As the six countries comprising the South East Europe (SEE) region exit recession, they are now poised to begin building on the nascent economic growth in the region. Although economic growth is projected to be just 1.8% in 2014, this modest growth will nonetheless help reduce unemployment, increase exports, and limit inflationary pressures in the six countries of Albania, Bosnia and Herzegovina, Kosovo, the Former Yugoslav Republic of Macedonia, Montenegro, and Serbia. As the region travels this slow road to recovery, one of the main challenges that emerges for policymakers there is to ensure that all forthcoming initiatives designed to exploit this growth are as inclusive as possible, capable of increasing shared prosperity for all populations in the region.
Economic growth is a cornerstone for poverty reduction and shared prosperity in the region, but growth that benefits only segments of the population is not sustainable and can limit the long-term economic growth potential of a country. While consumption growth among those who make up the bottom 40% of consumption distribution in the six countries in the SEE region has varied, overall this growth performance has paled on average in comparison to many other neighboring countries in the Europe and Central Asia Region. In order to counter this trend, the World Bank Group is helping guide policymakers in the region in developing programs and policies that are more inclusive and capable of boosting the livelihoods of the most vulnerable populations throughout the region.
Crucial to the development of such initiatives, however, is a strong understanding of the specific drivers of shared prosperity in these six countries as a whole. This examination is the impetus behind a new paper that identifies these drivers and outlines specific policies and recommendations for designing appropriate interventions in the region that can foster greater shared prosperity – particularly among the bottom 40%.
This new paper, First Insights into Promoting Shared Prosperity in South East Europe, provides a diagnostic on how the region has fared in promoting shared prosperity and explores the pathways - along different dimensions - toward shared prosperity.
“By boosting shared prosperity, we can effectively contribute to growth as a whole in the region,” notes Gallina Andronova Vincelette, Lead Economist at the World Bank and co-author of the paper, “however, in order to achieve the desired results, more data and analysis are needed. This is just the first step in a long journey.”
The report takes an assets-based approach toward collecting and analyzing this specific data, applying a microeconomic framework for policy development that looks at a household’s assets, intensity of use of (and ultimate return on) those assets, and the impact of public and private transfers for these households. This approach reveals that the bottom 40% in the region tend not only to have fewer assets – including education and savings – they also use these assets with lower intensity and receive lower returns on this use. The report also finds that this group is also more vulnerable to shocks, further diminishing their chances to accumulate assets and increase their productive capacity in the long term.