Regional Challenges

Public policies to address poverty reduction in Eastern Europe and Central Asia need to focus on three areas common to all of the countries: (1) fostering job creation and raising productivity; (2) improving public service delivery; and (3) addressing spatial inequalities.

 

The broad-based improvement in productivity and real wages that accompanied the resumption of growth in the region, has not been matched by job growth.  In many countries, the process of labor reallocation is far from over, as job destruction which accompanied restructuring in many old-economy sectors has outpaced job creation in new areas.   Maintaining macroeconomic stability, strengthening the business environment, and adapting the skills base of the population will be key in this regard.

Although most of the countries in the region inherited good networks of education and health services and adequate infrastructure, the process of transition saw an erosion of access and quality which has only been partially reversed.   The region is putting increasing resources in social sectors as economic performance improves, but in many cases spending is significantly limited by fiscal constraints, and the delivery systems strained by a new environment.   Improving efficiency and targeting will be crucial to maintain and expand social and infrastructure services, and safety nets.    

 

Countries in the region face substantial differences in poverty rates, between urban and rural areas, and between capital cities and smaller towns.   This is not the case in large countries, but also in small ones.  Some countries have attempted to address this through fiscal transfers to lagging regions, but in many cases these allocations need to be more effectively targeted and capacity built for their efficient use.