The correct answer is - decreases.
The basis of all development and production is the labor power. The more laborers are there on the market, the bigger the chances of developing further, thus having bigger and growing production in the industry and the business.
When a nation comes in a situation to have a declining population, it reflects on the economy immediately, and the economy decreases because the industrial and business sectors are starting to lack in labor force.
Also, a declining population usually means low birthrates and longer lifespan, which results in having a larger mass of elderly people, which creates even bigger economic problems.