1. Pro-Poor Economic Policies and Poverty in Eastern Europe and the CIS
United Nations Economic Commission for Europe
Pro-Poor Economic Policies and Poverty in Eastern Europe and the CIS
Marek Belka
Executive Secretary of the
UN Economic Commission for Europe
Under-Secretary-General of the United Nations
July 2007
ECOSOC, Geneva

2. Economic Overview of the ECE Region: 56 countries of Europe, Central Asia and North America
Rapid Economic Growth and Favourable Prospects
Tremendous Diversity: Region Has the some of the Richest and Poorest Economies
Future Growth Will Need to Be in Knowledge Intensive Industries-UNECE Has a New Program
A Major Challenge from Globalization Is How to Preserve the Social Welfare State

3. Solid Real Growth in the ECE After a Difficult Decade (1990s) There Is Now Solid Growth in the Transition Economies especially since 2002

4. Per Capita Income in the UNECE Region:Significant Diversity

5. Poverty in the Transition Economies of the ECE
The collapse of central planning and dissolution of the USSR and Yugoslavia resulted in a decade long transitional recession
GDP fell by:
20% in central Europe
30% in southeast Europe
50% in much of the FSU
In addition to the fall in income, much of the institutional structure supporting social services fell apart as well, resulting in rising unemployment, poverty, and inequality.

6. Inequality in the Transition ECE Above Western Europe, Below Latin America
U.S.
France
Nordics

7. Inequality Increased during the Transition Two Different Patterns of Increasing Inequality: Poland Typical of NMS, Russia of CIS

8. Poverty in the ECE Region Highest in Central Asia, Caucasus
40 Million ($2.15PPP) and 150 million ($4.30PPP)

9. Central Asian and Caucasus As Poor as Many African Countries

10. Poverty: The Vulnerable Groups
Rural Areas
Unemployed
Ethnic Minorities
Retired, Elderly
Unskilled
Single Parent Households
Health Problems

11. Poverty Varies Significantly Within Countries --Geographically Kyrgyzstan
Note: Poverty is generally lowest in capital cities
Source:UNDP

12. Poverty is Significantly Related to Unemployment in the Transition Economies
Although unemployment has been declining; still very high in southeast Europe
A significant percent of unemployed are long-term due to large structural changes in sectoral output (2 to 3 times western levels)
Unemployment likely to result in poverty since weak safety nets, tight eligibility, limited funds for active labor market policies
Large informal sectors with no benefits
Women and youth have especially high unemployment
Economic growth in the resource rich-CIS has not (until recently) produced much employment growth

13. Gender Pay Gap: Worsened During the Transition Percentage Women’s Pay Is Less than Men’s Red=Transition Economy

14. There Is an Ethnic Dimension to Poverty: The Roma of Southeast Europe
Source: UNDP

15. By Some Measures the Transition Economies Appear to be Pro-Poor
It is difficult to assess the overall policy environment of a country in addressing basic needs
The UNDP human development index (HDI) may provide a reasonable overall measure (includes literacy, life expectancy, etc)
Generally most of the transition economies rank significantly higher by the HDI than by per capita income
Thus for their income level, they seem to be addressing basic needs reasonably well

16. Pro-Poor versus Pro-Growth
Not all growth policies are pro-poor, and not all pro-poor policies are pro-growth
The pro-poor growth agenda attempts to promote those that are both (such as broad-based education programs)
But there are large policy areas where there is some trade-off; how do we assess policies where the benefits “trickle-down” only in the long-run
Generally, donors favor poverty reduction while national governments favor growth

17. Just How Pro-Poor Are Some Current Economic Policies
Just How Pro-Poor Are Some Current Economic Policies? Tax Competition Amongst the Middle-Income Countries
In order to encourage investment (especially FDI) and improve competitiveness, taxes (especially on corporations) have been cut, made less progressive; and social benefits, and government’s role has been cut back
Flat taxes in Baltics, Russia, Slovakia, Ukraine, Georgia, Romania, fYR of Macedonia, others considering
There is tax competition throughout Europe, especially the lowering of corporate taxes
Generally, the government sector is significantly lower in these low tax economies with less spent on social services, less investment in human capital & infrastructure
Although some of these economies have grown quite rapidly, it is less clear if tax policy is the key

18. Just How Pro-Poor Are Some Current Economic Policies
Just How Pro-Poor Are Some Current Economic Policies? PRSP/PRGF in Low-Income Economies
Macroeconomic policy in the poorest ECE members is formulated under the IMF/WB Poverty Reduction Strategy Papers and Poverty Reduction Growth Facility (1999)
Covers Albania, Caucasus, Kyrgyzstan, Moldova, Tajikistan, Uzbekistan
Provides concessionary lending
Definitely a positive development, but is this framework working effectively?
There has been progress in terms of the MDGs, but not that rapid
Are the country programs pro-poor enough or just the old Washington Consensus policies repackaged?
Research, Assessment Is Needed

19. Policies for Promoting Pro-Poor Development
Social Policies
Improve the design of social safety nets
Improve access to education and health resources
Structural Policies
Encourage creation of SMEs, self-employment
Improve access to finance for the poor
Macroeconomic Policies
Reduce cyclical fluctuations by making fiscal policy more counter-cyclical
Diversify out of resource-intensive sectors in order to stimulate employment growth
Keep borders open; benefits of trade and migration; stick with economic reforms, don’t backtrack
Political Policies
Resolve political conflicts; ensure the disenfranchised have a voice; civil society has a role to play
Address ethnic and gender discrimination

20. Summary: Pro-poor Development in the ECE Region
The ECE region has solid economic growth
This is having a major impact on poverty
Policy reforms have also contributed but more is needed
Economic policies should better target the vulnerable groups
There are some broad macroeconomic policy trends in the region, however, that may not be pro-poor