Macroeconomic performance and prospects
View Full Text (PDF)
Fields marked with an asterisk * are mandatory.
The past year has been a time of increasing uncertainty for the global economy. The world’s major economic blocks– the United States, the European Union and Japan– all face major difficulties in keeping growth on track or, in the case of Japan, in escaping from years of stagnation. The first anniversary of the 11 September attacks in the US has come with renewed fears of further terrorist acts and possible conflict in the Gulf. Throughout the world, investors face heightened risks and challenges. In addition, recent performance among emerging markets has been mixed, with contagion from the collapse of the Argentine economy in 2002 having significant impacts in Brazil and Uruguay.
Against this backdrop, the performance of most of the 27 transition economies of central eastern Europe and the Baltic states (CEB), south-eastern Europe (SEE) and the Commonwealth of Independent States (CIS) continues to be robust. Over the first decade of transition, these economies have become increasingly integrated into the global economy, both in terms of trade in goods and services and financial flows. Therefore, they are not insulated from adverse developments elsewhere. However, most transition countries have shown a consistent and sustained commitment to reforms and are now reaping some of the benefits of these reforms in terms of greater macroeconomic stability and sustained growth.
Growth in most countries in the region is slowing in 2002 relative to 2001, particularly in the advanced countries of CEB. The CEB countries are relatively exposed to the slowdown in the EU, their main export market, and fiscal constraints are beginning to have an effect in a number of them. Nevertheless, prospects for the rest of 2002 and 2003 remain sound in CEB in the run-up to accession to the EU. In SEE the outlook is more favourable than at any time since the break-up of the former Yugoslavia, as countries begin to cooperate with each other more effectively. The CIS continues to reap the benefits, albeit to a lesser extent than one or two years ago, of higher commodity prices and improved competitiveness.
The chapter examines some of the key macroeconomic policy challenges facing the region over the medium term. For EU accession countries, one difficulty facing most of them is how to balance the fiscal demands of accession with the challenge of meeting the budgetary criterion of the Stability and Growth Pact. This states that the general government budget should be close to balance or in surplus in the medium term. This criterion will be binding on the accession countries as soon as they join the EU. Moreover, those accession candidates pursuing early adoption of the euro will face the further challenge of meeting the Maastricht criteria for joining the monetary union soon after their EU accession. These are difficult, but by no means insurmountable, challenges for EU/Economic and Monetary Union candidates.
In SEE a key question is whether countries participating in the Stability Pact for South-eastern Europe can capitalise on the new-found political stability, and convince not only themselves but also the outside world that they now constitute a region that is worthy of investment. In the context of persistent fiscal imbalances and weak export performance, recent initiatives to promote trade, investment and intra-regional cooperation are welcome. However, the legacy of recent conflicts and persistent problems with the investment climate may hold these countries back, even over the medium term. For some countries, official grants and private sources of income from abroad will continue to play an important, though diminishing, role.
For the CIS the period of "easy growth" is coming to an end. Building capacity and, for poorer countries, managing the external debt, are key challenges. The continuing capital outflows from Russia, although sharply reduced from the levels of recent years, demonstrate the reluctance of domestic and foreign savers to commit resources to investment in the country. Higher growth rates are essential for the poorer countries of the CIS to tackle poverty effectively. However, attracting investment to this part of the region is a formidable challenge given the distant location, under-developed infrastructure and uncertainty in several cases about the medium-term debt sustainability. Lack of regional cooperation, reflected in widespread artificial barriers to trade and transit, limits the size of the market available to would-be investors in these land-locked economies and represents a severe constraint on the growth potential of smaller nations of the region.
The annex includes cross-country tables on the main macroeconomic indicators. As usual, it is worth noting that, while the quality of macroeconomic statistics in transition countries continues to improve, weaknesses remain in some of the data. Given the difficulty of accounting for the large unofficial (informal, black and grey) economies in some countries, the variation of country-specific definitions and the different composition of price baskets, cross-country comparisons should be interpreted with appropriate caution. Where official data are unavailable or unreliable, the analysis is based on EBRD staff estimates using secondary information from a wide range of sources. As in previous years, the annex includes forecasts from a variety of institutions for growth and inflation in 2002 and 2003 (see Tables A.3.10– A.3.13 in Annex 3.1).
Email to a friend
Printer Friendly
Please Enter Your Comment: |
Rate the Article |
|---|---|
|
|
You need to login for rating the article.
|
Most Rated Articles |
Most Emailed Articles |
Most Viewed Articles |
|---|---|---|
| * Top 3 Articles | ||
