Country Economic Memorandum

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  • Publication
    Guatemala : Country Economic Memorandum, Challenges to Higher Economic Growth
    (Washington, DC, 2005-03) World Bank
    The purpose of this Country Economic Memorandum (CEM) is to contribute to the ongoing discussion in Guatemala about means of accelerating economic growth to help achieve targets set in the 1996 Peace Accords as a key ingredient in the fight to reduce national poverty rates. Chapter I examines historical and recent developments and uses a benchmarking growth methodology to identify the measures and policies most conducive to increasing long-term economic growth. Those areas that are identified as critical on the list of priorities are developed further in separate chapters. Chapter II focuses on the important role of human capital development for growth, along with the complementary policies for improving education and health. Chapter III examines the investment climate, broadly understood, which includes governance, access to infrastructure, and financial development. Chapter IV analyzes the importance of innovation and technology adaptation for productivity growth. Chapter V looks at trade openness and the catalytic role that the recently negotiated free trade agreement with the U.S. (CAFTA) could have on the Guatemalan economy.
  • Publication
    Kyrgyz Republic : Country Economic Memorandum - Enhancing the Prospects for Growth and Trade, Volume 1, Main Report
    (Washington, DC, 2005-01) World Bank
    This Country Economic Memorandum is aimed at helping the authorities in the Kyrgyz Republic identify factors explaining the apparent divergence between policies and outcomes, with a view to determining priorities for reform in the coming period. The main messages of the report are: 1) Kyrgyz policymakers should take advantage of the currently favorable nexus of a stable macro-environment, relatively strong gold production and international prices, and fast-growing neighboring markets, to address lingering policy and institutional deficiencies that limit the efficient restructuring of the economy away from its dependence on primary agriculture, mining and hydro-power. Action is needed to provide for more rapid progress with poverty reduction, and to mitigate the impact on the economy of an expected major decline in gold production by the end of the decade. Detailed quantitative analysis reveals a significant unrealized growth potential in agriculture and livestock products, agro processing and light manufacturing, based on prevailing inter-sectoral linkages in the Kyrgyz economy. 2) The prospects for successfully changing the growth pattern and trajectory, depend fundamentally on accelerated investment and export diversification. The contribution of foreign direct investments (FDI) to non-gold real sector investment has been minuscule over the past decade, limiting opportunities for much needed technology transfer and access to global value chains. The weaknesses of the export sector are reflected in the steady erosion of the Kyrgyz share of traditional regional markets. The report proposes a strategy for economic-cum-export diversification that requires simultaneous actions to address external, and domestic trade policy issues. Poor infrastructure, limited competitive pressures and low-level corruption, however, combine to raise trading costs to often prohibitively high levels. Safeguard measures remain a potential problem, and technical barriers to trade are pervasive in the CIS countries and elsewhere, although their impact on Kyrgyz exports has apparently been modest to date. Over the past few years, the government has adopted a range of measures aimed at reducing administrative barriers and strengthening the commercial legal system through a highly participatory reform process. In the end, however, it is firms not countries that are on the front line of international competition and business development. Favorable national circumstances, such as supportive macroeconomic conditions, friendly investment climates, and market-expanding trade agreements, contribute to competitiveness, but they do not guarantee success.
  • Publication
    Albania - Sustaining Growth Beyond the Transition : A World Bank Country Economic Memorandum
    (Washington, DC, 2004-12-27) World Bank
    While Albania 's performance has been impressive, there are concerns about the sustainability of high rates of economic growth in the future. The evidence from the growth accounting exercise indicates that total factor productivity growth from post-transition reallocation is gradually coming to an end. At the same time, the contribution of capital accumulation has only picked up modestly. This suggests that in order to sustain high GDP growth going forward, Albania must seek to raise its investment and, secondary school enrollment rates, increase the degree of trade integration, and improve institutional quality (governance). Worryingly, total factor productivity growth has slowed significantly in recent years while the contribution of factor accumulation was negligible. Neither remittances nor earnings from illegal activities constitute a solid basis for long-term economic development. There are signs, already, of a decelerating trend in the level of remittances. Furthermore, there are concerns about the financing of the country's investment needs over the medium term. The likelihood that Albania's access to concessional financing sources will decline, as well as expectations for dwindling external support and inflows from abroad, presents major risk factors that must be mitigated with the help of the donor community.
  • Publication
    Serbia and Montenegro : An Agenda for Economic Growth and Employment
    (Washington, DC, 2004-12-06) World Bank
    Upon resumption of its transition to a market economy in late-2000, Serbia made good initial progress across a range of areas. This progress began from a very difficult starting point which reflected the legacy of a decade of isolation, conflict, and poor economic management. However, deep structural weaknesses remain. Growth rates of around 4 percent per year will not suffice to produce a rapid convergence of living standards towards historical levels. Moreover, the positive elements of Serbia's recent performance are not sustainable without further adjustment and sustained reform. This report analyzes Serbia's recent performance and near-term reform priorities, in five areas which are particularly important for growth and employment creation. Eight themes emerge as the key reform priorities for enhancing growth and employment generation in Serbia: enhanced political stability and improved governance are key prerequisites for sustained growth; reduction of the public sector, thus reducing spending and fiscal burdens; promotion of export development, addressing the anti-export bias, through adequate institutional framework, tariff reform, and a strong trade policy; completion of enterprises and banks privatization; enhanced financial discipline and competitiveness; enabling an improved business environment; foster an enhanced, flexible formal labor market; enhance quality of, and access to education and training. The report demonstrates in great detail the outlined package of substantial and permanent fiscal adjustment, and sustained progress in structural reform, in order to generate the higher investment rates and a more competitive economy which can prod sustainable growth, and improved living standards over the medium-term. Such policies need to be implemented with urgency and unwavering commitment.
