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Cloudy Outlook for Growth in Emerging Europe and Central Asia

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Growth in the Emerging Europe and Central Asia (ECA) region remains tepid, with GDP growth for the region expected to be only 1.8 percent in 2014 and improving slightly up to 2.1 percent for 2015, the World Bank said during the 2014 World Bank/IMF Annual Meetings.

“The Emerging Europe and Central Asia region is facing some daunting challenges amid a cloudy outlook for growth,” said Laura Tuck, Vice-President for the World Bank’s Emerging Europe and Central Asia region. “The tensions in Ukraine have clearly had an impact on the country’s growth and have disrupted economic activity. But many of the structural problems that confront countries in the region existed before the crisis and still need to be urgently addressed.”

Added Tuck, “While we monitor the impact of the Ukraine crisis on the region, it is important not to lose sight of these longer-term issues that countries need to tackle to boost growth and create badly needed jobs. In many countries of Central and Eastern Europe, the challenge is to finally put the economic crisis behind – to kickstart the financial sector and improve the business climate. In the Balkans, deepening institutional reforms and improving governance are crucial. In Russia and many neighboring countries, key are reforms to enhance competitiveness and create sources of growth beyond oil and gas.”

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Signs of recovery

Some signs of hope show through in the region. Central and East European (CEE) countries are expected to see growth accelerate to 2.5 percent in 2014 and to 2.8 percent in 2015 – a significant improvement from the previous two years when growth was very modest (0.8 percent in 2012 and 1.3 percent in 2013). But recovery in the new EU member states remains mixed and growth in Western Europe is disappointing.

Unemployment rates in several countries have peaked and are now showing signs of improvement. While they remain above 10 percent in several CEE countries, they are declining the most in countries such as Estonia, Latvia, and Lithuania, where structural reforms and prudent policies were implemented swiftly. Given past trends, these positive developments are expected to be reflected in higher income growth for the bottom 40 percent of the population.

In the Western Balkans, economic growth is expected to drop from 2.4 percent in 2013 to only 0.6 percent in 2014, due to its debt overhang that is reducing financing for business and lack of reform momentum, and then recover modestly to a projected 1.9 percent in 2015.  

Ukraine crisis

Meanwhile, in Ukraine, geo-political tensions have developed into a deep crisis for the country. Recent trends point to a sharper decline in Ukraine’s real GDP in 2014 and continued retrenchment in 2015 compared to earlier projections. Ukraine’s GDP is expected to contract 8 percent in 2014 and 1 percent in 2015.

The conflict in the east has disrupted economic activity, made collection of taxes difficult, adversely affected exports, and hurt investor confidence. Meanwhile, weak revenue performance, rising spending pressures, and a growing Naftogaz deficit make fiscal adjustment more challenging. The current account deficit has adjusted because of the sharp depreciation, but balance of payments pressures remain high due to large external debt refinancing needs, low FDI, and limited access to external financing. A prolonged confrontation in the east, constrained credit supply due to risks in the banking sector, constrained domestic consumption, and investment demand all pose risks and affect prospects for recovery.

Russian stagnation

In Russia, the World Bank warned earlier this year of an unfinished transition, including ongoing problems in the business environment and heavy reliance on oil revenues. Currently, the Russian economy is slowing as its past growth drivers have weakened. GDP growth in Russia was just 0.8 percent in the first half of 2014, compared to 0.9 percent in the first half of 2013.

Economic activity was already hamstrung in 2013 by lingering structural problems and a wait-and-see attitude on the part of both businesses and consumers. An additional negative impact on the economy – besides slow structural reforms – came from increased geopolitical tensions and an uncertain policy environment. It is policy uncertainty about the economic course the country will take that is casting the longest shadow on Russia’s medium-term prospects. There is a greater need for reforms to enhance the business climate to build avenues for growth and less reliance on the energy sector.

