Opening of the World Bank/NBRM Public Information Center Lilia Burunciuc December 16, 2010

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 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) GDP per capita, in PPP, EU-27=100

 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%.

 Learning from success stories: findings of the Commission on Growth and Development  13 countries have grown at 7+% for at least 25 years since  Botswana, Brazil, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Malta, Oman, Singapore, Taiwan, and Thailand.  India and Vietnam can join soon

Openness Import Knowledge Exploit global demand Macroeconomic stability Modest inflation Sustainable public finances Future orientation High investment High savings Market allocation Prices guide resource Resources follow prices Leadership and governance Credible commitment to growth Credible commitment to inclusion Capable administration

 Mostly through FDI,  Foreign trade  Foreign education Source: World Bank ECA Regional Tables

 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

Source: Eurostat

 Education  Health  Decent and slightly improving health indicators but considerable efforts still needed Source: World Bank / EBRD BEEPS

 “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

 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

Findings from 2008 Country Economic Memorandum: 1.Firm entry is strong 2.Survival rate is decent 3.Firms DO NOT grow Source: World Bank Staff calculations based on SSO and Eurostat data Contribution to Value Added by various types of enterprises

 Leadership is crucial – a coherent growth strategy  Long planning horizon  Communicating vision Source: Worldwide Governance IndicatorsSource: World Economic Forum Global Competitiveness Report

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

 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.

 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

 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

Source: World Economic Forum Global Competitiveness Report

 Life expectancy is increasing and infant mortality is declining  Enrollment is increasing in secondary and tertiary education 22 Source: State Statistics Office Source: UN Human Development Report