Lessons learned and priorities ahead Vladimir Popov, UN, DESA

Roundtable – A Vision of a Sustainable
and Resilient North and Central Asia
Lessons learned and priorities ahead
Vladimir Popov,
UN, DESA
1990s – unique experiment of transition to the
market
Lessons are relevant not only for transition
economies






Transformational recession
Mortality crisis
Increase in inequalities
Crime
Corruption
Deterioration of health care and education
1
GDP change in FSU economies, 1989 = 100%
225
Turkmenistan
Uzbekistan
205
Azerbaijan
Kazakhstan
185
Belarus
165
Central Europe
Tajikistan
145
Estonia
Armenia
125
Lithuania
Latvia
105
Russia
85
Kyrgyzstan
Georgia
65
Ukraine
Moldova
45
COUNTRY Yincr07_09 Y2009gr
Latvia
‐21.772
‐18
Estonia ‐17.1924 ‐14.1
Ukraine ‐13.215
‐15
Lithuania ‐12.45
‐15
Ireland
‐9.79
‐7
Zimbabwe ‐9.3662
Armenia ‐8.5792
‐14.4
Finland ‐6.6936
‐7.8
Iceland
‐6.5001
‐7.7
Japan
‐6.3376
‐5.2
Denmark ‐5.9541
‐5.1
Italy
‐5.95
‐5
Hungary ‐5.7378
‐6.3
Mexico ‐5.2845
‐6.5
Sweden ‐5.0902
‐4.9
Barbados ‐4.7318
‐5.3
Jamaica ‐4.658
‐3.5
Slovenia ‐4.573
‐7.8
Luxembou ‐4.5
‐4.5
United Kin ‐4.43
‐5
Turkey
‐3.8423
‐4.7
Germany ‐3.765
‐5
2012
2013 (forecast)
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
25
COUNTRY Yincr07_09 Y2009gr
Croatia
‐3.5392
‐5.8
Botswana ‐3.274
‐6
Russian Fe ‐2.7424
‐7.9
Spain
‐2.7324
‐3.6
Portugal ‐2.7
‐2.7
Canada ‐2.2104
‐2.6
Netherland‐2.08
‐4
Belgium ‐2.03
‐3
United Sta ‐2.0096
‐2.4
Georgia ‐1.978
‐3.9
France
‐1.8088
‐2.2
Czech Rep ‐1.805
‐4.2
Austria
‐1.672
‐3.6
New Zeala ‐1.3951
‐.7
Chad
‐1.1042
‐1.4
Moldova ‐1.0544
‐7.7
Singapore ‐.922
‐2
El Salvador‐.575
‐3
Malta
‐.4525
‐2.5
Hong Kong‐.3648
‐2.7
Romania ‐.3183
‐7.1
Greece
‐.04
‐2
Source: EBRD
Transition Reports
for various years.
Central Europe is
the unweighted
average for Czech
Republic, Hungary,
Poland, Slovakia,
and Slovenia.
Out of 42
countries
that
experienced
reduction of
GDP in
2007-09,
13 were
transition
economies
2
GDP Grow th Rates in Recent Recession in Trans ition Econom ies, %
a year, - top 5, bottom 5
Azerbaijan
10
Turkm enistan
Uzbe kistan
5
MACRO
ECONOMIC
POLICY
Tajikistan
0
Be larus
Croatia
-5
Uk raine
Lithuania
-10
Estonia
-15
Latvia
-20
2008
2009
TRANSITION
ECONOMIES
DID WORSE
THAN
OTHERS IN
2008-09
RECESSION
2010
GDP Growth Rates in Recent Recession in Transition Economies
Years/Countries
2008
2009
2010 2010 GDP as a % of 2007
-18.00
-1.00
77.73
Latvia
-4.24
Estonia
-5.06
-13.90
2.40
83.70
-14.78
0.50
88.01
Lithuania
2.76
Ukraine
2.10
-15.10
4.00
90.15
Croatia
2.40
-5.80
-1.50
95.01
0.64
-6.32
0.80
95.04
Hungary
-8.13
1.10
