Chapter 9: Financing of enlargement and catching up
Ewald Nowotny CONTINUING – BUT SLOW – CONVERGENCE In the Central and Eastern European (CEE) accession countries, GDP per capita – measured at purchasing power parity (PPP) rather than market exchange rates – went up from an average of about EUR 6200 in 1994 to about EUR 9100 in 2001, implying an annual average growth rate of 5.75 per cent. During the same period the PPP GDP per capita in the EU rose from an average of EUR 17 200 to EUR 23 400 (see Figure 9.1). As a result, the income of the accession countries rose from 36 per cent of the EU average in 1995 to almost 40 per cent in 2001. THE PUBLIC SECTOR As Figure 9.2 indicates, however, developments have been quite uneven across countries. Fiscal deﬁcits widened in the three largest economies, that is Poland, the Czech Republic and Hungary, and in the Slovak Republic. The deterioration ranged from 2.25 per cent of GDP in the Czech Republic to 0.75 per cent in the Slovak Republic, resulting in a ﬁscal deﬁcit of around 5.5 per cent of GDP in both countries. The other six countries – Bulgaria, Estonia, Latvia, Lithuania, Romania and Slovenia – made progress towards ﬁscal consolidation and have, with the exception of Romania, small deﬁcits or even ﬁscal surpluses (Bulgaria and Estonia). It is probably worth noting that, except for Slovenia, all countries with an improved ﬁscal position have been implementing macroeconomic stabilization and structural adjustment policies in the framework of IMF stand-by arrangements. Furthermore,...
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