Country Economic Memorandum

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Leveraging Global Value Chains for growth in Turkey: A Turkey Country Economic Memorandum
(Washington, DC: World Bank, 2022-03-02) World Bank
Turkey saw phenomenal growth in the 2000s as economic reforms ushered in FDI, GVCs expanded, and productivity increased. The early 2000s saw Turkey exit from major economic crisis with a strengthened fiscal framework, a strengthened, inflation-targeting mandate for the Central Bank, the establishment of an independent bank regulator, and importantly, a recently agreed Customs Union agreement with the EU. From 2001 to 2017, incomes per capita in Turkey doubled in real terms and tripled in current dollar terms. Turkey transformed from a lower-middle-income country (LMIC) at the start of the 2000s to very nearly reaching high-income status by 2014. This drove a rapid fall in poverty from above 30 percent to just 9 percent1. Very few other countries matched Turkey’s growth over this period, and almost all of them were new EU member states.
Ghana Rising: Accelerating Economic Transformation and Creating Jobs
(World Bank, Washington, DC, 2021-11-10) World Bank
Ghana has been a rising growth star and a beacon of hope in West Africa. Strong economic growth over the past two decades led to a near doubling of GDP per capita, lifting the country through the threshold for middle-income status in 2011. GDP per capita grew by an average of 3 percent per year over the past two decades, putting Ghana in the top ten fastest growing countries in Sub-Saharan Africa (SSA). A rising tide has tended to lift all boats. Poverty rates more than halved between 1998 and 2016, and the extreme poverty rate declined from 36.0 percent in 1991 to 8.2 percent in 2016. The net primary school enrollment rate rose from 62.5 percent in 2000 to 86.0 percent in 2019. This progress has motivated the government’s goal to lift the country to high-income status by 2057. The focus of this Country Economic Memorandum (CEM) is to review options for Ghana to create enough higher quality jobs through economic transformation. Economic transformation, or inclusive productivity growth, occurs as people and resources shift from lower to higher productivity activities. It raises household incomes and living standards, thereby lifting people out of poverty. It can be achieved through the movement of workers and other resources between firms and sectors, or through workers staying within existing firms that benefit from within-firm productivity growth by adopting better technologies and capabilities.
Kosovo Country Economic Memorandum, November 2021: Raising Firm Productivity
(World Bank, Washington, DC, 2021-11) World Bank
To boost economic growth and foster sustained formal job creation in Kosovo, igniting firm productivity is crucial. Based on detailed micro-data, this note examines the characteristics and recent evolution of firms in Kosovo, with particular attention to firm productivity. For the last decade, the landscape of firms in Kosovo has been dominated by microenterprises with low productivity, employment, and survival rates. Firm creation and growth,small firm density, average size, and the likelihood of survival are all low, which implies that there are severe constraints on private sector development. Kosovo’s firms are only tenuously linked to global markets and the country is lagging in the share of female-run companies. Positive and rising net job creation in 2015-18 was driven by higher formalization of jobs and the increasing size of incumbent firms, especially young small and medium enterprises (SMEs). Kosovo needs a multidimensional policy strategy to foster growth in firm productivity. Based on the study findings and the results of other notes prepared for Kosovo’s country economic memorandum (CEM), this note presents a policy strategy that targets the three main sources of firm productivity growth: (1) firm productivity (the within component); (2) market reallocation (the between component); and (3) firm dynamics (entry and exit). Section one examines the characteristics and recent dynamics of Kosovar firms. Section two analyzes the drivers and evolution of productivity, with emphasis on the links between productivity and access to credit. It also assesses the main barriers to productivity growth. Section three sheds light on how Coronavirus disease 2019 (COVID-19) has affected Kosovar firms. Section four concludes by discussing tentative policy implications of the analysis.
Albania Country Economic Memorandum: Strengthening the Sustainability of Albania’s Growth Model
(Washington, DC, 2021-09) World Bank
Albania is gradually emerging from the unprecedented economic disruptions caused by the coronavirus disease 2019 (COVID-19) pandemic. As the pandemic is overcome, it is crucial to shift attention back to Albania’s long-term objective of building a stronger underlying economic growth model. This country economic memorandum (CEM) highlights 4 key priorities to help Albania identify the next steps in its structural reform agenda. Albania needs to refocus attention on the pre-crisis reform agenda and accelerate long-term economic growth, including by spurring productivity growth, building human capital, and supporting investment. On the labor supply side, this means investing in people and supporting workers’ transition to better employment (Priority 1), while on the labor demand side, this means accelerating firm productivity growth and creating better job opportunities (Priority 2). But Albania should also use the current crisis to set its aspirations higher. Beyond achieving higher economic growth, policymakers need to strengthen the quality of the country’s socioeconomic development model. Through more green, resilient, and inclusive development (GRID), Albania can ensure the sustainability of economic growth (Priority 3). Foundationally, this CEM highlights the need for Albania to create fiscal space to support its growth priorities (Priority 4). The COVID-19 crisis has driven public debt to new heights, and upgrading Albania’s growth model - including by implementing many of the reforms presented in this CEM - will require further public spending.
Serbia’s New Growth Agenda: Investment for Growth
(World Bank, Washington, DC, 2020-03-26) World Bank
Because of its difficult starting position in transitioning to a market economy, so far macroeconomic policy in Serbia has mainly been concerned with achieving stability. At the start of its transition in 2001, Serbia was practically bankrupt, burdened with old overdue debt and huge arrears in budgetary payments, especially pensions. At the end of 2000, public debt was 175 percent of GDP and external debt was 128 percent. In both 2000 and 2001, inflation was over 80 percent. High inflation and external imbalances were the main concerns all the way through the global financial crisis (GFC). The GFC (as well as external shocks) brought multiple recessions between 2009 and 2014, and a major widening of the fiscal deficit. Since 2014, the focus has been on consolidating public finances, in addition to keeping inflation low. While macroeconomic stability is a necessary precondition for growth, the question is whether Serbia can do more to create a pro-growth environment. Serbia has succeeded in keeping inflation low over recent years; the current account deficit (CAD) is now low enough to be manageable and is almost entirely financed by non-debt-creating flows; large fiscal deficits have been converted to a surplus; and public debt is heading downward. However, growth is still meager. To ensure that the Serbian economy grows more quickly, the focus should be on increasing investment—both private and public.