96.35
Slovenia
3.74
Armenia
6.90
-14.20
4.00
95.39
-7.13
-2.00
97.70
Romania
7.35
2.10
-4.50
2.00
99.46
Georgia
2.46
-4.30
1.70
99.72
Czech Republic
Montenegro
7.50
-5.70
-0.60
100.76
Russia
5.20
-7.90
4.40
101.15
6.22
-4.95
0.40
101.37
Bulgaria
6.00
-2.80
0.80
103.86
Bosnia and Herzegovina
Serbia
5.50
-3.10
1.60
103.87
FYR Macedonia
4.80
-0.80
0.80
104.79
6.17
-4.66
4.00
105.27
Slovak Republic
Kyrgyzstan
8.40
2.30
-3.50
107.01
-6.49
6.90
107.80
Moldova
7.84
Poland
5.13
1.65
3.30
110.39
Kazakhstan
3.2
1.2
6
110.70
Albania
7.7
3.3
3
114.59
Kosovo
5.40
4.00
4.60
114.66
8.9
-1.6
7
114.66
Mongolia
7.90
3.40
5.50
117.70
Tajikistan
Belarus
10.00
0.20
6.60
117.49
9.00
8.10
8.20
127.49
Uzbekistan
Turkmenistan
10.50
6.10
11.00
130.14
Azerbaijan
10.80
9.30
9.00
132.00
3
Increase in income inequalities in transition
economies in the early 1990s
4
Gini coefficient of income distribution in post Soviet states, %
50
45
Russian Federation
Georgia
Turkm enistan
40
Lithuania
Kyrgyz Republic
Latvia
Estonia
35
Moldova
Azerbaijan
Tajikistan
30
Arm enia
Kazakhstan
Ukraine
25
Uzbekistan
Belarus
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
20
5
Mortality rate (per 1000) and average life
expectancy, years, in Russia
71
17
70
15
69
14
Life expectancy (right scale)
68
13
67
12
11
66
Mortality
(left scale)
10
Average life expectancy, years
Moratlity rate, per 1000 inhabitants
16
65
9
64
8
7
63
2010
2007
2004
2001
1998
1995
1992
1989
1986
1983
1980
1977
1974
1971
1968
1965
1962
1959
1956
1953
1950
Murders per 100,000 inhabitants in 1987 and in 2002 (WHO statistics)
35
Murders per 100,000 inhabitants in 2002
Russia
30
y = 1,2507e 0,4158x
R2 = 0,6517
25
Kazakhstan
20
Ukraine
15
Turkmenistan
10
Latvia
Estonia
Belarus
Moldova
Kyrgyzstan
Tajikistan
5
Lithuania
Slovenia
0
0
1
45 degrees line
Albania Georgia
Azerbaijan
2
3
4
5
6
7
8
Murders per 100,000 inhabitants in 1987
6
CRIME, MURDERS, SUICIDES IN RUSSIA DURING TRANSITION
Crime rate (left scale), murder rates and suicide rate (right scale) per 100,000
inhabitants
August 1998 currency crisis
2900
45
2700
40
2500
35
2300
30
2100
25
1900
20
1700
15
1500
Crime rate
1300
Murder rate (crime statistics)
10
Murder rate (death statistics)
5
1100
Suicide rate
900
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
0
Corruption perception indices (Transparency International)
5.5
China
5
Russia
4.5
India
4
3.5
3
2.5
2
1980-85
1995
2002
2003
2004
2005
7
LESSONS FOR FUTURE
ECONOMIC POLICY
State capacity
 Macroeconomic policy
 Industrial policy
 Social Policy
 Privatization (state enterprises)
 Financial sector

