EIB Papers Volume 13. n°1/2008 - European Investment Bank

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Table 2. Business constraints perceived by private firms in NMS 1/ 120 Volume13 N°1 2008 EIB PAPERS Group average Slovenia (2002) Slovakia (2002) Romania (2002) Poland (2003) Lithuania (2004) Latvia (2002) Hungary (2002) Estonia (2002) Bulgaria (2004) Business constraint factors CEEs Baltics Slovenia (2002) Slovakia (2002) Romania (2002) Poland (2003) Lithuania (2004) Latvia (2002) Hungary (2002) Estonia (2002) Bulgaria (2004) Group average CEEs Baltics Average score on importance Ranking of constraints based on the average scores 2/ Telecommunications 1.4 1.5 1.3 1.4 1.3 1.6 1.5 1.3 1.2 1.4 1.4 1.4 17 16 15 15 17 15 17 17 15 17 17 17 Electricity 1.7 1.6 1.2 1.3 1.5 1.7 1.7 1.5 1.2 1.5 1.5 1.5 15 14 17 17 15 14 15 16 17 16 16 16 Transport 1.8 1.6 1.5 1.4 1.5 1.5 1.6 1.6 1.2 1.5 1.5 1.5 14 15 14 16 16 17 16 15 16 15 15 15 Access to land 1.6 1.4 1.3 1.4 1.8 1.6 1.7 1.7 1.4 1.5 1.6 1.6 16 17 16 14 14 16 14 14 13 14 14 14 Tax rates 3.1 2.3 2.7 2.8 3.8 3.5 3.2 2.7 2.1 3.0 2.9 2.9 4 4 1 2 1 2 2 3 4 1 2 1 Tax administration 2.2 1.8 2.1 2.8 2.9 3.0 2.7 2.2 1.7 2.5 2.3 2.4 12 12 7 3 3 5 5 8 10 4 8 6 Customs and trade regulations 2.2 1.6 1.8 2.1 1.9 2.4 2.0 2.2 1.5 1.9 2.0 2.0 11 13 10 6 13 11 12 9 12 11 12 12 Labor regulations 2.3 1.8 1.8 1.9 2.2 2.5 1.9 1.9 1.7 2.0 2.0 2.0 10 11 9 8 10 10 13 13 9 10 11 11 Skills of available workers 2.2 2.8 2.1 2.1 2.7 2.3 2.0 1.9 1.8 2.5 2.0 2.2 13 1 8 5 5 12 11 12 8 3 10 8 Licensing and operating permits 2.5 1.9 1.7 1.8 1.9 1.7 2.3 2.2 1.6 1.9 2.0 2.0 9 9 11 11 12 13 9 10 11 12 13 13 Access to finance (e.g. collateral) 3.1 1.9 2.2 1.9 2.4 2.9 2.5 2.5 1.8 2.1 2.5 2.4 5 8 5 9 7 7 7 6 7 8 6 7 Cost of finance (e.g. interest rates) 3.5 2.0 2.3 2.0 2.4 3.3 2.8 2.6 2.2 2.1 2.8 2.6 1 6 3 7 8 3 4 4 2 7 4 4 Economic & regulatory policy uncertainty 3.4 2.4 2.4 2.8 2.9 3.6 3.0 3.0 2.3 2.7 2.9 2.9 2 3 2 1 2 1 3 2 1 2 1 2 Macroeconomic instability (infl., exch. rate) 3.0 2.2 2.3 2.4 2.4 3.2 3.3 3.1 2.2 2.3 2.8 2.7 7 5 4 4 6 4 1 1 3 6 3 3 Crime, theft, disorder 3.1 2.0 1.5 1.8 2.2 2.6 2.1 2.0 1.4 2.0 2.1 2.1 6 7 13 11 9 9 10 11 14 9 9 10 Anti-competitive /informal practices 3.4 2.5 2.2 1.8 2.9 2.8 2.6 2.3 2.1 2.4 2.5 2.5 3 2 6 10 4 8 6 7 5 5 5 5 Legal system/conflict res. 2.6 1.8 1.5 1.6 2.1 2.9 2.4 2.5 2.0 1.9 2.3 2.2 8 10 12 13 11 6 8 5 6 13 7 9 Source: World Bank (2004) Notes: 1/ A higher value indicates higher importance of the corresponding factor as a business constraint for the surveyed business unit. Firms were asked to rate the importance of the potential business constraints on a 5-point Likert scale that corresponds to integer values of 0-4, and simple averages are then used to calculate country averages. 2/ A lower value corresponds to higher importance for the surveyed business unit.
Figure 4. Per-capita GDP growth and total investment, 2000-2005 Average real per capita GDP growth 10 8 6 4 2 Poland Lithuania Romania Hungary Efficiency frontier Average linear fit Slovenia Czech Republic 16 18 20 22 24 26 Average total investment in percent of GDP Sources: Eurostat (2007) and IMF (2006a) Note: Data refer to averages by country in 2000-2005. The efficiency frontier is indicative of the highest per capita GDP growth that can be achieved at a given level of total investment. 3. Fiscal adjustment and public investment in the new member states Latvia Slovak Republic Estonia How much fiscal adjustment has taken place in the NMS and how has it been achieved? While the experience has been uneven, many of the NMS now face fairly high levels of public debt and heightened macroeconomic vulnerability indicators. The need to bring down fiscal deficits and public debt has constrained the room for higher public investment. Experiences from around the world suggest that, often, governments try to achieve adjustment by increasing taxes and cutting public investment, rather than curtail current spending (IMF 2005). However, when fiscal adjustment relies on measures of poor quality, growth prospects may be compromised. This section looks particularly at whether the NMS have relied on public investment cuts to implement fiscal adjustment. Recent fiscal outcomes in the NMS have varied significantly, with some countries implementing sizable fiscal adjustment. Fiscal balances in all countries displayed considerable vulnerability to the large recession that followed the Asian crisis in 1997. However, developments have differed substantially since the early 2000s (Table 3). The Baltic countries made significant progress in reducing their fiscal deficits between 1999 and 2006. For instance, Estonia and Latvia registered a budget surplus in 2006. In contrast, the CEEs have shown more inertia in improving their budgetary positions. In particular, Hungary stands out as the NMS with the largest fiscal imbalances measured by either fiscal deficit or public debt levels, followed by Poland. Other CEEs have been able to bring deficit levels and debt levels to below the reference value under the Stability and Growth Pact. Of the most recent NMS, Bulgaria achieved strong fiscal outcomes over the last few years, while Romania posted fiscal deficits but still had comparably lower debt levels (Figure 5). Since the 1990s, expenditure and revenue reforms have played different roles in fiscal retrenchment efforts. During the 1990s, fiscal adjustment in the NMS relied primarily on expenditure cuts. Several NMS pursued tax reforms that lowered the overall tax burden, and general government revenues have declined in the Baltic countries and Slovakia to around 35 percent of GDP. Expenditures in these The Baltic countries have greatly improved budgetary positions, most Central and Eastern European countries less so. EIB PAPERS Volume13 N°1 2008 121
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Preface This year the European Inve
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The share of transport in governmen
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The shares of infrastructure and ho
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Government transport investment has
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