Serbia’s New Growth Agenda: Forging a New Future
(World Bank, Washington, DC, 2020) World Bank
Although current growth rates are improving incomes in Serbia, they are not bringing the country closer to average living standards in the European Union fast enough. To reach European levels of prosperity, Serbia must embrace a new, ambitious agenda for growth. Serbia can become a fast-growing, sophisticated modern economy, driven by its private sector, if it maintains the hard-won gains of macroeconomic stability and advances the transformation in the following seven areas: boosting investment, financing growing firms, skilling workers, raising productivity, expanding exports, enabling business, and unleashing competition. Reforms will at once promote growth and build needed resilience for the coming period and beyond. The challenge is not only economic. It requires courageous, decisive, and bold political commitment as well as strengthening government effectiveness and accountabil
Finance for Growth: Micro, Small, and Medium Enterprise Financing
(World Bank, Washington, DC, 2019-12-18) World Bank
This report provides an overview of the demand and supply side of MSME finance as well as certain aspects of the enabling environment. A detailed analysis of the financial sector infrastructure for MSME financing and the secured transactions framework was outside of the scope of this report but would be a useful complement. Equally useful would be a detailed analysis of bank efficiency, including competition and profitability aspects, and its effect on MSME finance.
Country Economic Memorandum for Sao Tome and Principe - Background Note 8: How to Increase the Availability of Financing Needed to Stimulate Private Sector Investment? A Review of the State of and Barriers to Access to Financial Services in São Tomé and Príncipe
(World Bank, Washington, DC, 2019-06-26) Barreto, Rúben; Vicente, Carlos Leonardo
This note discusses the current structure of the financial sector in São Tomé and Príncipe (STP) and the main obstacles preventing mobilization and allocation of more resources to private sector investment. Since 2012, credit to the private sector in STP has been declining and is currently below peers. In an economy dominated by informality, banks provide credit to a limited number of borrowers, prioritizing large borrowers. A survey completed in 2017 showed that only 18 percent of micro, small and medium-sized enterprises (MSMEs) reported being registered and having a bank account, of which only 3 percent had access to credit. The same survey showed that only 39 percent of individuals, some of them owners of micro-enterprises registered under their personal name, have access to financial services. The note is divided into four sections. The first provides an overview of STP’s financial sector, analyzing and benchmarking its structure, depth, and soundness. The second section analyzes the landscape of access to financial services (focusing on individuals and MSMEs), while the third describes some of the key limitations of the financial infrastructure in STP that create obstacles to financial sector development and access to finance. Finally, the fourth section concludes with policy recommendations that can help increase access to financial services in STP.
Country Economic Memorandum for Sao Tome and Principe - Background Note 2: Is it Sustainable for Sao Tome and Príncipe to Have a Large Current Account Deficit and a Fixed Exchange Rate?
(World Bank, Washington, DC, 2019-06-26) Arteta, Carlos; Kirby, Patrick
Is it sustainable for São Tomé and Príncipe to have a large current account deficit and a fixed exchange rate peg? Sao Tomé and Príncipe (STP) pegs its currency, the dobra, to the euro and has both persistent current account deficits and a persistent inflation differential with the Euro Area. In other countries, these characteristics have proved to be unsustainable over time, as rising debt and a worsening trade imbalance leads to the abandonment of the peg. This note examines whether this might be the case in STP, and finds that, despite some vulnerabilities, there does not appear to be an immediate threat to the peg, as the country’s current account deficits seem to be determined not by its trade balance but by its capital balance, which is largely sustained by inflows of aid and remittances. This background note has four sections: the first examines the general theoretical conditions for the sustainability of exchange rate pegs, the second assesses whether these conditions exist or are relevant for STP, a small, open economy with a small financial sector, and the third provides analysis of the drivers of the country’s current account deficit. Policymakers could mitigate risks to the peg by broadening the country’s revenue base, developing a domestic debt market, and diversifying exports.
Doing Business Reform Memorandum: Bulgaria
(World Bank, Washington, DC, 2015-10) World Bank Group
Bulgaria experienced strong economic growth prior to and shortly after joining the European Union (EU) in 2007. Under the better regulation program, the government adopted over 100 measures to reduce the regulatory and administrative burden, but no formal mechanism was introduced to regularly monitor and review its implementation at the national or municipal level. Some areas, in which entrepreneurs expected to see improved efficiency, actually saw setbacks. The time needed to get a construction permit, import license, or operational license almost doubled between 2008 and 2013, and senior managers of firms reported that they were spending more time, 22 per cent in 2013 , dealing with public officials or public services than in 2008, when it took 14 per cent of their time. The final diagnostic study considered in this memo is the Doing Business report, which is also the basis for the reform recommendations presented in the document. According to last year’s Doing Business report, business regulation in Bulgaria varies significantly across the areas measured. Bulgaria is among the global top 50 performers in 4 of the 10 areas, specifically, protecting minority shareholders (14th), getting credit (23rd), resolving insolvency (38th), and starting a business (49th). Bulgaria‘s performance lags behind in four areas, getting electricity (125th), dealing with construction permits (101st), paying taxes (89th), and enforcing contracts (75th).