Macroeconomic Aspects of Opening Up, Unemployment, Growth and Transition

Economic opening up has been a natural element of systemic transformation in the former Soviet Union and the smaller post socialist countries of Eastern Europe. Anticipating EU eastern enlargement, eastern European transition countries have reoriented the regional focus of trade towards the EU-15 countries. The change in regional orientation coincided with changes in the structure of output and trade. As regards structural change of exports, several countries underwent rapid structural change and achieved gradually improved RCAs (revealed comparative advantage) in non-labor intensive sectors (BORBÉLY, 2004).

After high inflation rates and a massive transformational recession in the early transition stage – reflecting obsolescence of part of the capital stock and adjustment costs in the course of restructuring – in the first transition stage, most transition countries have achieved considerable economic growth. Countries with relatively low per capita income, a well educated labor force and a functioning banking system should indeed be able to record considerable economic growth if stable and efficient institutions, competitive pressure and opening up are combined in a sustained manner. It is not easy for transition countries with a young democracy to come up with the right combination of constitutional foundations and efficiency enhancing political learning, in particular since governments eager to generate quick improvement in some fields might favour short-term political action over long term growth strategies.