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ECONOMIC SITUATION : CEE COUNTRIES CAN RETURN TO PRE-CRISIS GROWTH, SAYS REPORT.

Despite the severe ongoing recession across Europe and the prospect of low growth, the countries of Central and Eastern Europe (CEE) have the potential to return to pre-crisis growth rates. These EU countries (Bulgaria, Croatia, the Czech Republic, Hungary, Poland, Romania, Slovakia and Slovenia) can continue to rely on their intact competitive advantages, namely an educated workforce, wages that are lower than in Western Europe, a stable macroeconomic environment and strategic location, concludes a report drafted by McKinsey Global Institute in cooperation with its regional offices.

While the EU's economies continue their quest for a way out of the prolonged crisis, the research paper identifies three areas that could fuel growth in the CEE region: expanding and upgrading exports, raising productivity in lagging domestic sectors, and attracting foreign direct investment and increasing domestic savings.

These shoud be the pillars of a new growth plan for these countries. But according to the authors, the road map also requires the presence of "critical enablers," such as investment in infrastructure, education and innovation, and regulatory and institutional reforms. "Together, these efforts could put the CEE economies back on a path to faster growth and rising per capita GDP and help counter the looming effects of ageing populations," said Pal Erik Sjatil, McKinsey director for the CEE and CIS regions.

This new growth model would help the CEE countries distance themselves from a growth strategy highly dependent on consumption and foreign investment, and move toward a model based on investment, productivity and trade. The report predicts that if the road map is implemented, investment in fixed capital would rise by 1.9% a year and productivity growth would average 2.9%, putting the region on the path to pre-crisis levels of GDP growth of 4.6%.

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Title Annotation:Central and Eastern Europe
Publication:European Report
Article Type:Brief article
Geographic Code:4E
Date:Dec 16, 2013
Words:292
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