january 2008 world bank eu8+2 world bank eu8+2 regular economic report regular economic report...
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January 2008
World Bank EU8+2World Bank EU8+2 Regular Economic Report Regular Economic Report
Special Topic on Satisfaction with Life and Special Topic on Satisfaction with Life and Public Service Delivery Public Service Delivery
January 2008January 2008
The World Bank’s Regular Economic The World Bank’s Regular Economic Reports (May, September, January) Reports (May, September, January) examine recent economic developments examine recent economic developments and prospects in the NMS. Each edition and prospects in the NMS. Each edition includes a Special Topic of current policy includes a Special Topic of current policy relevance in the region. This one focuses relevance in the region. This one focuses on the satisfaction with life and public on the satisfaction with life and public services .services .
Message 1:Message 1:
The economic outlook for the EU8+2 The economic outlook for the EU8+2 in 2008 and 2009 is generally in 2008 and 2009 is generally positive, however, as in the advanced positive, however, as in the advanced economies, the baseline scenario is economies, the baseline scenario is now subject to greater downside risk.now subject to greater downside risk.
GDP growth rates peaked in many countries GDP growth rates peaked in many countries in the first half of 2007.in the first half of 2007.This deceleration is likely to continue though This deceleration is likely to continue though 2008 but growth could still average as much 2008 but growth could still average as much as 5%. as 5%. The slowdown is most pronounced in the The slowdown is most pronounced in the Baltics. Baltics. Growth should gradually resume in Hungary. Growth should gradually resume in Hungary. Romania and Bulgaria may stay at or near Romania and Bulgaria may stay at or near current rates of growth.current rates of growth.The rates of growth were unsustainable in The rates of growth were unsustainable in some countries.some countries.
Message 2: Message 2:
While globalization offers the While globalization offers the prospect of higher sustained growth, prospect of higher sustained growth, it also carries risks related to it also carries risks related to turbulence in external markets.turbulence in external markets.
Potential for more severe global contraction Potential for more severe global contraction affecting export markets in EU. affecting export markets in EU.
Risk of cutoff of financing for current account Risk of cutoff of financing for current account deficits which are large in the Baltics and are deficits which are large in the Baltics and are continuing to grow in Romania and Bulgaria.continuing to grow in Romania and Bulgaria.
Significant portion of debt is denominated in, Significant portion of debt is denominated in, or linked to, foreign currency.or linked to, foreign currency.
Message 3: Message 3:
The disturbances originating in the The disturbances originating in the sub-prime mortgage market in the sub-prime mortgage market in the US have widened to affect other US have widened to affect other countries and other markets, and countries and other markets, and prospects for US growth have prospects for US growth have become less clear, but several become less clear, but several factors serve to dampen the effect factors serve to dampen the effect on the EU8+2.on the EU8+2.
EU8+2 economies are linked more directly EU8+2 economies are linked more directly to the EU than the US.to the EU than the US.
Banks in the region are not as exposed to Banks in the region are not as exposed to the sub prime market. the sub prime market.
Domestic private demand (not net external Domestic private demand (not net external demand) has been the main engine of demand) has been the main engine of growth. growth.
While credit has increased rapidly, private While credit has increased rapidly, private borrowers were under-leveraged a the borrowers were under-leveraged a the outset.outset.
Message 4: Message 4:
Inflation is on the rise throughout the Inflation is on the rise throughout the regionregion
Food and oil prices are a main factor.Food and oil prices are a main factor.
Changes may not be temporaryChanges may not be temporary
Credit expansion slowing but strong.Credit expansion slowing but strong.
Currency appreciation effects have Currency appreciation effects have reversed in some countries. reversed in some countries.
Wage growth easing but still strong Wage growth easing but still strong
Unit labor costs continue to rise.Unit labor costs continue to rise.
Convergence dynamics create strong Convergence dynamics create strong price pressures for non-traded goods.price pressures for non-traded goods.
Message 5:Message 5:
The region faces some important The region faces some important macroeconomic challenges.macroeconomic challenges.
It is difficult for fixed exchange rate It is difficult for fixed exchange rate countries to use monetary policy to fight countries to use monetary policy to fight inflation and contain CADs.inflation and contain CADs.
Monetary policy is less effective when a Monetary policy is less effective when a large portion of debt is in foreign currency.large portion of debt is in foreign currency.
Authorities must rely more on fiscal policy Authorities must rely more on fiscal policy to control demand but have been reluctant to control demand but have been reluctant to take stronger measures despite buoyant to take stronger measures despite buoyant revenues which may soften next year.revenues which may soften next year.
Special topicSpecial topic
Satisfaction with Life Satisfaction with Life and Public Service Delivery and Public Service Delivery
in EU8+2 Countriesin EU8+2 Countries
EBRD-World Bank Life in Transition EBRD-World Bank Life in Transition SurveySurvey
1.Satisfaction with life and surroundings
2.Satisfaction with public service delivery
3.Other findings
• Priorities for public investments
• Democracy
• Economic system
• Corruption
• Income redistribution
Overall satisfaction with life is high..Overall satisfaction with life is high..
