Much of Europe and Central Asia faced unprecedented political, economic, and social change after the break-up of the Soviet Union. The challenges to the transition were formidable, including deep economic distortions, major trade disruptions, and the absence of market-oriented institutions. As was foreseen, GDP fell sharply at the beginning of the period. In the Central and Eastern European countries, the transition recession was relatively shallow, but in the CIS (Commonwealth of Independent States), GDP fell an average of over 40 percent, and poverty and inequality increased sharply. No CIS country has yet regained its pre-transition per capita GDP.
The World Bank, in collaboration with the IMF, the European Union (EU), and other donors, geared up rapidly to support macroeconomic stabilization and structural reform. Many transition countries quickly accomplished price and trade liberalization. Small-scale privatization is virtually complete, and large-scale privatization is under way in most countries. While progress has been slower in financial sector reform, public sector reform, social protection, enterprise restructuring, and competition policy, the trend is upward. The private sector share of GDP across the transition countries is nearly 70 percent, eight Central and Eastern European and Baltic countries have joined the EU, with four others – Bulgaria, Croatia, Romania and Turkey – preparing do the same. Much has been achieved, but much remains to be completed, especially in the CIS countries.
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