  • Publication
    Romania - Restructuring for EU Integration--The Policy Agenda : Country Economic Memorandum, Volume 2. Main Report and Annexes
    (Washington, DC, 2004-06) World Bank
    This Country Economic Memorandum (CEM) looks at the broad reform program, including institutional, governance, and economic restructuring reforms Romania is pursuing, which are anchored in its process for accession to the European Union (EU). The challenge is to expand integration with the EU more broadly throughout the economy, by relying on market driven mechanisms in a predictable rules-based policy environment, with the state sharply focused on the provision of essential public goods. Implementing the institutional reform agenda is the first priority in the accession-led reform, having the country the largest increase in its share of EU external imports among the Central Eastern European Countries (CEECs), with trade diversification providing a robust foundation for trade expansion. But, to deepen trade integration, Romania would need to broaden its trade performance throughout the economy. On restructuring the enterprise sector, the CEM indicates enterprise reform needs to be accelerated, and budget constraint discipline needs to be extended to the transaction interface between the state and enterprises. As for implementing agricultural transformation, the potential competitiveness of agriculture, associated with Romania's moderate climate, and the availability of land, remains largely untapped. Therefore, agricultural policies and transformation need to be driven by competitiveness. Moreover, increased labor market flexibility is needed to improve sectoral employment imbalances, and competitiveness, and hence reduce the risks to the sustainability of growth, as competing in the EU, and global markets becomes increasingly more difficult. Notwithstanding recent progress, there are risks and vulnerabilities to the macroeconomic stabilization, and reform achievements. The energy sector in Romania has been a main source of persistently large quasi-fiscal deficits, more so than in many other transition economies, with high hidden subsidies, and losses in the energy sector. Completing the energy sector reform is essential, but the challenge is to implement budget constraints between the state and energy enterprises, so as to complete the restructuring of the energy sector. Further recommendations include elimination of quasi-fiscal financing, replaced by efficient financial intermediation, and strengthening the regulatory and supervisory infrastructure; deepening the reforms of the social security system; and, containing the costs of upgrading environmental standards.
  • Publication
    Senegal - Policies and Strategies for Accelerated Growth and Poverty Reduction : A Country Economic Memorandum
    (Washington, DC, 2004-04-03) World Bank
    This Country Economic Memorandum (CEM) finalized as the implementation period of the Poverty Reduction Strategy (PRSP) began, undertaken in a context of other significant investigations on PRSP themes. One of the main macroeconomic variables affecting growth and competitiveness of the Senegalese economy, is the nominal exchange rate, which, as a member of the West Africa Economic and Monetary Union (WAEMU), its currency, the CFA franc, has a fixed parity to the Euro, and its issuance is governed for all members, by a single central bank, where the nominal exchange rate is not a policy variable under Senegal's direct control. This is why the CEM does not take up issues concerning the nominal exchange rate, however, several measures of the real exchange rate are examined. CEM chapters on human capital include treatment of PRSP-related issues in health and education. The chapters present a portrait of constraints hindering progress toward PRSP targets, and the main interrelated points, first, between health and education, and second, between the public expenditure system and the delivery of health and education services to the poorest citizens. On social protection, the CEM analyzes important topics in tax incidence and pensions. Recommendations suggest Senegal should foster cooperation between unions, firms, and government, so as to shift all parties' focus away from dividing rents, toward the expansion of employment and production, creating a profitable business environment, with long term commitment to the marketplace, and, where the labor force is more likely to stimulate appropriate human capital formation. This calls for improvements in the overall efficiency of the education system, while systems of fiscal decentralization must b e adequate to the delivery of social services in all regions.
  • Publication
    Brazil - Growth and Poverty Reduction in Rio Gande Do Norte: A State Economic Memorandum
    (Washington DC, 2004-01-16) World Bank
    Brazil was the fastest growing country in the world between 1930 and 1995, with an average annual growth rate of 6.1 percent. By 2000, Brazil's per-capita income stood at R$6,500. While RN's per capita income is slightly above half the national average, it increased from 43 percent of the national average in 1947 to 47 percent in 1998, implying that RN's economy grew faster than that of Brazil for over half a century. This has also been true in recent years. Between 1990-1998, RN's income per capita showed a respectable trend growth rate of 3.0 percent. The close relationship between Brazil's economic growth and RN's economic progress in the last five decades reflects a response to common macroeconomic forces and external environment as well as the enormous influence of national policies and programs on RN's economy. However, the state can also implement policies and programs to stimulate growth and employment. For this purpose, an understanding of trends in state GDP and employment and of the sources of growth is important. RN's economy has undergone a rapid and welcome transformation from one dependent on salt, cotton, sugar, and cattle to one dominated by services. The service sector has increased its share of GDP from 40 percent in 1985 to 59 percent in 1998. Over this period, the share of industry declined from 50 to 34 percent and the share of agriculture fell from 9 to 7 percent, though its share of total employment remains relatively high at 18 percent, reflecting lower productivity of agricultural workers. The shares of services and industry in total employment are 53 and 29 percent, respectively.
