Publication: Europe and Central Asia Economic Update, Spring 2023: Weak Growth, High Inflation, and a Cost-of-Living Crisis
Loading...
Files
9,586 downloads
1,714 downloads
1,815 downloads
364 downloads
Date
2023-04-06
ISSN
Published
2023-04-06
Author(s)
Editor(s)
Abstract
Economic growth slowed sharply last year in Europe and Central Asia, as Russia's invasion of Ukraine, a surge in inflation, and the sharp tightening of monetary policy and financing conditions hit private consumption, investment, and trade. The marked increase in food and energy prices boosted inflation to a pace not seen in 20 years. The burden of inflation was spread unevenly across households. The poorest households faced inflation that was more than 2 percentage points higher than the inflation faced by the richest households, with this difference exceeding 5 percentage points in some countries. Poverty and inequality rates derived from household-specific inflation rates differ from those based on the standard consumer price index (CPI) approach. These differences have important policy implications, because many programs use CPI–based inflation adjustments, which do not accurately capture changes in the cost of living of targeted populations. Output growth in the region is projected to remain little changed in 2023 but better than projected in January 2023, largely reflecting upgrades to the pace of expansion in Poland, Russia, and Türkiye.
Link to Data Set
Citation
“Roseman Norfleet, Julia Renee; Izvorski, Ivailo; Lokshin, Michael M.; Singer, Dorothe; Torre, Iván. 2023. Europe and Central Asia Economic Update, Spring 2023: Weak Growth, High Inflation, and a Cost-of-Living Crisis. © World Bank. http://hdl.handle.net/10986/39617 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Europe and Central Asia Economic Update, Fall 2023(Washington, DC: World Bank, 2023-10-05)Europe and Central Asia continues to be negatively impacted by the Russian Federation’s invasion of Ukraine, tighter global financial conditions, persistent inflation, and global economic fragmentation. Economic growth in the region is projected to remain weak relative to the long-term trend, delaying the convergence of living standards to those of high-income countries. The impacts of climate change are becoming a serious constraint on growth, as extreme weather events are affecting the region with increased frequency and severity. Economic growth for the emerging market and developing economies of the Europe and Central Asia region has been revised up to 2.4 percent for 2023. The pickup in growth reflects improved forecasts for Ukraine, Central Asia, Türkiye and Russia. Downside risks cloud the outlook. High inflation may persist amid heightened volatility in global commodity markets and a surge in energy prices. Global financial conditions may tighten further. And global growth, already the weakest on record for any five-year period since 1990, may slow further.Publication Europe and Central Asia Economic Update, Fall 2024: Better Education for Stronger Growth(Washington, DC: World Bank, 2024-10-17)Economic growth in Europe and Central Asia (ECA) is likely to moderate from 3.5 percent in 2023 to 3.3 percent this year. This is significantly weaker than the 4.1 percent average growth in 2000-19. Growth this year is driven by expansionary fiscal policies and strong private consumption. External demand is less favorable because of weak economic expansion in major trading partners, like the European Union. Growth is likely to slow further in 2025, mostly because of the easing of expansion in the Russian Federation and Turkiye. This Europe and Central Asia Economic Update calls for a major overhaul of education systems across the region, particularly higher education, to unleash the talent needed to reinvigorate growth and boost convergence with high-income countries. Universities in the region suffer from poor management, outdated curricula, and inadequate funding and infrastructure. A mismatch between graduates' skills and the skills employers are seeking leads to wasted potential and contributes to the region's brain drain. Reversing the decline in the quality of education will require prioritizing improvements in teacher training, updated curricula, and investment in educational infrastructure. In higher education, reforms are needed to consolidate university