Government capacity
Size of the government shrank in most
transition economies
Fig. 13. Consolidated government revenues as a % of GDP
Central European
countries
55
50
45
South East Europe
countries
40
Baltic states
%
35
30
Central Asian
countries
25
Caucasian states
20
-China
15
10
1989
RUSSIA
1990
1991
1992
1993
1994
1995
1996
8
Fig. 5. Government expenditure, % of GDP
60
U S S R /
P O L A N D
R U S S IA
C H IN A
50
40
Debt service
30
Defence
Subsidies
20
Investment
10
"Ordinary
government"
0
1985 1989 1995 1978 1985 1994 1989 1996
S o u rc e : (P o p o v , 2 0 0 0 ).
Decline in government revenues/ GDP ratio and GDP change in 1989-96 in
transition economies (EE, FSU, China, Vietnam, Mongolia)
China
200
180
160
Vietnam
140
120
Poland
100
80
Croatia Estonia
Belarus
Macedonia
60
40
Uzbekistan
Turkmenistan
Kyrgyzstan
Armenia
Russia
Tajikistan
20
-10
-5
0
5
10
15
20
25
30
35
Decline in government revenues/ GDP ratio from 1989-91 (average) to 199396 (average), p.p.
9
MACROECONOMIC POLICY




Government capacity – government
spending is inadequate
Fighting inflation is not #1 priority
(excessively tight monetary policy)
Exchange rate is overpriced (Dutch
disease)
External debts of companies and banks
are growing because there is no capital
control
Industrial policy




Resource abundance: A curse or blessing? - DESA
Working Paper No. 93, June 2010. CoCo-authored
with V. Polterovich and A. Tonis.
Tonis.
Mechanisms of resource curse, economic policy
and growth. NES Working Paper # WP/2008/082
(co(co-authored with V. Polterovich and A.Tonis).
A.Tonis).
Appropriate Economic Policies at Different Stages
of Development. CoCo-authored with V. Polterovich.
Polterovich.
NES, 2004.
Stages of Development, Economic Policies and
New World Economic Order (co(co-authored with V.
Polterovich).
Polterovich). Paper presented at the Seventh
Annual Global Development Conference in St.
Petersburg, Russia. January 2006.
10
Diversification
Dani Rodrik. WHAT’S SO SPECIAL ABOUT
CHINA’S EXPORTS? Harvard University,
January 2006
Actual sophistication of exports as
compared to predicted one (based on
GDP per capita) is very informative for
explaining variations in growth rates
among countries
Until recently Chinese import tariffs were
extremely high
11
Decrease in cotton production and increase in
output of cereals and vegetables
Production of som e agricultural goods, thousand tons
8000
Cereals
7000
6000
Vegetables
5000
4000
Cotton
3000
2000
Potatoes
1000
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
0
Manufactures exports, % of m erchandise exports
100
China
90
Georgia
80
Kyrgyz Republic
70
60
50
40
30
20
10
Arm enia
Afghanistan
Russian
Federation
Kazakhstan
Tajikistan
Azerbaijan
2011
2009
2007
2005
2003
2001
1999
1997
1995
1993
1991
1989
0
Turkm enistan
Source: WDI.
12
In Uzbekistan the share of machinery and equipment and
chemical in total industrial output increased
Structure of industrial output in 1991, % of total
Electric
Other energyFuelSteel
Food
Chemical and
Non-ferrous metals
petrochemical
Machinery and
equipment
Wood, pulp and
Construction
paper
materials
Light
Structure of industrial output in 2011, % of total
Food
Other
Light
Construction
Wood,
pulp and
Machinery and
materials
paper
equipment
Electric energy
Fuel
Steel
Non-ferrous metals
Chemical and
petrochemical
Source: State Committee on Statistics of Uzbekistan (http://www.stat.uz/en/)
13
Export and import, million USD
16000
14000
Export
Import
12000
10000
8000
6000
4000
2000
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
Source: State Committee on Statistics of Uzbekistan
(http://www.stat.uz
/en/))
http://www.stat.uz/en/
Source: Trushin,
Trushin, Eskender and Francisco G. Carneiro (2013). Changing for the
Better: The Path to UpperUpper-MiddleMiddle-Income Status in Uzbekistan.
Uzbekistan. Economic
Premise, No. 119, June 2013
(http://siteresources.worldbank.org/EXTPREMNET/Resources/EP119.pdf
http://siteresources.worldbank.org/EXTPREMNET/Resources/EP119.pdf).
14
Export to CIS and other countries, million USD
16000
14000
non-CIS countries
12000
CIS countries
10000
8000
6000
4000
2000
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
0
Source: State Committee on Statistics (http://
www.stat.uz/en/
/en/))
(http://www.stat.uz
R&D expenditure in selected countries, % of GDP
5
4.5
Israel
Finland
4
Japan
3.5
Korea, Rep.
3
United States
2.5
Germany
2
United Kingdom
1.5
China
1
Russian Federation
India
0.5
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
15
Social Policies





