Transition report 2005 [antikvár]

A better business environment brings dividends to the region. A resilient global economic expansion, sustained progress in reform and a better business environment underpinned another good year for the transition countries. Their pace of expansion in 2004-05 continued to exceed the levels of most other regions of the world. Market reforms advanced further in many countries but growth remains below rates witnessed during previous episodes of rapid expansion, such as the growth of western Europe in the post-war period. The challenge for eastern Europe today is to aim higher, to grow faster and to ensure that the benefits of growth are widely shared. Eighteen months after joining the European Union, the eight countries of central Europe and the Baltics continue to experience the benefits from EU accession, which was in many respects smoother and more successful than had been forecast. An unexpectedly strong export expansion following accession provided a significant fillip to growth in these countries. Estonia and the Slovak Republic, for example, have gained reputations as dynamic and business-friendly economies, and investors and lenders are responding to improvements in the business environment by increasing their exposure to this region. These capital inflows have also been encouraged by high global liquidity and by low interest rates and risk premiums. However, the macroeconomic tests for accession to Economic and Monetary Union continue to pose challenges for the larger central European countries. The strong growth performance of recent years in central Europe has gone hand-in-hand with rapidly expanding credit markets. While these credit booms contribute to much-needed financial development, they can also heighten risks in the financial sector and macroeconomic vulnerabilities. So far these risks seem manageable. They should remain so, provided that fiscal deficits are reduced further to make room for private borrowing and that the credit and market risks in this lending are assessed and managed appropriately, as shown in Chapter 2. In fact, similar financial deepening was observed in Greece, Ireland, Portugal and Spain when they were preparing for euro membership. However, full convergence with EU levels is still a long way off in terms of income per capita and financial depth. The same is true for the effectiveness of public administration and the