systems, integrate them with research centers, and provide reskilling opportunities for adult workers.Publication Europe and Central Asia Economic Update, Spring 2025: Accelerating Growth through Entrepreneurship, Technology Adoption, and Innovation(Washington, DC: World Bank, 2025-04-23)Business dynamism and economic growth in Europe and Central Asia have weakened since the late 2000s, with productivity growth driven largely by resource reallocation between firms and sectors rather than innovation. To move up the value chain, countries need to facilitate technology adoption, stronger domestic competition, and firm-level innovation to build a more dynamic private sector. Governments should move beyond broad support for small- and medium-sized enterprises and focus on enabling the most productive firms to expand and compete globally. Strengthening competition policies, reducing the presence of state-owned enterprises, and ensuring fair market access are crucial. Limited availability of long-term financing and risk capital hinders firm growth and innovation. Economic disruptions are a shock in the short term, but they provide an opportunity for implementing enterprise and structural reforms, all of which are essential for creating better-paying jobs and helping countries in the region to achieve high-income status.Publication Greater Heights(Washington, DC: World Bank, 2025-03-12)Twenty-seven countries have reached high-income status since 1990. Ten of these are in the Europe and Central Asia region and have joined the European Union. Another 20 in the region have become more prosperous since the 1990s. However, their transition to high-income status has been delayed. These middle-income countries have found that the prospects for growth to high-income status have become even more difficult since the 2007–09 global financial crisis. This reflects partly a slowdown in structural reforms at home and partly the challenges associated with a deterioration in the global environment. The concern has emerged that many countries in the region may be caught in the middle-income trap, a phase in development characterized by a recurring deceleration in growth and by per capita incomes that are systematically below the high-income threshold. To ensure that these countries overcome the obstacles to growth and achieve progress toward high-income status, policy makers need to make the transition from a strategy driven largely by investment to a strategy that is supported by the importation and diffusion of global capital, knowledge, and technology and then to a strategy that complements these with innovation. The report Greater Heights: Growing to High Income in Europe and Central Asia relies on the 3i strategy described in World Development Report 2024—investment, infusion, and innovation—to propose policy options to assist middle-income countries in Europe and Central Asia in the effort to reach high-income status. Drawing on comprehensive empirical analysis, the report offers actionable recommendations that will enable policy makers to advance stronger economic growth across the region. Such a transition will require continued and sustained foundational reform to maximize the drivers of economic growth while pivoting to new transformative reforms to promote the development of more complex economic structures and institutions. These involve the need to discipline incumbents, boost the role of the private sector, strengthen the competitive environment, and reward merit. The emphasis on a strategy driven by innovation is also critically important for those countries that have already attained high-income status.Publication Public Expenditure Policies in Southeast Europe(2008)This report reviews the level, composition and outcomes of government spending and distills some of the lessons that emerge from efforts by the Southeast Europe (SEE) countries in reforming expenditure policies. The report identifies key remaining challenges and proposes a broad menu of options in further reforms of sectors that account for the largest shares of public spending across the countries, and where reforms are likely to have significant budgetary implications. This has motivated the choice of sectors discussed in the report: social protection (including pensions), health, education, public administration, and infrastructure.