Inequalities
Billionaires
Crimes, suicides
Mortality
HDI
Fig. 12. Death rate from external causes (per 100,000 of inhabitants)
inhabitants)
- Russian Empire, RSFSR, RF, 18701870-2000 (log scale)
Source: Demoscope,
Demoscope, № 3131-32. August 2727- Sept. 9, 2001
http://demoscope.ru/weekly/031/img/nomer31.jpg).
http://demoscope.ru/weekly/031/img/nomer31.jpg).
1- all external causes, 2 - accidents, 33- suicides, 44- murders,
5-unknown, 6 – work related accidents.
16
Hum an Developm ent Index for China, Belarus, Russia and Ukraine
0.83
0.78
0.73
Cuba
Belarus
Russia
0.68
Ukraine
China
0.63
1990
1992
1994
1996
1998
2000
2002
2004
2006
Emissions of CO2 per $1 of PPP GDP, kg
2.5
2
China
1.5
Russian
Federation
1
India
0.5
United
States
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
0
European
Union
17
Privatization (state enterprises)


China did not privatize until 1996,
afterwards – very slowly, but growth rates
were high.
Financial sector – deregulation is not a
sine qua non for growth
M2 as a % of GDP
Рис. 3. Отношение М2 к ВВП в 1978–2006 гг. в некоторых странах в % 300
Гонконг
250
Япония
200
Китай
Швейцария
150
США
100
Польша
50
Россия
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
0
18
Bank credits as a % of GDP
Рис. 5. Кредиты банков в % к ВВП в некоторых переходных экономиках в 1990 г. и 1995
г.
100
90
1990
80
1995
70
60
50
40
30
20
10
0
Китай
Венгрия
Словения
Польша
Румыния
Молдова
Эстония
Монголия Азербайджан Армения
Bank credits (short term and long
term) as a % of GDP in Russia
Рис. 6. Кредиты банков в % к ВВП в СССР и России в 1985–96 гг.
80
70
60
50
40
30
20
10
0
Долгосрочные
Краткосрочные
1985 1986 1987 1988 1989 1990 1990 1991 1992 1993 1994 1995 1996
19
Stock exchange
in Kyrgyzstan – since 1995
in Tajikistan – no stock exchange
Financial sector
Market capitalization and bank credits, % of GDP
Рис. 10. Кредиты банков и рыночная капитализация компаний в % к ВВП в
1995 г.
300
Малайзия
250
ЮАР
200
Рыночная капитализация
> Кредиты банков
Сингапур
150
Великобритания
Нидерланды
США
Швеция
Филиппины
Таиланд
Чили
100
50
Гана
Кения
Швейцария
Рыночная капитализация
< 1/2(Кредиты)
Япония
Западная Европа
Пакистан
0
0
50
100
150
200
250
Кредиты банков
20
Russia's external debt, billion $
Non-financial
enterprises
Banks
CB (including
gov ernment
debt to IMF)
0 1 /0 1 /2 0 1 1
0 1 /0 1 /2 0 1 0
0 1 /0 1 /2 0 0 9
0 1 /0 1 /2 0 0 8
0 1 /0 1 /2 0 0 7
0 1 /0 1 /2 0 0 6
1 .0 1 .2 0 0 5
1 .0 1 .2 0 0 4
1 .0 1 .2 0 0 3
1 .0 1 .2 0 0 2
1 .0 1 .2 0 0 1
1 .0 1 .2 0 0 0
1 .0 1 . 1 9 9 9
Gov ernment
1 .0 1 .1 9 9 8
500
460
420
380
340
300
260
220
180
140
100
60
20
-20
LESSONS FOR FUTURE
ECONOMIC POLICY
State capacity
 Macroeconomic policy
 Industrial policy
 Social Policy
 Privatization (state enterprises)
 Financial sector

21