Western Balkans and Europe 2020 Does the Western Balkan need a new Growth Model? Peter Sanfey Lead Economist, EBRD Regional Coordination Meeting, Regional Cooperation Council Brussels, March 31 2011
The “growth model” of the Transition Region (incl The “growth model” of the Transition Region (incl. the Western Balkans): Market-oriented reforms Trade integration Financial integration with the West Political integration (for EU or near-EU countries). Rapid catch up and growing prosperity But also important weaknesses and gaps
Is a new approach to development needed after the crisis? The EBRD answer in a nutshell No new “growth model” needed, but region must address its key weaknesses Need both stronger and safer growth New reform agenda Close sector-level reform gaps Develop local currency finance Strengthen export capacity Improve business environment
Weakness (1): Incomplete Reforms
Weakness (2): Financial Sector Fragility
Weakness (3): Unbalanced Growth
Exports ► Innovation ► Growth Firm level R&D Spending Export activity significantly raises probability of R&D ≈1/3 Non-exporter Exporter
Top priorities to improve export-friendliness
Weakness (4): persistent business environment problems BEEPS: Top three constraints in each country