What does it take to grow
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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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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 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)


Growth performance1

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)


Convergence requires high and sustainable growth

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%.


What does it take to grow1

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

What can we learn from the success stories ?


Ingredients of growth strategies technology transfer

Ingredients of Growth Strategies:Technology Transfer

  • Mostly through FDI,

  • Foreign trade

  • Foreign education

Source: World Bank ECA Regional Tables


Ingredients of growth strategies macroeconomic stability

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


Ingredients of growth strategies investments

Ingredients of Growth Strategies:Investments

Gross Fixed Investments, % of GDP

Source: Eurostat


Ingredients of growth strategies savings

Ingredients of Growth Strategies:Savings

Private Consumption, % of GDP

Source: Eurostat


Ingredients of growth strategies investing in human capital

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


Ingredients of growth strategies competition and structural change

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


Ingredients of growth strategies

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


Ingredients of growth strategies1

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


Ingredients of growth strategies effective government

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


Ingredients of growth strategies equity and equality of opportunity

Ingredients of Growth Strategies:Equity and Equality of opportunity

  • Equity and equality of opportunity are essential ingredients of sustainable growth strategies


Ingredients of growth strategies export promotion and industrial policy

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

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 strategies2

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

Thank you

WWW.worldbank.org/mk


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