6th May 2016

IMF: CESEE region may face much slower pace of convergence to EU-15 unless they step up reform efforts. Czech Republic could gain most from better business regulation

The Regional Economic Issues (REI) reports assesses the macroeconomic outlook for the Central, Eastern and Southeastern Europe (CESEE) region in light of the latest global economic and financial developments. This update was published on May 6, 2016.

CESEE countries rank below advanced Europe on a number of institutional and structural characteristics The Baltics and some CEE countries (Czech Republic) tend to outperform other CESEE economies, but are still quite far from the frontier. According to the report, the Czech Republic is doing well in categories institutions, enforcing contracts, workforce with tertiary education, business regulations, and starting a business.

For the Czech Republic, the report sees large potential growth gains in improved protection of property rights and increased share of the service sector.

Structural reform priorities vary across countries depending on potential relative efficiency gains: 

Legal system and protection of property rights: Among CESEE countries, Bulgaria, Croatia, the Slovak
Republic, and Slovenia have relatively large room to increase efficiency by improving the legal system
(independence of the judicial system and impartiality of courts) and protection of property rights. Turkey also
has significant room to improve the independence of the judicial system. Albania, Hungary, Serbia, and the CIS
countries could also benefit from improving protection of property rights. In general, the Baltic countries have
institutional and structural characteristics very close to the EU-15 average. Thus, the room to gain efficiency by
improving these characteristics is limited.

Business regulation: Croatia, the Czech Republic, and the Slovak Republic could gain the most among CESEE
countries from easing general business regulation and restrictions for FDI.

Structural transformation: In Albania, Romania, Turkey, and, to a lesser extent, Poland, there is scope to raise
productivity by shifting labor from relatively lower productivity sectors (agriculture) to higher-productivity
(services) sector.

Life expectancy: the Baltic and the CIS countries have the greatest room to improve the life expectancy of the

Read more details here (in English). Projections of growth for the CEE region in 2016 and 2017 stand at 3.1%.

According to the UN projections (World Economic Situation and Prospects as of mid-2016)world gross product will grow by just 2.4 per cent in 2016, the same pace as in 2015, marking a downward revision of 0.5 percentage points from UN forecasts released in December 2015. 


Members of the American Chamber of Commerce in the Czech Republic