the national, regional and local levels, with long-term effects.
