opening of the world bank/nbrm public information center lilia burunciuc december 16, 2010
TRANSCRIPT
WHAT DOES IT TAKE TO GROW?
Opening of the World Bank/NBRM Public Information Center
Lilia Burunciuc
December 16, 2010
Growth performance
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009-10.0-8.0-6.0-4.0-2.00.02.04.06.08.0
10.0
MKD NMS SEE
NMS includes: Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovak Republic, Slovenia,.SEE includes: Albania, Bosnia and Herzegovina, Croatia, Kosovo, Montenegro, Serbia. Source: IMF World Economic Outlook (WEO)
Growth rates of GDP
Growth performance
NMS includes: Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovak Republic, Slovenia,.SEE includes: Albania, Bosnia and Herzegovina, Croatia, Kosovo, Montenegro, Serbia. Source: IMF World Economic Outlook (WEO)
2001
2002
2003
2004
2005
2006
2007
2008
2009
0
10
20
30
40
50
60
70
MKD NMS SEE
GDP per capita, in PPP, EU-27=100
Convergence requires high and sustainable growth
Macedonia needs to grow faster to catch-up with the EU-average
Convergence in 25 years would require growth rates of 6%
At the 2.8% average growth rate during the last decade, convergence in 86 years
6.0% 3.7% 2.8%0
20
40
60
80
100
Years required to converge to EU-27 average at various
growth rates
Assumes EU-27 growth rate of 1.5% .Average growth rate for Macedonia in last decade was 2.8%.
What does it take to grow?
Learning from success stories: findings of the Commission on Growth and Development
13 countries have grown at 7+% for at least 25 years since 1950.
Botswana, Brazil, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Malta, Oman, Singapore, Taiwan, and Thailand.
India and Vietnam can join soon
What can we learn from the success stories ?
OpennessImport Knowledge
Exploit global demand
Macroeconomic stability
Modest inflationSustainable public finances
Future orientationHigh investment
High savings
Market allocationPrices guide resource
Resources follow prices
Leadership and governance
Credible commitment to growthCredible commitment to
inclusionCapable administration
Ingredients of Growth Strategies:Technology Transfer
Mostly through FDI, Foreign trade Foreign education
ALB BIH BLG CRO CZE EST MKD HUNG KOS LTV LTU MNE POL ROM SRB SVK SLO0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
FDI, in USD per capita, 2000-2009
Source: World Bank ECA Regional Tables
Ingredients of Growth Strategies:Macroeconomic stability
Monetary and fiscal policies that keep prices stable, risks manageable and exports competitive
-25.0
-20.0
-15.0
-10.0
-5.0
0.0
MKD SEE
Current account, as % of GDP
2004200520062007200820092010-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
MKD SEE
Fiscal balance, as % of GDP
Source: MOF for Macedonia and WEO for SEE Source: NBRM for Macedonia and WEO for SEE
Good practice MacedoniaInvestments > 25% of GDP Only since 2007
Public Investments 5-7% of GDP Yet to be achieved
Public resources complemented by PPPs
Still in infancy
Ingredients of Growth Strategies:Investments
2001 2002 2003 2004 2005 2006 2007 2008 20090.0
5.0
10.0
15.0
20.0
25.0
30.0
NMS
MKD
Gross Fixed Investments, % of GDP
Source: Eurostat
Ingredients of Growth Strategies:Savings
2001 2002 2003 2004 2005 2006 2007 2008 200950
55
60
65
70
75
80
85
NMSMKD
Private Consumption, % of GDP
Source: Eurostat
Ingredients of Growth Strategies:Investing in Human Capital
Education
Health Decent and slightly improving health indicators
but considerable efforts still needed
WEF Competitiveness Report
MKD NMS
Quantity of Education
4.6
Quality of Education
4.1 4.5
2005 200836
38
40
42
44
46
48
Percent of firms say-ing skills are a prob-
lem
Source: World Bank / EBRD BEEPS
Ingredients of Growth Strategies:
Competition and Structural Change “Creative Destruction” requires
efficient entry and exit, i.e. an efficient business environmentEase of Doing
Business 38
Starting a Business 5
Construction Permits 136
Registering Property 69
Getting Credit 46
Protecting Investors 20
Paying Taxes 33
Trading Across Borders 66
Enforcing Contracts 65
Closing a Business 116
World Bank / EBRD BEEPS: Biggest problems of doing business in Macedonia: Access to finance Courts Tax rates Corruption
Ingredients of Growth Strategies
Labor Markets Promote labor mobility by having flexible
laws But, also invest in skills so that labor is
mobileWEF Competitiveness Report
MKD NMS
Labor Market Flexibility
5.2 4.7
Labor Force Survey2004 2009
Unemployed, primary
education and less
38.1 34.5
as % of total unemployed, Source: SSO
Ingredients of Growth Strategies
Findings from 2008 Country Economic Memorandum:1. Firm entry is strong2. Survival rate is decent3. Firms DO NOT grow
Source: World Bank Staff calculations based on SSO and Eurostat data EU-27 BLG CZE LTV POL ROM SVK MKD
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
LargeMediumSmall
Contribution to Value Added by various types of enterprises
Ingredients of Growth Strategies:Effective Government
Leadership is crucial – a coherent growth strategy Long planning horizon Communicating vision
Contro
l of C
orru
tion
Regulat
ory Qua
lity
Rule
of Law
0
30
60
2006 2008 2009
Governance IndicatorsMKD NMS
Voice and Accountability
53.1 74.6
Political Stability 37.3 70.6
Gov’t Effectiveness 50.5 72.2
Regulatory Quality 59.5 80.0
Rule of Law 47.6 71.7
Control of Corruption
57.1 67.6
Source: Worldwide Governance IndicatorsSource: World Economic Forum Global Competitiveness Report
Ingredients of Growth Strategies:Equity and Equality of opportunity
Equity and equality of opportunity are essential ingredients of sustainable growth strategies
Absolute Poverty
Non-poorFood PovertyModerate Poverty
Source: World Bank Staff calculations based on SSO HBS data
Ingredients of Growth Strategies:Export Promotion and Industrial Policy
Still a lively debate
The risks of doing a lot are well known, however there are also risks of doing nothing
Export promotion is not a good substitute for other key supportive ingredients: education, infrastructure, responsive regulation.
Small States
Per capita cost of Government and Services is very high
Little possibility to diversify economy high vulnerability to economic shocks
The answer: embrace the world economy, forming regional clubs and outsource some government functions
Ingredients of Growth Strategies
Some generally accepted “DONT’S” Subsidizing energy, expect most vulnerable Reducing unemployment with public sector
jobs Cutting deficits by slashing capital spending Shielding sector, firms and jobs from
competition Imposing price controls to fight inflation Underpaying civil servants
Thank you
WWW.worldbank.org/mk