The Commonwealth of Independent States (CIS) economies have faced headwinds due to the crisis in Ukraine and ongoing stagnation in Russia, however broad spill-overs to other countries have been limited so far. Immense reliance of the CIS economies on energy exports persists, and progress on structural reforms has slowed. Growth for these countries is expected to be a meager 1 percent in 2014 and to rise only slightly to 1.3 percent in 2015.

In Turkey, growth has also slowed from over 4 percent in 2013, but is projected to stabilize at about 3.5 percent in 2014 and 2015.

Going forward

“The forecast for the Emerging Europe and Central Asia region remains tepid because of deferred structural reforms, as well as ongoing weak growth in Western Europe and stagnation in Russia,” noted Hans Timmer, Chief Economist in the World Bank’s Emerging Europe and Central Asia region. “Economic growth in the region remains lower than in most other regions of the world. Going forward, the emphasis should be on improving governance and the investment climate, strengthening competitiveness, ensuring the stability of the financial sector, and maintaining a sound macroeconomic framework.”

“To be sustainable in the longer term, economic growth and shared prosperity need to be fiscally affordable, environmentally responsible, and conducive to social inclusion,” said Timmer.

The World Bank, working jointly with other World Bank Group institutions, is helping its client countries in Emerging Europe and Central Asia address these and other challenges to reduce poverty and boost shared prosperity through policy dialogue, analytical work, project funding, and reimbursable advisory services.

 

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Foreign Affairs Minister Ramona Mănescu: The Strategic Partnership with the US is the central focus of the Romanian diplomacy, while the accession to Schengen remains a priority

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Foreign Affairs Minister Ramona Mănescu said on Thursday that Romania’s accession to Schengen remains a priority of the Romanian diplomacy.

“Evoking the period when I was MEP, I can certainly tell you that (…) all the time both [the European] Parliament and the Commission said Romania was prepared to join Schengen, from a technical and logistical point of view. (…) Practically, we function de facto as a Schengen member state, but de jure we are not regarded as such. Romania doesn’t ask anything but the observance of the Treaty, we are members with full rights, we met our commitments and we seriously continue to meet them, no one can challenge Romania’s contribution to the security space, because we are not talking only about the eastern flank of NATO, we are also talking about EU’s eastern flank,” Ramona Mănescu told Antena 3 private television broadcaster on Thursday, quoted by Agerpres.

She maintained that the Romanian citizens “have all the right to get this well-deserved position of Schengen member state.”

“This is not something we must beg for, or be made a favour. It is provided in the Treaty and it must be observed. (…) I assure you we keep this on the agenda as priority topic, and all bilateral and extended discussions will include the Schengen accession component, we won’t stop from telling our colleagues in the EU that the Romanian citizens have the same rights,” Mănescu underscored, mentioning that, at present, in the Council half of the states support Romania’s accession to the free movement area, and the others oppose.

The Foreign Minister also pointed out that the Strategic Partnership with the US must remain the central focus of the Romanian diplomacy.

She also showed that Romania has the same position towards Russia as NATO and the EU.

“Romania’s position towards Russia starts in the first place from the vicinity we are in, but it is also part of the EU’s position regarding Russia, as we are part of the EU, we must get in line with EU’s stand. I am referring to sanctions, to certain limitations that we have in the dialogue and cooperation with Russia and I am particularly referring to the firm position we have as EU member, which we have always had, of observing the international legislative framework. We don’t ask too much from Russia as an actor on the geopolitical stage if we ask them to respect the international legislative framework. (…) It is the principle which we start from and which we cannot fail to keep not even for Russia, which is here, close to us. We have no reason to make an exception, because nothing is negotiable in this story,” Ramona Mănescu said.

According to the Minister, the relation with Russia represents “a key point in the stability in the area, in securing NATO’s eastern flank, in the manner in which we can further manage the discussions in the Black Sea. “The threats and gestures which Russia has repeatedly done in the Black Sea space, from a military stand, have been sanctioned all the time. (…) Both NATO and the EU have the same discourse. Romania cannot have a different discourse, because it is both part of the EU and NATO, and we are at the Black Sea,” she added.

Mănescu also said that she expected “the energy diplomacy to have its word,” in regards to the resources in the Black Sea.

