World Bank upbeat about European growth prospects

29 May 15

Countries in all European Union member states posted positive economic growth results in 2014 for the first time since the 2010 debt crisis and growth across the EU is now expected to expand to 1.8% this year and accelerate further next year to 2%, the World Bank has said.

Its latest EU economic report predicted that Poland, Bulgaria, and Romania would outpace the European average growth rate, reaching 2.4%. This would be driven by an increase in consumer demand, gradual recovery of investments and growth in exports.

‘Exports have been the main driver of growth in many Central and eastern European countries (EU-CEE), such as Poland, Bulgaria, and Romania,’ said Mamta Murthi, World Bank country director for Central Europe and the Baltic Countries.

‘However, as foreign direct investment (FDI) has declined following the crisis, there is greater need for countries to focus on improving business environments, developing skills, encouraging innovation, investing in infrastructure, and reducing regulatory barriers to encourage renewed FDI and export growth.’

In the eurozone, the economy will grow by 1.5% this year and by 1.8% in 2016, according to the report’s projections.

Despite the overall strong outlook, the bank warned that several risks needed to be carefully managed, pointing to the potential increase in market volatility as the US and EU implement divergent monetary policy. It also highlighted renewed pressure on public finances because of low inflation and modest growth and fears of ongoing financial strains in Greece and continued geopolitical tensions in Ukraine.

Theo Thomas, the report’s co-author and lead economist in the World Bank’s Europe and Central Asia region, called on all countries to continue reforming labour market polices, remove trade barriers and invest in skills needed for job creation and innovation.

He added that this should be combined with affordable social policies that help protect the most vulnerable, while promoting greater social and labour market inclusion.

‘The medium- and long-term challenge in many countries is to shift policy from fiscal and macroeconomic adjustment towards structural measures to promote growth and competitiveness,’ he said.

  • Judith Ugwumadu
    Judith Ugwumadu

    Judith writes about public finance, public services and economics across Public Finance International and Public Finance. She previously undertook reporting stints at Financial Adviser, Global Security Finance and The Sunday Express.

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