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Strategies for Economic Growth: Insights from the World Bank and NBRM

This report explores the critical ingredients for sustainable economic growth, as presented during the opening of the World Bank/NBRM Public Information Center. It emphasizes the need for countries, particularly Macedonia, to adopt effective growth strategies, including technology transfer, macroeconomic stability, and investment in human capital. By analyzing successful growth stories from around the world and highlighting necessary policies, the report aims to guide nations toward achieving higher growth rates to converge with EU averages.

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Strategies for Economic Growth: Insights from the World Bank and NBRM

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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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