## Central, Eastern, and Southeastern Europe: Harnessing the Power of Good Governance

_IMF Blog, July 27, 2017_

## Source details

**Canonical URL:** [Central, Eastern, and Southeastern Europe: Harnessing the Power of Good Governance](https://www.imf.org/en/blogs/articles/2017/07/27/central-eastern-and-southeastern-europe-harnessing-the-power-of-good-governance)

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## Bibliographic details
- Authors: Poul Thomsen
- Published: July 27, 2017

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### Overview and recent performance
- Publication date: July 27, 2017
- The region moved from centrally-planned to market-based economies in less than a generation, transforming legal systems, public administrations, and economic policies.
- Average income per capita in real terms (without inflation) in this region has almost doubled over the past two decades.
- Near-term growth in most countries is robust, but convergence with advanced Europe has slowed since the global financial crisis.
- Growth potential has almost halved from its pre-crisis level—largely because of a slowdown in productivity growth.
- Many higher-skilled workers have left the region in search of better opportunities abroad.
- Key headwinds: adverse demographics, skill shortages, and a less conducive external environment (subdued potential growth in the euro area and uncertain prospects for further EU enlargement).

### Rationale for focusing on governance
- Enhancing institutions and good governance remains central to raising prosperity to advanced European living standards.
- Better governance can:
  - Raise productivity.
  - Produce more durable growth.
  - Increase trust within society.
  - Improve the ability to share growth benefits broadly rather than for a few.
- Improved governance can also:
  - Improve government efficiency and public services.
  - Facilitate state-owned enterprise restructuring.
  - Strengthen banking systems so new firms can emerge and small ones can expand.
- The low-hanging fruit of reforms has largely been picked; a new wave of reforms is needed and will be more difficult than the initial transition.

### Three domestic economic policy priorities to improve governance
- First, increase transparency and accountability.
  - Design budgets that are understandable and widely available to the public.
  - Use transparent procedures for public procurement.
  - Provide clear information about the performance of state-owned enterprises.
  - Deploy e-government (the use of information and communication technologies in the activities of the public sector).
  - Make ownership structures of financial institutions and corporations more transparent.
  - Provide more information about the ultimate beneficiaries of loans and improve financial disclosures.
  - Empower citizens and civil society organizations in the fight against systemic corruption.
- Second, promote fair participation and a level playing field.
  - Ensure government spending and taxation systems promote an equitable distribution of resources.
  - Ensure broad access to education and health care to provide opportunities for active participation in society.
  - Learn from privatization experiences: designs that ensured wide participation had positive impacts on institution building, whereas concentration of privatized resources in the hands of a few had adverse effects.
- Third, boost the operational capacity of the state.
  - Make justice systems more effective and impartial.
  - Implement competitive and merit-based recruitment and promotion of public officials.
  - Limit political interference in public administration.

### Role of the IMF and next steps
- The IMF is promoting good governance through everyday work: policy advice, lending, and capacity development.
- Examples of IMF initiatives cited:
  - The fiscal transparency code.
  - The financial sector assessment program.
  - The anti-money laundering initiative.
  - Measures to improve public procurement and fight corruption in Fund-supported programs.
- Continued learning from experiences—what worked and what didn’t—is necessary.
- Collaborative dialogues (policymakers, academics, civil society) affirm that good governance and strong institutions can make growth more durable and inclusive.

*Source: Poul Thomsen, July 27, 2017*

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## References

- [https://www.imf.org/wp-content/uploads/2017/07/BLOG-1024x600-CROATIA-people-in-streets-of-croatia-Album-Prisma-Newscom-apaart784535.jpg](https://www.imf.org/wp-content/uploads/2017/07/BLOG-1024x600-CROATIA-people-in-streets-of-croatia-Album-Prisma-Newscom-apaart784535.jpg)
- [conference](http://www.imf.org/en/News/Seminars/Conferences/2017/04/28/reaccelerating-convergence-in-central-eastern-and-southeastern-europe)

_Source: https://www.imf.org/en/blogs/articles/2017/07/27/central-eastern-and-southeastern-europe-harnessing-the-power-of-good-governance_