Contacts: Cătălin Păuna
+40-21-20.10.311
cpauna@worldbank.org
Cristina Zirimis
+40-21-20 10 328
czirimis@worldbank.org
BUCHAREST, June 25, 2008 — The EU10 countries (Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia) are adjusting relatively well to the ongoing financial turmoil, higher and rising commodity prices and inflation, and outlook for weak economic growth in mature markets, according to the World Bank’s latest EU10 Regular Economic Report. The study says that although economic expansion in most EU countries is set to slow in 2008, led by substantially slower economic activity in Estonia, Latvia, and Lithuania, the overall pace has remained reasonably robust. Economic growth, moreover, should be broadly unchanged in Bulgaria and Poland this year, and should pick up in Hungary and Romania. “Some cooling down of economic activity is welcome,” said Ivailo Izvorski, the principal author of the report, “given the imbalances in some countries of large current account deficits and external debt, and high and rising inflation.” The report points out several pieces of good news. Robust real GDP growth has reduced unemployment to 6 percent or less in all but three EU10 countries, and employment among older workers has also risen substantially, all contributing to boosting living standards across the region. Tighter labor markets have brought measurable wage and inflation pressures, however, making it imperative for countries to improve productivity and the availability of labor. Driven in part by rising global food and energy prices and in part by buoyant economic expansion, inflation has risen substantially. As in more mature markets, high and rising inflation is becoming an increasingly important problem, especially for countries with slowing economic expansion. Higher inflation led central banks to tighten monetary policy this year in most of the EU10 countries.
Strong revenues and spending restraint have helped improve fiscal positions this year in the Visegrad countries, Bulgaria and Romania. This follows fiscal tightening in most of the region in 2007, with the largest improvements in the Visegrad countries, all of which were under the EU excessive deficit procedure. For the first time, the report includes short in-focus notes. The notes in this issue are: Slovakia Sets to Adopt the Euro The Financial Turmoil and the EU10 The Impact of Rising Food Prices Welcome Older Workers Back to Work Economic Adjustment in the Baltics
The special topic of this study looks at public investment in infrastructure as an essential part of the EU10’s growth and convergence strategy, but which is becoming increasingly important to building national procedures and practices that can strengthen the effective management of public infrastructure resources and use more fully EU funds. According to Bernard Myers, co-author of the special topic, “for public investments in infrastructure to be productive, they need to be supported by strong institutional processes for project planning, appraisal, and management. Strategic planning needs to be closely linked to multi-year fiscal frameworks. Capacity for appraising the economic cost-benefit of projects should improve, while project implementation will need to be supplemented by monitoring capacity and ex-post reviews.”
-###- The EU10 Regular Economic Report is published three times a year. It monitors macroeconomic and reform developments in the EU10 countries, and provides in-depth analyses of key policy issues. |
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