Reforms can support inclusive growth in times of economic turbulence – India Education | Latest Education News | World Education News
BRUSSELS — Reforms backed by investments in green and digital infrastructure and human capital can boost or even double the growth potential in some EU member states by 2030, according to a new World Bank report.
The European Union’s latest regular economic report – Realizing its potential in the wake of negative shocks – looks at how some EU Member States can weather economic turmoil to foster long-term growth and inclusion at the following a pandemic, ongoing conflict in the region and a cost of living crisis.
“Two consecutive shocks, one after the other, risk blocking the recovery in the EU.” said Gallina A. Vincelette, regional director for European Union countries at the World Bank. “The pandemic has drained national budgets and the war in Ukraine leaves governments facing an uphill battle to tackle high inflation, low growth and a cost of living crisis that is hitting the most vulnerable hard. But in the face of adversity hides an opportunity. Stronger institutions and better governance to deliver tough reforms and deliver inclusive, green and resilient growth are on the agenda.
Many EU member state economies have returned to pre-pandemic growth levels, albeit at an uneven pace. After contracting by 5.9% in 2020, EU27 economic growth jumped to 5.3% in 2021, its strongest post-recession recovery to date. This was largely due to an easing of COVID-19 restrictions which has since boosted demand, while unprecedented political support, increased adaptation and high vaccination rates have underpinned the recovery. The report recommends that governments build on this encouraging return to growth. In this context, the reforms supported by the National Recovery and Resilience Plans (NRRP) of the Member States of the European Union constitute a good starting point for the countries to face the constraints.
“Sharp labor markets, tight credit, disrupted supply chains and slowing innovation have shown us how a crisis can reverse years of income gains,” Vincelette added. “But there is hope for course correction if countries invest prudently, prioritize lifelong learning, and remove barriers to business entry and trade while promoting greater Increased attention to the green transition also offers an excellent opportunity for EU Member States to decouple economic growth from environmental degradation and put countries on a more sustainable path.
The report finds that over the long term, greater investment accompanied by reforms, such as increasing labor market participation, integrating migrant workers, strengthening institutions and improving educational outcomes can increase potential output. If these reforms are implemented, potential growth until the end of this decade (2022-2030) in Poland and Romania could significantly exceed the previous decade, while Bulgaria and Croatia could see their growth double compared to to the current baseline scenario. These reforms could propel average potential growth over the 2022-30 period to 4.6% in Bulgaria, 3.5% in Croatia, 4% in Poland and 5.2% in Romania. Implementing ambitious reform programs would put these EU member states on a path to greater convergence with EU average per capita income levels and offset the adverse effects of the pandemic and war. .
The World Bank’s regional work in Europe and Central Asia
To date, the World Bank has committed more than $1.7 billion to help emerging economies in Europe and Central Asia mitigate the effects of COVID-19. While the combined total support mobilized by the World Bank for Ukraine now stands at over $925 million.
The World Bank’s Global Economic Outlook suggests that global growth is expected to fall from 5.7% in 2021 to 2.9% in 2022, significantly lower than the 4.1% forecast in January 2022. It is expected to hover around this pace in 2023-24. , as the war in Ukraine is disrupting short-term business, investment and trade; as pent-up demand fades and accommodative fiscal and monetary policy measures are withdrawn.