The World Bank last week published its latest outlook for emerging Europe for Central Asia, and offered some cautious cause for optimism: not least the prospect that next year’s economic rebound from the recession caused by the Covid-19 pandemic could be stronger than anticipated, at least in some parts of the region.
“It’s very difficult to say which part of the region will bounce back first, as forecasting during a pandemic is itself difficult,” says World Bank Vice President for Europe and Central Asia Anna Bjerde. “What our research does show is that most likely, Central Europe and the Baltics will rebound fastest given their economic strength, including industrial production, retail and exports, as well as the recovery support offered by the European Union.”
Bjerde was speaking with Andrew Wrobel, a co-founder of Emerging Europe, as part of the Bucharest Forum, organised by the Aspen Institute in Romania. She was careful to state that there remain, however, a great many unknowns.
“It all depends on the pace of economic activity and global trade: how quickly will they pick up? When will a vaccine be available? Will the recent spikes in the number of cases lead to new restrictions? Uncertainty really is a factor.”
What Bjerde does feel confident enough to suggest, however, is that further contractions are unlikely, except in Eastern Europe.
“Even if we see growth for the Europe and Central Asia region as a whole at the lowest end of our forecast range, at around 1.1 per cent, all of the sub-groups in the region should still see positive growth, except for Eastern Europe,” she says.
Key to the recovery, Bjerde believes, and key to ensuring that the crisis does not go to waste, is to make sure that reforms are put in place now that will benefit all citizens of the region. These are particularly crucial, she says, in the areas of health and education.
“Each time we put out an economic outlook we also publish a companion piece looking at issues which are pertinent. In the spring it was Covid-19, this time it was health and education: both important for building up human capital.”
Both emerging Europe and Central Asia have rapidly ageing populations. Addressing this imminent demographic crisis now can help countries make themselves more resilient to future shocks.
“We need to make sure we boost the region’s global competitiveness, and that means making sure that adults have better health outcomes. This matters because it impacts on productivity,” she says. “So the focus on health is important as there is a direct correlation with the speed of the recovery from Covid-19: the healthier the country, the faster the recovery. It is timely to zoom in on some of these factors.”
Bjerde says that she has been encouraged by her conversations with the region’s stakeholders, and that they understand the need to focus on a reform agenda. “They realise that now is a good time to carry out these reforms, that there is more to the recovery than thinking short-term.”
Two areas in particular that can benefit greatly are the environment and digitalisation: both have seen the pace of innovation and transformation speed up as a result of the pandemic.
“We have learnt from the pandemic that the digital framework needs to be strong. So many children were out of school, and while many countries could teach them remotely, others realised that their digital framework was not as robust as they thought. We need to focus on this.”
Social protection too must be strengthened. “Despite the region benefitting from the legacy of a strong social safety net we have found that we need to target it properly, and that it is properly funded.”
Ultimately, it is about putting people first, and making the most of what is a real opportunity to unleash the energy of the region.
“We found that tertiary education in the region lags. This must be addressed because the region needs skills to bring about private sector-led growth and create a more inclusive and digital -led economy,” says Bjerde.
“We need more resilient economies in terms of physical infrastructure, human capital and a natural resource base. This comes about through good governance, both public and corporate, but also the financial sector making sure firms and individuals have access to finance.”
Working together, she concludes, with a huge effort by various sectors – scientific, financial, NGO, tech – all coming together to learn from each other can bring about the changes that the region requires.
“That must be the takeaway from this crisis. At an individual level we have all had our lives disrupted and it has been a time to reflect on how we will live going forward. Many of us have realised that ‘less is more’: this is a good basis for a more sustainable future.”
You can watch the full interview here.
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