Users also downloaded
Showing related downloaded files
Publication Choosing Our Future(Washington, DC: World Bank, 2024-09-04)Education can propel faster and better climate action in two crucial ways. First, education can galvanize behavior change at scale - not just for tomorrow, but also for today. Second, education can unlock skills and innovation to shift economies onto greener trajectories for growth. At the same time, education needs to be protected from climate change. Extreme climate events and temperatures are already eroding hard-won progress on schooling and learning. Climate change is causing school closures, learning losses, and dropouts. These will turn into long-run inter-generational earnings losses putting into jeopardy education’s powerful potential for spurring poverty alleviation and economic growth. Governments can act now to adapt schools for climate change in cost-effective ways. This report outlines new data, evidence, and examples on how countries can harness education to propel climate action. It provides an actionable policy agenda to meet development, education, and climate goals together, recognizing that tackling climate change requires changes to individual beliefs, behaviors, and skills – changes that education is uniquely positioned to catalyze.Publication World Development Report 2004(World Bank, 2003)Too often, services fail poor people in access, in quality, and in affordability. But the fact that there are striking examples where basic services such as water, sanitation, health, education, and electricity do work for poor people means that governments and citizens can do a better job of providing them. Learning from success and understanding the sources of failure, this year’s World Development Report, argues that services can be improved by putting poor people at the center of service provision. How? By enabling the poor to monitor and discipline service providers, by amplifying their voice in policymaking, and by strengthening the incentives for providers to serve the poor. Freedom from illness and freedom from illiteracy are two of the most important ways poor people can escape from poverty. To achieve these goals, economic growth and financial resources are of course necessary, but they are not enough. The World Development Report provides a practical framework for making the services that contribute to human development work for poor people. With this framework, citizens, governments, and donors can take action and accelerate progress toward the common objective of poverty reduction, as specified in the Millennium Development Goals.Publication Finance and Prosperity 2024(Washington, DC: World Bank, 2024-08-29)While financial sector risks in the larger and higher per capita countries are moderate, half of lower-income countries face significant risks over the next 12 months. Nearly 70 percent of countries facing high financial sector risks are currently not adequately prepared to handle financial stress. The report also identifies a particular risk facing financial sectors in several countries: a large and growing exposure to sovereign debt. This exposure surged to its highest level in the past decade. Finally, the report looks at how countries can enable more climate finance through the banking sector without compromising on the important goals of financial sector stability and inclusion for underserved people.Publication Unlocking the Power of Healthy Longevity(Washington, DC: World Bank, 2024-09-12)Noncommunicable diseases (NCDs) are among the major health and development challenges of our time. Every year, about 41 million people die due to NCDs. This makes up about 74 percent of all deaths globally, the majority of which are in low- and middle-income countries (LMICs). Countless more people live with NCDs every day. Yet, NCDs are largely treatable and preventable. The risk of developing NCDs and deaths from them can both be lowered with appropriate attention to prevention and treatment. However, weak health systems and limited access to affordable care and information, especially in LMICs, contribute to lapses in seeking and receiving appropriate and timely care. This compendium is a compilation of 18 chapters, each exploring a different but related topic in the nexus of NCDs, human capital, and productivity. It is based on a series of analytical work taken up by the World Bank to support the Healthy Longevity Initiative (HLI) - a collaborative effort between the World Bank, the University of Toronto, and key academic and development partners including the Harvard University and the University of Washington. The HLI presents one of a growing set of efforts to increase the urgency of policy response to NCDs across the world.Publication Democratic Republic of Congo Urbanization Review(Washington, DC: World Bank, 2018)The Democratic Republic of Congo has the third largest urban population in sub-Saharan Africa (estimated at 43% in 2016) after South Africa and Nigeria. It is expected to grow at a rate of 4.1% per year, which corresponds to an additional 1 million residents moving to cities every year. If this trend continues, the urban population could double in just 15 years. Thus, with a population of 12 million and a growth rate of 5.1% per year, Kinshasa is poised to become the most populous city in Africa by 2030. Such strong urban growth comes with two main challenges – the need to make cities livable and inclusive by meeting the high demand for social services, infrastructure, education, health, and other basic services; and the need to make cities more productive by addressing the lack of concentrated economic activity. The Urbanization Review of the Democratic Republic of Congo argues that the country is urbanizing at different rates and identifies five regions (East, South, Central, West and Congo Basin) that present specific challenges and opportunities. The Urbanization Review proposes policy options based on three sets of instruments, known as the three 'I's – Institutions, Infrastructures and Interventions – to help each region respond to its specific needs while reaping the benefits of economic agglomeration The Democratic Republic of the Congo is at a crossroads. The recent decline in commodity prices could constitute an opportunity for the country to diversify its economy and invest in the manufacturing sector. Now is an opportune time for Congolese decision-makers to invest in cities that can lead the country's structural transformation and facilitate greater integration with African and global markets. Such action would position the country well on the path to emergence.