Presidential panel within the Business Forum on the topic: “Three Seas Initiative: A path to smart development and comprehensive economic growth”
IMF News, July 8, 2021
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- Presidential panel within the Business Forum on the topic: “Three Seas Initiative: A path to smart development and comprehensive economic growth”
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- Published: July 8, 2021
Growth performance and convergence
- Finding: Since its inauguration six years ago, the Initiative is adding to the region’s positive growth momentum and its remarkable progress.
- Finding: During 2015-2019 the Three Seas economies averaged 3.8 percent GDP growth a year, nearly double the rate of EU-15.
- Finding: In 2020, the Three Seas economies shrank by 4 percent on average, while in Western Europe the contraction was about twice as big.
- Projection: Going forward, the twelve economies are on track to regain their 2019 GDP level by the end of this year and continue to close the income gap in the medium term, growing around 1.2 percent a year more than EU-15 economies through 2025.
- Interpretation: The region remains on a convergence path with western neighbors, helped by resilient market economies and strong macroeconomic fundamentals.
Infrastructure, connectivity, and long-term output gains
- Finding: Prioritizing infrastructure and connectivity has been key to resilience and the ability to rebound after the crisis.
- Quantified impact: The IMF estimates that, for every euro spent, this will increase output by a factor of 1.7‑2.5 over the long term.
- Policy implication: The right infrastructure investments should account for low carbon and climate resilient growth to both improve connectivity and accelerate the transition to the new climate economy.
- Recommendation: Sustain and prioritize infrastructure investment that strengthens competitiveness and productive capacity for the future.
Digital connectivity and social infrastructure (health and education)
- Finding: The pandemic highlighted the value of digital connectivity; it has been a priority for the 3SI and is now more important.
- Finding: The pandemic exposed shortcomings in coverage and quality of healthcare; in the region healthcare spending is two‑thirds of what it is in western Europe, compounding adverse demographic challenges.
- Recommendation: Invest in people—especially through health and education—to support comprehensive, private sector–led growth and to address pandemic-induced labor market shifts.
- Policy implication: Strengthening digitalization of public administration, schools, and health systems is critical.
Investment priorities, Next Generation EU allocations, and innovation
- Finding: 3SI members, under the Next Generation EU initiative, plan to allocate a larger share of investments to science and healthcare than their ‘EU-15’ neighbors by a ratio of 21 to 12 percent.
- Focus areas: Digitalization of public administration, schools, and health systems; mainstreaming green technology through expanding renewable energy sources.
- Finding: Today R&D spending in the Three Seas economies is still on average less than two-thirds of that in western Europe.
- Quantified effect: Fund analysis has found that in advanced economies, an increase of about 0.4 percent of GDP a year in R&D could raise GDP by 5 percent in the medium term.
- Recommendation: Support stronger R&D spending and enhance R&D collaboration to create more innovative economies.
IMF support, tools, and policy advice
- IMF offering: Public Investment Management Assessments (PIMAs) can support selection, appraisal, and spending efficiency of infrastructure projects.
- Update: PIMAs have been expanded to include climate mitigation and adaptation considerations.
- Policy advice: IMF guidance on overall policy frameworks can help create a dynamic business environment and facilitate more private investment in connectivity.
- Financial support instrument: The decision to take on a new $650 billion allocation of Special Drawing Rights will provide a contribution to building reserves; members may consider ways to use this added space in support of the 3SI mission.
Closing and personal note
- Personal account: Kristalina Georgieva recalls earning her PhD in economics from the then Karl Marx Institute, Bulgaria, and overcoming the legacy of the past together with her country.
- Sentiment: The Three Seas Initiative is founded on experience and conviction; best wishes for deploying it fully to build vibrant and prosperous economies for all people.
Kristalina Georgieva — Presidential panel within the Business Forum: “Three Seas Initiative: A path to smart development and comprehensive economic growth”. July 8, 2021.