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What does it take to grow?

What does it take to grow?. Opening of the World Bank/NBRM Public Information Center Lilia Burunciuc December 16, 2010. Growth performance. Growth rates of GDP. NMS includes: Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovak Republic, Slovenia,.

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What does it take to grow?

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  1. What does it take to grow? Opening of the World Bank/NBRM Public Information Center Lilia Burunciuc December 16, 2010

  2. Growth performance Growth rates of GDP 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)

  3. Growth performance GDP per capita, in PPP, EU-27=100 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)

  4. 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 Assumes EU-27 growth rate of 1.5% . Average growth rate for Macedonia in last decade was 2.8%.

  5. 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

  6. What can we learn from the success stories ?

  7. Ingredients of Growth Strategies:Technology Transfer • Mostly through FDI, • Foreign trade • Foreign education Source: World Bank ECA Regional Tables

  8. Ingredients of Growth Strategies:Macroeconomic stability • Monetary and fiscal policies that keep prices stable, risks manageable and exports competitive Current account, as % of GDP Source: NBRM for Macedonia and WEO for SEE

  9. Ingredients of Growth Strategies:Investments Gross Fixed Investments, % of GDP Source: Eurostat

  10. Ingredients of Growth Strategies:Savings Private Consumption, % of GDP Source: Eurostat

  11. Ingredients of Growth Strategies:Investing in Human Capital • Education • Health • Decent and slightly improving health indicators but considerable efforts still needed Source: World Bank / EBRD BEEPS

  12. Ingredients of Growth Strategies:Competition and Structural Change • “Creative Destruction” requires efficient entry and exit, i.e. an efficient business environment • World Bank / EBRD BEEPS: Biggest problems of doing business in Macedonia: • Access to finance • Courts • Tax rates • Corruption

  13. Ingredients of Growth Strategies • Labor Markets • Promote labor mobility by having flexible laws • But, also invest in skills so that labor is mobile as % of total unemployed, Source: SSO

  14. Ingredients of Growth Strategies Contribution to Value Added by various types of enterprises Source: World Bank Staff calculations based on SSO and Eurostat data Findings from 2008 Country Economic Memorandum: Firm entry is strong Survival rate is decent Firms DO NOT grow

  15. Ingredients of Growth Strategies:Effective Government • Leadership is crucial – a coherent growth strategy • Long planning horizon • Communicating vision Source: World Economic Forum Global Competitiveness Report Source: Worldwide Governance Indicators

  16. Ingredients of Growth Strategies:Equity and Equality of opportunity • Equity and equality of opportunity are essential ingredients of sustainable growth strategies

  17. 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.

  18. 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

  19. 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

  20. Thank you WWW.worldbank.org/mk

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