a new growth model in the western balkans?
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A New Growth Model in the Western Balkans?. B Snoy , IFI Coordination Office Regional Cooperation Council Western Balkans and Europe 2020 – Supporting Convergence and Growth , 31March 2011. Context. - PowerPoint PPT PresentationTRANSCRIPT
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey
April 20, 2023
A New Growth Model in the Western Balkans?
B Snoy, IFI Coordination OfficeRegional Cooperation Council
Western Balkans and Europe 2020 – Supporting Convergence and Growth,
31March 2011
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey 2
Context
o Review of latest thinking from EC, IFIs and Think Tanks regarding policy changes needed post-crisis
o Contribute to the formulation of new growth strategies/agenda/initiatives and to development of new assistance programmes
o Link with assessment of impact of austerity measures on investment programmes
o Synopsis report available in April
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey 3
Limitation of pre-crisis growth model
o Unbalanced growth driven by domestic demand with high imports
o Too much consumption (both public and private), too little domestic savings
o Weakness and limited diversification of export sector
o Investment excessively concentrated in construction activities
o High size of government compared to countries at comparable per capita income level
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey 4
Limitations of pre-crisis growth model
o High dependence on foreign capital inflows o FDI concentrated on acquisition of privatised
assets (primarily in the financial sector) with little greenfield investment
o Low contribution of labour inputs to growtho Financial sector fragilitieso Incomplete transition linked to incomplete
reforms
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey 5
Main themes for new growth agenda
oFrom exogenous to endogenous growth (EC)oRecreating fiscal room for manœuvre (IMF)oPlaying the global game of competitiveness (WorldBank)oInvigorating trade, integration and export-ledgrowth (EBRD)oImproving the business environment (EBRD & OECD)oDeveloping local currency finance and new instruments such as PPPs (EBRD & OECD)oContribution of think tanks & academics
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey 6
EC: From exogenous to endogenous growth o European Economy Occasional Paper 62, June 2010o Need for a growth model less dependent on external capital
inflowso Encourage flows that enhance the intrinsic competitiveness
& productive capacity of economieso Moderate those which fuel domestic and external
imbalanceso Shift the composition of investment to tradable sectoro Promote structural reforms that enhance domestic savingso Focus on completion of unfinished transition reform agenda,
including labour market reform o Convergence with adoption of acquis communautaire
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey 7
World Bank - Playing the global game of competitiveness
o Shift of emphasis from demand to supply sideo Prepare for a more competitive external
environmento Skills, technology absorption, capacity, institution
building & the overall business environment will become more important
o The new markets to be conquered are those of the emerging countries
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey 8
« Turmoil at Twenty » World Bank, 2010
• Infrastructure and labour skills emerged as binding constraints to growth & raised cost of weak institutions
• Private investment crucial for opening infrastructure bottlenecks
• Requires competitive trading regimes & predictable &credible regulatory frameworks
• State has the important task of continually strengthening institutions that provide essential public goods (e.g. regulation, supervision and education)
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey 9
« Western Balkan Integration and the EU » World Bank, 2008
o Deeper integration within CEFTA will bring benefits. Need for an agreement on services
o Human capital development and return migration can help
o Reduction in telecommunication costs and efficient transport are catalysts for development
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey 10
« Investment matters » World Bank, 2009
• Investment rates are too low• ICT investment plays important role in improving
the quality of overall investment• WBC trail in R&D spending & most of funding
comes from the public sector• Improving the quality of public investment is key• Plan properly and implement public
infrastructure projects in order to maximize the « crowding in » effect and avoid « crowding out » effect
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey 11
Improving the business environment
o Common denominator of policy advice given by EC, OECD and IFIs
o Major business environment concerns: skills availability, infrastructure, tax administration, corruption and crime
o Significance of transport as a business environment constraint
o Need to enhance broadband internet penetration
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey 12
Conclusions
• The end of complacency: the transition agenda must be completed
• Improving the business environment is the cornerstone of the post crisis agenda
• New growth agenda is a revised and reinforced version of the old agenda of structural reforms .
• « Europe 2020 can provide inspiration for a framework for smart, sustainable and inclusive growth »
EU Funded Project implemented by
Support to IFI Coordination
in the Western
Balkans and Turkey
April 20, 2023
Thank you for your attention!