Growth to Accelerate in ECA

Economic growth in Europe and Central Asia will accelerate slightly in 2017, following the stabilization of oil prices, benefitting the eastern half of the region, and a continued recovery in the western half of the region.

According to the latest ECA Economic Update, Trade in Transition, launched Thursday in Tbilisi, Georgia, regional growth is forecast at 1.9% for 2017, up 0.3 percentage points from an earlier forecast in October, and will remain a stable 1.8% in 2018, World Bank Group reported.

The report also notes that policies focused on improving trade in the region are crucial for building on this modest growth. Trade has been vital in improving the lives of people in ECA. From the transition period in the 1990s to today, trade has promoted growth, created jobs, and granted access to various goods and services for millions of people.

“The sharp increase in international trade over the last three decades has dramatically transformed the region. It made the transition of Central and Eastern Europe into market economies possible, and it was linked to the creation of the common market in the European Union,” says Hans Timmer, World Bank Chief Economist for Europe and Central Asia.

“Trade has promoted innovation and more people in the region currently participate in the labor market than ever before. However, international competition and new technologies have reduced job security. Countries must align their social protection systems with these new labor market realities in order to help workers cope with this uncertainty.”

  New Growth Strategy

Overall, the region has been resilient to the ongoing global slowdown in trade, with trade volumes continuing to grow twice as fast as gross domestic product. The current slowdown of China’s exports has been the main driver of the global trade slowdown, but the reduced competitiveness of China’s exports has actually opened up new opportunities for ECA. According to the report, countries can best take advantage of these opportunities by embracing a new growth strategy focusing on these new job opportunities in sectors that are internationally competitive.

Three transitions are necessary to build on this strategy:

- a continued shift to producing goods that can sell in international markets to drive a sustained shift from imports to exports;

- a reorientation towards Asia, moving away from the intraregional trade that has defined ECA in recent decades; and

- a shift away from goods toward services, such as tourism and software, where most future growth opportunities are.

  Kazakhstan

The WB forecasts Kazakhstan’s GDP growth to hit 2.4% in 2017 compared to 1% in 2016, the report said. GDP growth in Kazakhstan is forecast to reach 2.6% in 2018 and 2.9% in 2019.

“Economic activity is projected to pick up gradually over the medium term, but growth will remain well below its 2014 level, when the oil price shock hit the economy,” the report said.

The WB noted that a projected increase in oil prices from $55 per barrel in 2017 to about $60-62 in 2018-19 will drive growth in Kazakhstan, supported by increased oil production, as rising output at the Kashagan offshore oil field is expected to more than offset declining output among older oil fields.

  Georgia

The World Bank is moving its forecast up and saying the Georgian economy will grow by 3.5% in 2017, 4% in 2018 and 4.5% in 2019. High investments and increased exports pave the way for growth in Georgia, the report said.

Furthermore, a recovery in export markets and an uptick in oil prices leading to growth in many of the country’s trading partners are all contributing to this accelerated growth, said the report.

  Nepal

Nepal is set to record highest economic growth in 23 years in the current fiscal year, according to the World Bank’s new estimates. The World Bank has projected that the growth will rebound strongly to 7.5% (market prices). The projection is higher than the government’s growth estimate of 6.9% unveiled two weeks ago.