For 2014, we project that Russia’s economy will grow at an estimated 0.3-0.5 percent. This is the lowest growth rate since the global financial crisis but higher than the high-risk case scenario which was expected since the geopolitical tension started and the sanctions of the EU and the US took hold. This means that Russia’s expected economic performance in 2014 will be similar to that of the Euro-zone, even though Russia is much more dependent on the European market than the EU is on Russia.
A Ukrainian paradox
When Ukrainians took the streets in the winter of 2013/14, protests – sparked by the then Government’s decision to suspend the signing of the association agreement with the EU – reflected widespread discontent over deep-seated corruption. From its independence over two decades ago, Ukraine has struggled with corruption and state capture. So-called oligarchs dominate large sectors of the Ukrainian economy, extracting rents and controlling the state through direct representation in the Parliament. This allowed oligarchs to tap into rich sources of corruption, including energy subsidies, discretionary public procurement, privatization of state assets and wide spread tax fraud and evasion. These governance failures created an economy largely built around redistribution of rents. Arguably, this accounts for much Ukraine’s dismal economic performance despite an abundance of natural resources, qualified human capital and a strategic location in the center of Europe.
One of the targets of the Millennium Development Goals for poverty and hunger is monitored in part through a measure called Prevalence of Undernourishment. This is defined in the World Development Indicators (WDI) database as the proportion of the population whose food intake is insufficient to meet minimum dietary energy requirements continuously.
Comparative data (see figure below) show two, somewhat contradictory, aspects of undernourishment in the Middle East and North Africa (MENA) region. During 1991-2012, the MENA region has had very low levels of undernourishment; among developing regions, it is tied for lowest average with Europe and Central Asia. But the average level of undernourishment in the region appears to have worsened over time. The latter is surprising because the MENA region is made up of middle and high income countries (with the exception of Djibouti and Yemen) and has not been subject to any prolonged negative food or income shocks in the past two decades. Indeed, all other regions have experienced a steady decline in undernourishment since 1991.
A view from Central Europe and the Baltics
Being busy with everyday life many of us, including myself, do not spend much time thinking how our lives will look like in 20 or 30 years. However, when I travel to the countries I work on, I see the challenges faced by the elderly, especially in rural areas. These challenges include poor access to social and health services, exclusion and simply loneliness.
The countries in Central Europe and the Baltics are ageing. As a result, the size of the working age population is shrinking, creating labor shortages which could potentially challenge future growth. Ageing is also putting government budgets under pressure from the rise in age-related spending on pensions and healthcare, and the shrinking base of tax contributors.
All of this is well known. Less appreciated, however, is the fact that in many countries there is a distinct geographical pattern to ageing. Sparsely populated rural areas are seeing an increasing share of elderly people, while urban areas still attract most of the young generation. The greying of the rural population creates a challenge for public policy as rural municipalities often have fewer resources with which to address the needs of their elderly population.
This is the story of a country located next to the largest and most connected economic block in the world, with fairly low labor costs and a relatively well educated workforce. You would expect that country to do well. However, the state of Serbia’s economy is problematic. Today, Serbia’s output is below what it was in the 1980s (in the time of Yugoslavia) and only half of its working age population has a job in the formal sector.
At the heart of Serbia’s problems are two interconnected imbalances, which explain why the country appears to be stuck on its path to prosperity. First, the economy is running on domestic consumption, which was fueled by financial inflows since 2000, while exports remain well below potential. Second, employment is driven by the state, not the private sector, with almost half (45%) of all formal jobs in the government or State Owned Enterprises.
Over the past decade there has been growing interest in using the internet and other communication technologies for conflict management and peacebuilding. Two key areas have emerged: (1) using publicly available data on events and social dynamics to monitor and predict escalations of tensions or violence, and (2) harnessing the increased access to the internet and mobile telephones to promote positive peace. In both areas exciting innovations have developed as well as encouraging results.
In the first area, perhaps the most comprehensive information source is Kalev Leetaru’s “Global Database of Society” or GDELT Project that “monitors the world's broadcast, print, and web news from nearly every corner of every country in over 100 languages and identifies the people, locations, organizations, counts, themes, sources, and events driving our global society”. The event database alone covers 300 categories of peace-conflict activities recorded in public media since January 1979, while the identification of people, organizations and locations enables network graphing of connections in media records.
In a recent article called “Economic Convergence: The Headwinds Return”, The Economist magazine called the rapid convergence of income levels between developing countries and the United States an aberration. It presented data showing that the difference between income per capita growth in developing countries and in developed countries had peaked around 2008 and had since become steadily smaller. When China is excluded from the calculations, the difference becomes smaller still.
So should we dismiss convergence as a trend whose time is past? I would argue that this would be premature, and that convergence is still a feature of our time. The different conclusion is not because of different data--both of us use the IMF’s World Economic Outlook series for GDP per capita at purchasing power parity terms, and its forecasts until 2019—but a different approach to convergence.