0 20 40 60 80 100Percent of respondents
Hungary
Bulgaria
Romania
Poland
Lithuania
Czech Republic
Latvia
Croatia
Slovakia
Estonia
Slovenia
All things considered, I am satisfied with my life right now
Strongly disagree Disagree
Neither Agree
Strongly agree
..even if that with the economy is not..even if that with the economy is not
0 20 40 60 80 100Percent of respondents
Hungary
Croatia
Bulgaria
Romania
Slovakia
Slovenia
Poland
Latvia
Czech Republic
Lithuania
Estonia
Economic situation is better today than around 1989
Strongly disagree Disagree
Neither Agree
Strongly agree
Mixed responses about impact of transition Mixed responses about impact of transition on on theirtheir lives … lives …
0 20 40 60 80 100Percent of respondents
Hungary
Croatia
Bulgaria
Romania
Slovakia
Latvia
Poland
Czech Republic
Slovenia
Lithuania
Estonia
My household lives better now than around 1989
Strongly disagree Disagree
Neither Agree
Strongly agree
.. relative to .. relative to parents parents ....
0 20 40 60 80 100Percent of respondents
Hungary
Bulgaria
Poland
Czech Republic
Croatia
Latvia
Romania
Lithuania
Slovenia
Estonia
Slovakia
I have done better in life than my parents
..with optimism about the future for ..with optimism about the future for childrenchildren
0 20 40 60 80 100Percent of respondents
Hungary
Slovenia
Bulgaria
Romania
Croatia
Czech Republic
Poland
Slovakia
Estonia
Latvia
Lithuania
Children born now will have a better life than my generation
Strongly disagree Disagree
Neither Agree
Strongly agree
2. Satisfaction with Public Service 2. Satisfaction with Public Service DeliveryDelivery
• Public education• Request for official documents• Public health system• Road police• Social security benefits• Courts• Other police• Unemployment benefits
Generally high satisfaction levels…Generally high satisfaction levels…
0 20 40 60 80 100Percent of respondents
Unemployment benefits
Other police
Courts
Social security benefits
Road Police
Public health system
Request official documents
Public education
Satisfaction with Public Service Delivery
Very unsatisfied Unsatisfied
Neither Satisfied
Very satisfied
... though some variation by country... though some variation by country
0 20 40 60 80 100Percent of respondents
Romania
Poland
Hungary
Latvia
Lithuania
Slovakia
Czech Republic
Bulgaria
Estonia
Croatia
Slovenia
Public Health System
Very unsatisfied Unsatisfied
Neither Satisfied
Very satisfied
0 20 40 60 80 100Percent of respondents
Slovakia
Romania
Lithuania
Croatia
Poland
Bulgaria
Czech Republic
Slovenia
Latvia
Estonia
Hungary
Public Education (university, college, vocational)
Very unsatisfied Unsatisfied
Neither Satisfied
Very satisfied
3. Other Key Findings3. Other Key Findings
• Priorities for public investment• Democracy • Economic system • Corruption• Income redistribution
Support for healthcare is a prioritySupport for healthcare is a priority
Education
Healthcare
Housing
Infrastructure
Pensions
Other
Which of these fields should be the first priority for extra government investment?
0 10 20 30 40 50Percent of respondents
Croatia
Slovenia
Latvia
Estonia
Poland
Czech Republic
Romania
Lithuania
Slovakia
Hungary
Bulgaria
Healthcare
0 10 20 30 40Percent of respondents
Hungary
Romania
Poland
Bulgaria
Lithuania
Czech Republic
Estonia
Slovakia
Slovenia
Latvia
Croatia
Education
0 5 10 15 20Percent of respondents
Slovakia
Slovenia
Hungary
Czech Republic
Lithuania
Estonia
Bulgaria
Croatia
Latvia
Poland
Romania
Pensions
Strong public support for democracyStrong public support for democracy
0 20 40 60 80 100Percent of respondents
Bulgaria
Romania
Poland
Lithuania
Croatia
Latvia
Czech Republic
Estonia
Hungary
Slovenia
Slovakia
Attitudes Towards Type of Political System
Democracy preferable to any other system Authoritarian government may be preferable under some circumstances
Doesn't matter for people like me
Attitudes towards type of economic Attitudes towards type of economic systemsystem
0 20 40 60 80 100Percent of respondents
Croatia
Bulgaria
Hungary
Latvia
Poland
Lithuania
Romania
Czech Republic
Slovakia
Estonia
Slovenia
Attitudes Towards Type of Economic System
Market economy preferable to any other system Planned economy may be preferable under some circumstances
Doesn't matter for people like me
Perceptions regarding corruptionPerceptions regarding corruption
0 20 40 60 80 100Percent of respondents
Croatia
Bulgaria
Hungary
Czech Republic
Lithuania
Latvia
Slovakia
Poland
Romania
Slovenia
Estonia
There is less corruption now than around 1989
Strongly disagree Disagree
Neither Agree
Strongly agree
Strong Support for RedistributionStrong Support for RedistributionReducing income gap: share of population that would like the state to be:
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Czech Republic
Poland
Slovakia
Estonia
Hungary
Latvia
Lithuania
Slovenia
Not involved Moderately involved Strongly involved
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