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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

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
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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