Income Growth in Eastern Europe is Losing Momentum, but Bulgaria has the Potential for Progress
Convergence in Central and Eastern European (CEE) countries in the area of income is threatened by a slowdown if these members do not restructure their economies faster and do not begin to bring about the related productivity gains. That's what Moody's warned, reports money.bg
"Low wages, skilled labor, European funding, and European value-added integration with strong FDI have led to productivity improvements since the late 1990s," the experts said. The agency points out that these factors have succeeded in supporting faster growth and income growth, and a number of countries in the region have experienced an improvement in the economic environment. "The traditional growth model in the CEE countries is beginning to lose momentum," said Moody's Deputy Chairman Heiko Peters.
"The speed with which the CEEC 8 (Estonia, Latvia, Lithuania, Czech Republic, Poland, Hungary, Slovenia, Slovakia, Poland, Hungary) catches up against the rest of the EU in terms of productivity slowed significantly between 2009-2017 compared to 2000 - 2008, he added.
Moody's adds that countries with the greatest catching-up potential compared to the other members of the Union are often also faced with the greatest difficulty in realizing their potential because of institutional weaknesses, innovations and the quality of human capital.
"Bulgaria and Romania show the greatest potential for progress, but the opportunity to take advantage of this potential is limited by weaknesses in institutions and lack of readiness for innovation," the agency said.
"Countries showing a promising combination of catching-up potential and the opportunity to take advantage of this potential are the Czech Republic, Poland and Bulgaria, and to a lesser extent, Hungary," experts add. Moody's concludes that boosting productivity will be crucial to the future of the region's countries and to the "catch-up" of Western Europe.
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