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Global Problems--Regional Implications
Presentation to the 5th Vienna Economic Forum: Investment Possibilities in the Countries from the Adriatic to the Black Sea and the Caspian Region-Take the Real Chance
Theodore AhlersDirector of Strategy and Operations
Europe and Central AsiaWorld Bank
November 10, 2008
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We are experiencing the first global economic crisis since the 1930s
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Many countries have large current account deficits, often funded through extensive bank borrowing.
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Continuation of the expansion of credit to the private sector is uncertain
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Perceptions of risk in countries of the region, is often higher than in other emerging markets.
Note: Comparator regions are the median values for the following groups: Emerging Asia (Indonesia, Korea, Malaysia, and Thailand) and Latin America (Argentina, Brazil, Chile, Colombia, Mexico, and Peru).
Source: Bloomberg.
Change in Credit Default Swap Spreads (Year on Year Change to end October 2008), bps
0
500
1000
1500
2000
2500
3000
Ukraine Russia Latvia Kazakhstan Estonia Romania Lithuania Bulgaria Turkey Hungary Croatia Poland
Emerging Asia Latin America
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The crisis will result in a period of slower global growth, complicating investment in the region.
Easily available foreign credit gone, for now.
Public-private partnerships more challenging
Tighter fiscal constraints
More rigorous cost-benefit analyses for public investment.
Large human capital & infrastructure investment requirements in the region.
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Governments must not jeopardize long-term growth -- social investments are of critical importance.
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Need better targeting of funds for the poor
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Employment of women and Roma populations an untapped resource
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Families with debt in foreign currencies at risk
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Investment Climate issues even more important
Note: Economies are ranked on their ease of doing business, from 1-181, with first place being the highest. Regional aggregates are the median values of the following groups: EU10 (Bulgaria, Czech Rep, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovak Rep, and Slovenia); Middle Income CIS (Belarus, Kazakhstan, Russia, and Ukraine). Source: Doing Business 2009.