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Central, Eastern, and Southeastern European Countries’ Convergence: A Look at the Past and Considerations for the Future

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Abstract

CESEE countries have achieved substantial progress and their income and living standards have improved significantly since the beginning of transition. Nevertheless, convergence to high-income status is not assured. Strong demographic headwinds ahead and a subdued outlook for capital accumulation reinforce the need for productivity growth to converge to the income levels of advanced European countries. Better governance and institutions hold high promise to deliver the needed productivity growth, by spurring innovation, fostering competition, and retaining and attracting skilled workers.

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Fig. 1

Source: Aiyar et al. (2013)

Fig. 2

Source: Aiyar et al. (2013)

Fig. 3

Sources: World Bank, World Development Indicators; and IMF staff calculations

Fig. 4

Sources: World Bank Development Indicators; and IMF staff calculations

Fig. 5

Source: IMF, May 2016 Central, Eastern, and Southeastern Europe regional economic issues

Fig. 6

Sources: Global Innovation Index Report, 2017; and World Bank Development Indicators

Fig. 7

Source: OECD

Fig. 8

Source: World Economic Forum Global Competitiveness Report, 2017–2018

Fig. 9

Source: IMF, November 2017, Europe Regional Economic Outlook “Europe Hitting Its Stride,” Chapter 2

Fig. 10

Sources: World Bank, Worldwide Governance Indicators (rule of law); World Economic Forum (protection of property rights, judicial independence, impartiality of courts); and IMF staff calculations

Fig. 11

Source: UN World Population Prospects: The 2017 Revision

Fig. 12

Source: Penn World Table (Version 8.1)

Fig. 13

Source: EIB Investment Survey

Fig. 14

Sources: Haver Analytics; and IMF staff calculations

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Notes

  1. Central, Eastern, and Southeastern Europe in this paper includes the following countries: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Kosovo, Latvia, Lithuania, Macedonia, FYR, Moldova, Montenegro, Poland, Romania, Serbia, the Slovak Republic, Slovenia, Turkey, and Ukraine.

  2. Even as late as 1989, in the 13th edition of Economics, Samuelson says: “the Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive”.

  3. The slowdown episodes are confined to middle and high-income economies and entail growth dropping by more than 2 percentage point per annum during a seven-year period from the growth rate that was greater than or equal to 3½% during the preceding 7-year period.

  4. These are primarily quantity based indicators, such as PISA scores, university rankings, spending by top R&D companies, as well quality of institutions (World bank Governance Indicators) and outputs, such as patent applications, research publications, exports of IT products and many others.

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Authors and Affiliations

  1. International Monetary Fund, Washington, USA

    Laura Papi, Emil Stavrev & Volodymyr Tulin

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  1. Laura Papi
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  2. Emil Stavrev
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  3. Volodymyr Tulin
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Correspondence to Emil Stavrev.

Additional information

This paper is based on a presentation delivered at the conference “Reaccelerating Convergence in Central, Eastern, and Southeastern Europe: The Role of Governance and Institutions”, co-organized by the Croatian National Bank and the International Monetary Fund in July 2017.

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Papi, L., Stavrev, E. & Tulin, V. Central, Eastern, and Southeastern European Countries’ Convergence: A Look at the Past and Considerations for the Future. Comp Econ Stud 60, 271–290 (2018). https://doi.org/10.1057/s41294-018-0068-2

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