As opposed to other regions, Europe and Central Asia (ECA) was the most affected by the global economic-financial crisis, because of the strong integration of their commercial and financial relations. As a consequence, the drop in activity led to the fastest decline of emerging countries in terms of economic activity, fiscal balance and capital injections. The growth engines that led to the development of this region prior to the downturn (fast export increase, large capital injections, high prices on raw materials and domestic consumption) are less likely to contribute to economic recovery. The economic integration has made the region’s economic perspectives to be strongly linked to the major economic partners of other regions, especially Western Europe. Therefore, the global economic growth requires the implementation of structural reforms to increase exports, promote economic diversification and establish fiscal balance in a fair and sustainable manner. In October 2010, during its annual reunion, the World Bank (WB) held a press conference which focused on the impact of the financial crisis and the growth perspectives in ECA. According to WB, the emerging countries in Europe and Central Asia recorded an economic growth, but the problems related to work places continue. “The good news is that the emerging countries in Europe and Central Asia have recorded economic growth, after going through a fast decline during the financial crisis. ECA is currently going through a period of economic recovery and stabilization. Due to the stronger economic markets in Poland, Russia and Turkey, the growth rate has gone from -5.1% in 2009 to +3.9% in 2010”, said Philippe Le Houérou, WB Vice-President for Europe and Central Asia. ECA is a region with various economies and the economic growth wasn’t felt in all the countries. The various economic situations led to a various impact generated by the financial crisis and this requires the adoption of different measures for economic recovery. However, countries like Croatia, Kyrgyzstan, Latvia and Romania have yet to record an economic growth. “This growth is not equal; it highlights a different image for each of the 30 countries. Most countries recorded growth this year, but there are still many countries which haven’t. Also, the workforce occupation rate has had trouble in keeping up with this growth. In fact, unemployment has continued to grow in Central and Eastern Europe and it continues to grow in the CIS region”, added Le Houérou. For 2010, WB reported an estimated growth increase in ECA, but the region has recorded the lowest growth rate out of all developing economies. The growth perspectives in ECA are around 3.9% in 2010, compared to 5% in Latin America and the Caribbean and 9% in the developed region of Asia. “While most economies in the region decreased in 2009, many countries have had growth estimates in 2010. This determines a recovery in the exports sector, mainly in Western Europe. The prices on prefabricated goods, oil, metal and food are increasing and this will help many countries. Others, however, will begin to recover through large official transfers and better conditions for private capital flows”, said Indermit Gill, WB Chief Economist for Europe and Central Asia. The economic recovery has two major flaws. “First of all, with the exception of Turkey, the workforce occupation market represents a major issue and, if the current trend continues, ECA will not be able to recover the workforce lost during the recession by 2012. Second of all, Western Europe suffered a great deal during the recession (except for Germany). Here, the economic growth will be determined by reforms and dynamism”, added Indermit Gill. According to WB officials, ECA’s economic recovery will depend on Russia, Western Europe and EU15, an area to which ECA is strongly connected in terms of economy and trade. While the growth estimates depend on external factors, there are also policies that, once implemented, will contribute to economic growth. To that end, the business sector is highly important. That is why “countries need to constantly improve the business sector in order to attract the necessary investments to stimulate the economy”, stated WB officials. In order to surpass the financial crisis, WB allocated funding in the amount of USD 10.8 Billion for ECA, of which 8 Billion were allocated for the implementation of development policies.
by Pamela Luică
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