  • Publication
    Turkey - Country Economic Memorandum : Towards Macroeconomic Stability and Sustained Growth, Volume 2. Main Report
    (Washington, DC, 2003-07-28) World Bank
    This report addresses key questions facing Turkish policymakers: how to sustain the economic recovery that began in 2002 following the deep crisis of 2001, how to ensure disinflation and public debt sustainability, and how to foster broad-based and equitably distributed growth in the future. After a brief review of the 2001 crisis and the Government response, the report analyzes the economic opportunities and challenges facing Turkey, and identifies policies to build on the economic recovery which began in 2002. The CEM develops a comprehensive four-point agenda for sustainable and more equitably distributed growth. The agenda encompasses: (i) macroeconomic stability, (ii) effective government, (iii) improved business environment, and (iv) stronger social policies. The report closes with medium-term macroeconomic projections to illustrate Turkey's prospects under a scenario of sustained reform and to highlight the risks to growth and macroeconomic stability should the economic program go off track.
  • Publication
    Sudan - Stabilization and Reconstruction : Country Economic Memorandum, Volume 1. Main Text
    (Washington, DC, 2003-06-30) World Bank
    This Country Economic Memorandum is the first economic report in a decade. It gives priority to updating knowledge about the evolution of social and economic developments during the 1990s. It reviewareas of progress in macroeconomic reforms and the lack of success in governance and institutional reforms. Substantial reforms were undertaken in this period , but the civil war continued to have a serious negative impact on Sudan's people and its economic prospects. While the results of the reforms have been promising, particularly in the area of macroeconomic stabilization and liberalization, the distribution of economic wealth needs to improve. Although there has not been any national household survey since 1978, social indicators point to low levels of welfare throughout Sudan, with some indicators well below those in Sub-Saharan Africa. among the many issues facing the Sudanese economy are these: There has been high growth but skewed distribution. Stabilization has been costly in social terms: expenditures were cut by more than 50 percent relative to gross domestic product (GDP), causing considerable reductions in social services and infrastructure development. Key services were decentralized, delegated to states and local communities, which had neither the revenues nor the administrative capacity for these tasks. High poverty rates persist. Social inequalities threaten to undermine macroeconomic stability. Moreover, the civil war was costly in terms of human suffering. Millions are internally displaced, there are almost a million refugees in camps in neighboring countries, the death toll is estimated at 2 million, and warring armies continue to claim substantial resources. However, peace negotiations look encouraging. For peace to be sustained, it must be accompanied by economic and governance reforms, and a formula for equitable sharing of resources and power must be found for resolving the major root causes of decades of civil war. Reconstruction and development needs are enormous and will require external financing. Even after debt rescheduling, additional resources will be needed and the Sudan will urgently be expected to put measures in place to improve public resources management. As for the major sectors, infrastructure needs major rehabilitation and development, agricultural reforms need to be pursued, improved social services are a high priority, and war-affected areas face special difficulties like food insecurity. The needs of women require special attention, particularly in those parts of the country where women suffer severely from the violence and lawlessness that emerged as a result of the prolonged civil war. Many are widows and many have suffered also from rape, insecurity, and other traumas. the average ratio iof adult women to adult men is two to one in war-affected areas in southern Sudan, and only one out of ten women is literate,
  • Publication
    A Medium-Term Macroeconomic Strategy for Algeria : Sustaining Faster Growth with Economic and Social Stability, Volume 1. Main Report
    (Washington, DC, 2003-05) World Bank
    This study is part of a series of analytical works on Algeria prepared by the Bank, with the aim of laying out the framework, and facilitating the dialogue for elaborating the Bank's Country Assistance Strategy for Algeria. Companion studies include: "A Private Sector Development Strategy Note: A Diagnostic on Foreign Direct Investment in Algeria" (FIAS). This report is divided into three parts. It presents a diagnostic of the slow growth performance, by benchmarking Algeria's performance against other comparator countries, with the aim of identifying the key bottlenecks to better long-term growth performance in Algeria". Building on this analysis, experience from transition economies, and diagnostics in the companion reports, the second part reviews options in structural reforms to encourage the development of the private sector, by strengthening the investment climate and furthering Algeria's transition to the market. the third part examines options to strengthen the fiscal framework, to insulate the fiscal stance from volatile hydrocarbon fiscal revenues and secure fiscal sustainability, so as to achieve a sustained acceleration of growth. More technical background material of the analysis is presented in the annexes, in volume two.