Azerbaijan, Baku, April 17 / Trend N. Ismayilova /
Every country in the Emerging Europe and Central Asia (ECA) region is expected to grow in 2011, but some countries are vulnerable to rising food and energy prices, said Theodore Ahlers, Director of Strategy and Operations of the World Bank's Europe and Central Asia region at a press briefing during the World Bank/IMF Spring Meetings 2011.
"For most countries in the region growth returned in 2010, following sharp declines in 2008 and 2009," he said. However, the region's annual growth of around 4.5 percent was much lower than that of other regions in 2010, and projections for 2011-13 indicate only slightly stronger performance."
Every country in the ECA region should record positive growth in 2011, however growth is more tepid in Central and Southeastern Europe than in the Commonwealth of Independent States (CIS), where high commodity prices have lifted net exports, increased remittance flows from migrants, and boosted private consumption. Yet, higher food and energy prices are a source of vulnerability for net importers as these threaten to increase poverty, particularly in lower income economies in the CIS, and add more pressures to macroeconomic policy management across the region, he said.
The global food and energy price increases represent an opportunity for commodity exporters. Large oil exporters Azerbaijan, Kazakhstan and Russia, which account for 15 percent of the world's oil production, are benefitting from higher prices which are boosting growth, current account and fiscal balances. At the same time food and energy price inflation represents an additional source of vulnerability for many net importers, particularly Armenia, Georgia, Kyrgyz Republic, Moldova, and Tajikistan.
Trade restrictions on food exports and price controls are not the best way to protect poor consumers as they hinder longer term adjustment in markets and may worsen price volatility," said Roumeen Islam, World Bank Economic Advisor and the main author of the report "Rising Food and Energy Prices in Europe and Central Asia". "The expansion of targeted social assistance systems should be the preferred method of protecting the poor. ECA's food and energy production is important for both regional and global markets. ECA wheat exports account for 25 percent of world wheat exports on average. Countries in the region could double their wheat production by cultivating more land ― sustainably ― and by increasing yields. Better irrigation and improved post-harvest logistics would help raise yields.
As the cost of energy is rising, ECA countries will need to reform their pricing policies and reduce their energy intensity. Rising oil and gas prices will push up energy trade deficits which are already high for some countries in the region. In 2010, the energy trade deficit was 20 percent of GDP in the Kyrgyz Republic, followed by 14 percent in Georgia and 11 percent in Ukraine. The energy intensity has declined in all ECA countries but can be further reduced with policies and investments that encourage energy efficiency and renewable energy, he said.