CHAPTER THREE • OFID IN THE WORLD
Emerging Europe: Transport and finance boost for two countries
Economic context
Economic activity continued to expand in emerging Europe in 2018, reflected in real GDP accelerating one percentage point to 3.5% compared to the year before. Domestic demand, supported by stronger employment and wages, was the main driver of growth. However, tighten- ing financial conditions in the region and maturing business cycles acted as a brake on growth. The stronger growth environ- ment, reflected in high capacity utilization and low unemployment in many economies, sustained inflation of over 8% in 2018, up from 6% the year before. Meanwhile, fiscal policy remained broadly neutral, reflecting more fiscal consolida- tion and adjustment despite increased public and social investment. This resulted in another relatively small aggregate fiscal deficit. Fiscal deficits mean that several countries sustained high levels of public debt, which reduced their ability to rebuild fiscal buffers and cope with future shocks. The external environment became less supportive in the latter part of 2018 owing to slowing global demand, rising trade tensions, and higher energy prices. As a result, the current account deficit widened somewhat to an estimated 2.8% of aggregate GDP from 2.6% the year before.
Social context
With the pick-up in growth last year, unemployment remained relatively low across the region, which helped raise incomes and prosperity. Many countries in the region have made the transition to middle-income status, reflecting the success of socioeconomic policies and investments in human capital. Social inclusion indicators related to education, health and infrastructure improved, but there remain large gaps in access to good quality services. Moreover, major social and structural challenges remain
Activity in 2018 Partner Countries
2 1
Regional activity in 2018 Country
1 Albania Sector Transport 2 Bosnia and Herzegovina Transport
and range from inequality to economic rigidities that continue to undercut progress. For example, large sections of the labor force are working in precari- ous or informal jobs and are not fully covered by social protection, which highlights the efforts still required to meet many of the SDGs in a region that has advantages compared to others. More specifically, inequality and how best to address it remains a work in progress. Any advantages of the post-socialist heritage, which left relatively equal distributions of income, broad access to social services, and small gender disparities, appear to be at risk in some of the region’s poorer countries where social expenditure remains uneven.
OFID in Europe
Through partnerships with seven countries in the region, OFID is actively engaged in helping emerging Europe
Mechanism
Public Sector Public Sector
Amount ($m)
16.00 70.08
achieve its development goals. These efforts continued with the approval of $86.08m in public sector loans: to Bosnia and Herzegovina ($70.08m) for the ‘Hrenovica-Goražde Expressway and Hranjen Tunnel Project’ to ease transport constraints for an estimated 900,000 people; and to Albania ($16m) to improve the Tirana-Elbasan Highway.
For more information please visit:
http://www.ofid.org/COUNTRIES/ Europe
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