## IMF Survey : Emerging Europe Moves Ahead but Slower

_IMF News, May 6, 2016_

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**Canonical URL:** [IMF Survey : Emerging Europe Moves Ahead but Slower](https://www.imf.org/en/news/articles/2015/09/28/04/53/socar050616a)

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## Bibliographic details
- Published: May 6, 2016

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### Regional overview and headline findings
- Most Central, Eastern, and Southeastern European economies (CESEE) continue to record robust growth, while Russia and other countries in the Commonwealth of Independent States (CIS) remain in recession.
- Date of publication: May 6, 2016.
- CESEE growth: Central and Eastern European (CEE), Southeastern European (SEE) and Turkish economies expanded at around 3-4 percent in 2015.
- CIS outlook: IMF forecasts CIS contraction in 2016 to moderate to 1.5 percent, from 4.25 percent in 2015.
- Average growth across the region remains well below pre-crisis levels, implying a longer path to catch-up with advanced Europe.

### Growth drivers and risks
- Primary drivers of growth in much of the region:
  - Domestic consumption, supported by supportive macroeconomic policies and rising real wages.
  - In EU member countries, a boost to investment owing to increased utilization of EU funds before their expiration in 2015.
- Key downside risks to CESEE:
  - Stagnation in the euro zone—the largest trading partner for many CESEE countries—would be the strongest brake on growth.
  - Lower-than-expected growth in the United States and China.
  - Tighter global financial conditions.
  - Political instability and the rise of populist parties increasing regional uncertainty.
- Policy stance suggested under heightened risks: supportive monetary policy combined with medium-term fiscal consolidation for many economies in the region.

### Catch-up with advanced Europe: challenges and priorities
- With a less supportive global economy in the medium term, lower growth may become "the new normal" for the region, slowing convergence to advanced Europe.
- To close the gap faster, CESEE countries need stronger policies focused on:
  - Improving labor supply.
  - Boosting investment.
  - Increasing efficiency through structural reforms.

### Improving the workforce
- Demographic and labor-force challenges:
  - Most CESEE countries face severe declines in the working-age population, a trend expected to continue or worsen in some cases.
  - Emigration has removed 20 million people (or 6.25 percent of the working-age population) from the workforce in the past 25 years.
- Policy recommendations to bolster labor supply:
  - Reduce structural unemployment and skill mismatches.
  - Extend work opportunities to underemployed groups such as women and seniors.
  - Improve health care to raise life expectancy.
  - Strengthen institutions to retain and attract skilled workers.

### Boosting investment
- Investment gaps:
  - Capital stock per capita in a typical CESEE economy is still about one-third of that in advanced Europe.
  - Investment shortfalls are especially large in infrastructure; public investment could help but would not be sufficient alone.
- Constraints on investment:
  - Lingering crisis-era issues in some cases—high debt burdens and nonperforming loans.
  - Deeper structural issues that depress private investment and returns.
- Policy focus to raise investment:
  - Institutional reforms to reduce inefficiencies and increase returns on private investment and savings.
  - Address domestic savings shortfalls: in most of the region, domestic savings are lower than needed to sustain investment rates high enough to close income gaps with advanced Europe within a generation or so.

### Raising productivity
- Importance of structural reforms to boost productivity and speed convergence.
- Suggested reform areas:
  - Upgrade legal systems.
  - Improve health care.
  - Ensure a supportive environment for high-productivity sectors and firms.
  - Increase government efficiency and reduce regulatory burdens on businesses.
  - Improve affordability of financial services, particularly for small but productive firms.
- Country-specific needs highlighted:
  - Belarus: deeper reforms to re-orient the economy toward more private-sector-led growth.
  - Moldova: reinforce the independence of the judiciary system.
  - Ukraine: fight corruption and reform tax administration.

*Source: IMF Survey : Emerging Europe Moves Ahead but Slower (May 6, 2016).*

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
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- [IMF Country Focus](https://www.imf.org/en/news/country-focus)
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- [Read the report](http://www.imf.org/external/pubs/ft/reo/2016/eur/eng/erei0516.htm)
- [Latest global outlook](http://www.imf.org/external/pubs/ft/weo/2016/01/index.htm)
- [IMF regional office for Central Eastern Europe](http://www.imf.org/external/region/bal/rr/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/socar050616a_