Publication: EU11 Regular Economic Report : Coping with External Headwinds
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2012-06
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2012-06
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This study claims that despite the challenging external environment, EU11 countries did well in 2011. First, economic growth strengthened to above 3 percent (from around 2 percent in 2010) and the region fully recovered its output losses from the global financial crisis. Second, fiscal measures delivered reduction of around 3 percent of GDP in the EU11 average fiscal deficit. Third, the financial sector remained resilient to renewed concerns about negative feedback loops between insecure sovereign debtors and fragile financial markets. However, the good performance conceals important shifts in economic sentiment that occurred during the year. While the growth momentum was still strong in the first half of 2011, it slowed toward the end of the year, as the region started to feel the impact of lingering concerns about European sovereign-debt markets, creeping oil prices, and the global slowdown. With the downward trend in economic activity, labor markets remained slack. Unemployment rates hovered around those recorded in the midst of the global financial crisis with sluggish employment growth. The paper points out that the European economic growth model has delivered unprecedented welfare to the continent over the last half century. In spite of its remarkable success, several aspects of the European economic growth model require reform to ensure that it is sustainable. Among the priorities for many European states today are providing incentives for labor mobility, making public finances more sustainable, and adapting social security systems to demographic developments, and harmonizing regulation across borders. This note zeroes in on the EU11 region to explore what is driving their prosperity and growth. The main messages related to the drivers of growth and prosperity in EU11 are as follows: 1) Convergence; 2) Trade and finance; 3) Enterprise and innovation; 4) Labor; and 4) Government.
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“World Bank. 2012. EU11 Regular Economic Report : Coping with External Headwinds. © World Bank. http://hdl.handle.net/10986/11896 License: CC BY 3.0 IGO.”
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Publication EU11 Regular Economic Report, Issue #26, January 2013(Washington, DC, 2013-01)The economic report comprises two parts: a macroeconomic report and a special topic on the issue of economic policy interest. According to the first part, in 2012 the EU11 economies have outperformed the rest of the European Union (EU). In the middle of a recession in the Euro area, the EU11 region is set to expand by about 1 percent in 2012. However, the recession in the Euro area continues to dampen the EU11 economic performance. With an uncertain economic outlook in the medium term, the EU11 need to pursue decisive economic policies on two fronts to safeguard and accelerate their growth momentum. First, a prudent macro-policy stance should continue to shore up the confidence of financial markets. Second, the medium-term economic growth potential of the EU11 can only be realized if structural barriers to economic activity are removed. 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However, increasing labor force participation as well as improving the skill level of the labor force in the EU11 appears to be a powerful instrument for fostering economic growth and further convergence in the EU in the context of aging societies.Publication EU11 Regular Economic Report, Issue #27, June 2013(Washington, DC, 2013-06)This economic report covers economic developments, prospects, and policies in 11 European Union (EU) countries. Throughout the report this group of eleven countries is referred to as EU11.The economic recovery of the EU11 countries was put on hold in 2012 as the external environment weakened and domestic demand subsided. All EU11 countries, with the exception of Latvia, grew slower than in 2011. The overall Gross domestic product (GDP) growth of 0.8 percent in 2012 was just a quarter of the pace recorded the year before. Domestic demand, in particular investment, abated, leaving net exports as the sole driver of growth. In addition, the number of EU11 countries in recession doubled to four, after the Czech Republic and Hungary joined Slovenia and Croatia. Overall, this empirical result confirms that, in qualitative terms, the analyzed firm characteristics affect job creation both during recessions and economic recoveries. They indicate that the more productive firms tend to be less vulnerable to economic downturns. 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Inflation rates are expected to remain below targets during 2014, with some countries already experiencing deflation, but as global commodity prices stabilize, activity increases and output gaps diminish, inflation is expected to gradually rise. Fiscal consolidation will continue in 2014 and 2015, but at a more gradual pace than in the previous years. Economic growth forecasts in the EU11 are subject to multiple risks, mainly on the downside, as the global financial situation remains fragile. Rising global interest rates coupled with volatile capital markets, or an extended period of regional geopolitical tensions could slow the European recovery and constrain exports, credit and investment in EU11. While labor market conditions have started to improve, the pace of job creation and reduction in unemployment rates are likely to be gradual. Many of the economies in the EU11 face the twin challenge of high youth unemployment and rapidly aging populations. EU11 countries also struggle with equipping the next generation with the skills necessary to achieve their full potential e.g. in literacy, math and science. The persistence of large numbers of inactive and unemployed youth therefore poses unique risks of creating a "lost generation" of workers. Understanding the cyclical and structural nature of youth unemployment is therefore important to mitigate the potentially damaging cycle between youth unemployment and broader economic growth and productivity.Publication EU11 Regular Economic Report, Issue #29, July 2014 : Strengthening Recovery in Central and Eastern Europe(Washington, DC, 2014-07)Economic growth is expected to almost double in EU111 in 2014, and continues to strengthen in 2015. Overall EU11 GDP growth is forecast to strengthen from 1.4 percent in 2013 to 2.6 percent in 2014. The initial reliance on net export growth, with rising demand from the rest of the EU, is gradually giving way to more balanced growth as domestic demand picks-up, notably in Romania, Slovakia and Poland. Fiscal consolidation will continue in 2014 and 2015, but at a more gradual pace than in the previous years. The overall EU11 fiscal deficit is expected to drop to 2.9 percent of GDP in 2014 and to 2.5 percent of GDP in 2015. However, there is a need for larger adjustments in Croatia and Slovenia to achieve sustainable deficit and debt levels. Economic growth forecasts in the EU11 are subject to multiple risks, mainly on the downside, as the global financial situation remains fragile. While labor market conditions have started to improve, the pace of job creation and reduction in unemployment rates are likely to be gradual.
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