The emerging Europe and Central Asia (ECA) region will face a slow recovery from the global economic crisis in the year ahead, and countries facing tight fiscal pressures should take care to target social spending on the most needy and vulnerable, the World Bank said on Friday.
"Countries of Emerging Europe and Central Asia were hit the hardest by the global economic crisis and are likely to be the slowest to resume economic growth," said Philippe Le Houerou, the World Bank vice president for the Europe and Central Asia region, at a press conference on the sidelines of the World Bank and International Monetary Fund (IMF) Spring Meeting in Washington.
According to the World Bank, 20 out of 30 countries in the region experienced a decline in GDP in 2009, with GDP growth ranging from a negative 18 percent in Latvia to a positive 9.3 percent in Azerbaijan.
The World Bank projected a growth of three to four percent for the region between 2011 and 2013, compared to nearly five percent in the Middle East and about eight percent in developing Asia.
The region has faced the greatest fiscal pressures among all the world's regions during the crisis. Average fiscal deficits amounted to six percent of GDP in the region between 2008 and 2009, compared with one percent in the Middle East, three percent in Latin America and about four percent in developing Asia and Africa.
"The global economic crisis has taken a heavy toll on the Region's poverty reduction accomplishments of the last decades. The number of poor and vulnerable has risen by about 13 million in 2009, instead of falling by 15 million as expected before the crisis," the World Bank said.
The jobless rates in Estonia, Hungary, Latvia, Lithuania, the Slovak Republic and Turkey exceeded 10 percent, the bank said.
"The drivers of pre-crisis growth and improved government finances -- rapid export growth, large capital inflows, high commodity prices, and domestic consumption and construction booms - - are unlikely to return soon," said Indermit Gill, the World Bank chief economist for the Europe and Central Asia region.
Countries in the region should accelerate fiscal reforms in 2010, said Gill. Priorities include a varying mix of reforming social security, investing in infrastructure, and scaling down stimulus programs.
"Done well, these reforms can help societies be more inclusive, economies more competitive, and nations decidedly more prosperous, " said Gill.
Responding to requests of countries in the region, the Word Bank said it has more than doubled lending to the region from an average of 3.9 billion U.S. dollars between 2000 and 2008 to 9 billion dollars in 2009, while lending in 2010 will rise further to 11 billion dollars./.