The New Growth Agenda

By Anthony Williams

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President Mirow describes Bank’s expectations ahead of Annual Meeting in Zagreb

Preparing for the EBRD’s Annual Meeting in Zagreb on 14-15 May, EBRD President Thomas Mirow says the Bank will respond to lessons learnt from the financial crisis by addressing imbalances in economies that were unmasked over the last 18 months.

In a speech at the London School of Economics tonight, he will argue for a New Growth Agenda in order to prepare for sustainable economic growth in the longer term.

Ahead of the next official economic forecasts from the Bank – due to be published next week - President Mirow will say that while the EBRD is now expecting return to growth in most countries of the region, the recovery period will be protracted, overall growth will be patchy and below pre-crisis levels for the foreseeable future.

The key drivers of pre-crisis growth such as foreign direct investment or household consumption will remain subdued and the future will bring much tougher competition for much scarcer sources of finance.

The New Growth Agenda will seek to address such imbalances as the mismatch between external and domestic sources of financing, bottlenecks to long-term competitive success and a greater emphasis on investments in the corporate sector with a view to further diversification of economies.

Thomas Mirow will argue that developing local currency markets could help overcome a dependency on foreign currency debt and encourage more reliance on domestic savings. The EBRD plans to launch a Local Currency Initiative at its Annual Meeting.

Higher corporate investments will widen the scope of countries’ offer of products, away from an over dependence on raw materials or a limited number of individual product groups.

Infrastructure investments will also continue and there will be a strong focus on energy efficiency and energy security projects. A priority will be set for investments in the Western Balkans and the less advanced countries of the Caucasus and Central Asia. Investments in Turkey are also set to rise over the next five years.

In order to finance increased investments aimed at addressing precisely these new challenges, the EBRD’s Board of Governors is being asked at the Zagreb meeting to approve a management proposal to increase the Bank’s capital by 50 percent to €30 billion.

This would unlock additional capital for EBRD financing of between €8.5 billion and €9 billion a year between 2011 and 2015.

Already this year the EBRD is well on track to achieve investments of around €8 billion for 2010, following funding of €1.76 billion in the first quarter of this year, a rise of 60 percent from the same period in 2009.

The Annual Meeting itself, together with the traditional Business Forum - this year entitled “Building Sustainable Growth” - will be dedicated to seeking how best to support the region in the recovery period and beyond and looking at lessons learnt from the crisis.

The Business Forum panels also include discussions that will seek solutions for the development of financial markets and strengthening the corporate sector. Reducing carbon emission twinned with the drive for greater energy security will also be on the agenda.

Economic and Monetary Affairs Commissioner Olli Rehn will hold this year’s Jacques de Larosiere lecture.

The Annual Meeting in 2011 is due to be held in Astana, the administrative capital of Kazakhstan.

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