The EBRD’s Annual Meeting in Warsaw this year kicked off with a theme at the very core of the Bank’s current priorities: how to attack the reform stagnation that is preventing the path towards convergence and how to “re-energise” the transition process.
Chief Economist Erik Berglof set the tone for the discussion by asking a packed breakfast session in Warsaw what was the biggest single factor impeding growth right now. Forty-nine per cent of respondents came back with “lack of structural reforms”, by far the largest single block.
They were responding to the findings of the EBRD’s Transition Report 2013 which found that many countries in the EBRD regions were now “stuck in transition”. A lack of reforms was impeding growth and also convergence with more advanced economies in western Europe.
Panellist Jan Krzysztof Bielecki, Chairman of the Economic Council of the Polish Prime Minister, agreed with the Transition Report about the importance of political institutions. It was also important to overcome vested interest groups who stood in the way of reforms. “Don't forget about the politics and the economics will come much more easily,” he said.
Deputy Bulgarian Prime Minister Daniela Bobeva stressed the importance in the reform process of gaining consensus on what sort of reforms were needed and she also placed an emphasis on investment in education.
Egyptian economist Ahmed Galal saw a positive medium-term future for the southern and eastern Mediterranean countries even though the short-term prospects were affected by instability. He stressed that the early stages of reform were much easier than the later stages. Further on in the cycle reforms became more complicated and more subtle. He hoped the Middle East was now on the way to developing political institutions.
The EBRD has long said that announcing reforms is the easy part. What really matters, though, is implementation. Forcing through reforms takes political courage.
Latvia’s Finance Minister Andris Vilks, agreed, saying managing transition meant managing expectations. Reforms needed political leadership. It was particularly important to get the public on one’s side to explain why often painful reforms were necessary.
According to Poland’s Finance Minister, Mateusz Szczurek, demographic trends were impeding further economic development. “Demography in the region is something that everyone needs to deal with and we need to make sure resources are used the best we can.”
Countries needed to be ready for the time when they did not have baby booms but had to work with a smaller workforce which needed to be more productive and more inclusive.
He also said that while Poland’s economic performance had been impressive, it was even more gratifying that Poland had risen up the World Bank’s Doing Business index.
Fabrizio Saccomanni, a former EBRD Vice President and high-ranking Italian financial official agreed that structural reforms were crucial to promoting growth – both in the EBRD regions and also in the eurozone.
But he argued that while reforms were important for growth, growth was equally important for reforms. It was time to return to investment, he said. There was a strong need to bring the current high level of liquidity to fruition. It was crucial to find the resources to fight unemployment particularly among young people.
The EBRD’s report itself stresses the importance of inclusion, making sure that all sectors of society gain from economic development.
At the EBRD Annual Meeting this week, EBRD President Sir Suma Chakrabarti outlined a three-pronged strategy for getting countries back on the reform track, by making reforms more resilient, supporting integration and increasing the Bank’s activities to address global challenges.
Wednesday, 14 May 2014
- Erik Berglof Chief Economist, @ErikBerglof, EBRD
- Jan Krzysztof Bielecki, Chairman of the Economic Council of the Prime Minister, Republic of Poland
- HE Daniela Bobeva, Deputy Prime Minister for Economic Development, Republic of Bulgaria
- Ahmed Galal, Managing Director, Economic Research Forum
- Fabrizio Saccomanni, @FabSaccomanni, Senior Economic Adviser, Istituto Affari Internazionali, Rome
- Andris Vilks, @AndrisVilks, Minister of Finance, Ministry of Finance of the Republic of Latvia
- Mateusz Szczurek, Finance Minister, Poland