“Our desire is for a partner such as Exxon to stay here and continue to work together as much and as well as possible. This entails our making some steps in an expected direction. I believe things will settle in the end, enter the right track and I even want to clarify this position shortly and the US partners must be convinced that we’ll be keeping the same line. (…) Mrs PM wants this as well,” Mănescu said.

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Romania has a new Foreign Affairs Minister. Ramona Mănescu took the oath of office

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Ramona Mănescu, Nicolae Moga and Mihai Fifor took the oath of office on Wednesday in the presence of President Klaus Iohannis for the Interior and Foreign Affairs Ministries office, Deputy Prime Minister for implementing Romania’s strategic partnerships office respectively.

The head of state wished success to the new three members of the Dancila Cabinet.

The swearing-in ceremony was attended by Prime Minister Viorica Dancila, ministers, Deputy Speaker of the Deputies’ Chamber Florin Iordache, Government Secretary General Toni Grebla and presidential advisors.

President Klaus Iohannis signed on Wednesday the decrees appointing Nicolae Moga as Interior Minister and Ramona Mănescu as Foreign Affairs Minister, according to a Presidential Administration release.

Through another decree, Mihai Fifor was appointed Deputy Prime Minister for implementing Romania’s strategic partnerships.

Furthermore, Iohannis took note of Carmen Dan’s resignation from the Interior Ministry and signed the decree dismissing Teodor Meleșcanu from the Foreign Affairs Minister office.

Ramona Mănescu is a Romanian politician and lawyer. She was a Member of the European Parliament serving 2007 to 2013 and 2014 to 2019 from the National Liberal Party (till July 2017), active within the European People’s Party group in the European Parliament.

As part of this group she is a member of the European Parliament Committee on Foreign Affairs, vice-chair in the Delegation for relations with the Mashreq countries and a substitute member in the Committee on transport and tourism and in Delegation for relations with the Arab Peninsula.

Between 2007 and 2014 she was part of the ALDE group in the European Parliament, where she also held the position of Vice-President (11 November 2012 – June 2014) of the ALDE Party (Alliance of Liberals and Democrats for Europe Party). As a member of this group she is a coordinator in the Regional Development Committee and a member in the Committee on Employment and Social Affairs.

At the European Parliamentary elections from June 2014, Mănescu renewed her mandate within European Parliament, where she became a member of the European People’s Party group in the Parliament European.

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Romania: President Klaus Iohannis appoints former MEP Ramona Mănescu as the new Foreign Affairs Minister

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President Klaus Iohannis signed on Wednesday the decrees appointing Nicolae Moga as Interior Minister and Ramona Mănescu as Foreign Affairs Minister, according to a Presidential Administration release.

Furthermore, Iohannis took note of Carmen Dan’s resignation from the Interior Ministry and signed the decree dismissing Teodor Melescanu from the Foreign Affairs Minister office.

Through another decree, Mihai Fifor was appointed Deputy Prime Minister for implementing Romania’s strategic partnerships.

The swearing-in ceremony takes place on Wednesday at 11:00hrs, at the Cotroceni Presidential Palace. 

Ramona Mănescu is a Romanian politician and lawyer. She was a Member of the European Parliament serving 2007 to 2013 and 2014 to 2019 from the National Liberal Party (till July 2017), active within the European People’s Party group in the European Parliament.

As part of this group she is a member of the European Parliament Committee on Foreign Affairs, vice-chair in the Delegation for relations with the Mashreq countries and a substitute member in the Committee on transport and tourism and in Delegation for relations with the Arab Peninsula.

Between 2007 and 2014 she was part of the ALDE group in the European Parliament, where she also held the position of Vice-President (11 November 2012 – June 2014) of the ALDE Party (Alliance of Liberals and Democrats for Europe Party). As a member of this group she is a coordinator in the Regional Development Committee and a member in the Committee on Employment and Social Affairs.

At the European Parliamentary elections from June 2014, Mănescu renewed her mandate within European Parliament, where she became a member of the European People’s Party group in the Parliament European.

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