Growth Drivers in Belarus, Russia and Ukraine. Growth perfo

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Comments on the Presentation Growth and Inst
itutions in the Transition
by Lúcio Vinhas de Souza EUROPEAN COMMISSION
DIRECTORATE GENERAL ECONOMIC AND FINANCIAL
AFFAIRS (DG-ECFIN) HEAD, RUSSIA/BELARUS DESK
Presentation for the 7th. Annual Global
Development Conference Institutions and Developme
nt At the Nexus of Global Change
St. Petersburg, Russia, January 19-21,2006
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Growth Drivers in Belarus, Russia and Ukraine

• Growth performance related to
• Macro stabilization
• The upward cycle in commodities prices from 1999
  onwards
  
• Limited but significant reforms (corporate
  restructuring, a more sustainable macro
  framework, some institution building).

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Growth Performance BY, RU UA

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Growth Performance BY, RU UA

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Russia

• Growth performance related to
• Competitiveness gains after the 1998
  devaluation
  
• The upward cycle in energy prices from 1999
  onwards
  
• Limited but significant reforms (some corporate
  restructuring, a more sustainable macro
  framework).

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Russia

• Contribution of oil and gas sectors to industrial
  production growth (in )

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Ukraine

• Growth performance related to
• Competitiveness gains after the 1998 devaluation,
  growth resumption in major CIS markets
  
• The upward cycle in commodities prices from 1999
  onwards
  
• Limited but significant reforms (a more
  sustainable macro framework).
  

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Ukraine
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Belarus

• Growth performance related to
• Preferential relations with Russia, including
• -privileged access to the large Russian market
  and
  
• - direct and indirect resource transfers from
  Russia (not necessarily decreasing and still very
  substantial)
  
• 2. (Relative) competitiveness gains towards its
  main single market (Russia).
  
• 3. Preventing disorganization short-run losses
  via limited market reforms(?).

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Belarus
Estimate
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Dangers to growth sustainability in the
short/ middle run
Belarus Very sensitive to external shocks (espec
ially from Russia) Reduction in transfers, loss o
f competitiveness Low investment, low FDI, very l
imited market reforms

• Russia
• Slowing of growth effects from commodities boom
• Dutch Disease
• Stalling of reforms
• Dangers to macro stabilization

Ukraine Slowing of growth effects from commoditi
es boom External shocks Disorganization, polic
y inconsistency, stalling or roll back of reforms
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• Need for policies that assure that growth is
  sustainable
  
• Diversifying external markets and products
• Greater FDI inflows
• Continuing stalled structural reform (greater
  introduction of market mechanisms) and assuring
  that those reforms achieved are not compromised
  
• The measures listed above are complementary (the
  policy set has to be consistent and
  reinforcing).
  
• Reform drivers Domestic policies (RU), external
  anchors (UA), interaction of those.

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Conclusions

• Russia Initial competitiveness boost, energy
  commodities prices plus limited but significant
  reforms largely explain growth performance.
  
• Ukraine Rather traditional explanations for
  growth upswing (commodities prices upsurge, some
  reforms) and downswing (disorganization,
  negative external shocks).
• Belarus Also, perfectly traditional explanations
  for growth performance privileged relations with
  Russia, relative competitiveness gains. Neither a
  puzzle, nor a model.
• Basic questions what are the ways to acquire and
  support institutions that are conducive to long
  run, sustainable growth? Not a single, unique
  formula.

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Thanks for your attention
and buy the book!
Lúcio VINHAS DE SOUZA, Ph.D. European Commissio
n, Unit ECFIN.D.3 Avenue. de Beaulieu, 1, Office
-1/182 B-1160, Brussels Belgium Tel. 00 (32
) (2) 298-0267 Fax. 00 (32) (2) 295-2791 email
Lucio-Mauro.VINHAS-DE-SOUZA_at_cec.eu.int
Private Website http//www.tinbergen.nl/phare/Pa
rtners/Souza.html