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Fourth Poverty Reduction Strategy Forum
Recent Progress in PRSP Implementation
June 26-27, 2007, Athens, Greece
Current Economic Developments
Presentation outline:
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Economic developments in 2006
Economic developments in Q1 2007
Structural reforms
Future economic prospects
Macroeconomic results in 2006
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Real GDP growth of 3.2%
Industry growth of 3.6%
Services growth 3.2%
Average CPI inflation rate of 3.2%
Central government deficit of 0.6%
Trade deficit (20.5% in 2006)
Current account deficit of 0.4% of GDP
Foreign exchange reserves 4.5 months Import
coverage
 Unemployment rate 35.9 (ILO definition)
GDP components
7,5%
5,5%
1,5%
Fi
re
0,0%
ul
tu
re
In
du
C
st
on
ry
st
ru
ct
io
n
Tr
ad
e
Tr
To
an
ur
s&
is
m
co
m
m
un
.
A
gr
ic
G
DP
8,0%
7,0%
6,0%
5,0%
3,6%
4,0% 3,2%
3,0%
2,0%
0,6%
1,0%
0,0%
-0,4%
-1,0%
Macroeconomic results in 2006
 However the MoF estimate for 2006 is 4%
GDP growth
 Reasons:
 Annual GDP is calculated on the basis on
the financial accounts, whereas quarterly
data from surveys
 Data inconsistency in some sectors (ex.
Construction)
External sector

Export growth of 17.5% and import growth of
16.5% in 2006,

Trade deficit slightly increased to 20.5% of GDP

Stable remittances

Current account deficit of 0.4% - lower than
expected due to non paid Telecom dividend

Foreign exchange reserves of 1.45 billions of
Euro – 4.5 months of import coverage
Exports and imports growth rates
70
64,9
60
50
40
37,0
30
25,2 23,0
25,0
22,3
20 14,3 17,7
18,0
10,8 9,4
10
7,5
7,3
3,2
0
Food
Bever and
tobacco
Crude
materials
Exports
Fuel
Chemical
prod
Imports
Manufact.
Goods
Machinery
and equip
Employment - 2006
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Activity rate of 55.7% (ILO definition, Q4)
Employment rate 35.7% (4.3% growth), relatively
high gender gap
Unemployment rate 35.9% (0.6 p.p decline),
almost equally distributed between genders
New employed persons 150 000 in 2006
(2% more than 2005)
Employed by sectors (Q4, 2006)
Other 19.8%
Agriculture 17.6%
Education&health
11.8%
Manufacturing 24.6%
Trans&comm. 5.8%
Trade 14.4%
Construction 6.0%
Better than expected economic developments in
the first months of 2007
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GDP growth for the first quater is 7%
Industry growth of 10% in the first four months of 2007
Exports growth of 55% and imports growth of 36% for
the first 4 months of 2007, as compared to the same
period 2006
Strong fiscal performance
Low inflation rate of 0,8%
Reforms: Business environment
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Substantial reforms to reduce administrative burden
on businesses and to ease market entry and exit
Entry: reduction of time and financial needs to register
a business (effective one-stop shop system from
January 2006)
Exit: facilitated by the new bankruptcy legislation from
March 2006 that streamlined and shortened
bankruptcy procedures and reduced their costs.
Regulatory guillotine - to eliminate all unnecessary
regulations and procedures that are burden on
businesses (involvement of business community, by
September 2007)
Reforms: Business Environment
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Improvement of tax system: simplified tax administration
(April, 2006) and introduction of flat and lower tax rates
Reform of social contributions system to simplify the
system and to reduce tax wedge - harmonisation of
basis for calculation and the minimum contribution base

Reforms in the Cadastre to ensure effective acquisition
and application of ownership rights

Substantial judiciary reforms to improve its efficiency
Reforms of the Judiciary
Recent reforms
 Significant attention to the fight against corruption
(amendments to the Law on Corruption Prevention, new
Law on Conflict of interests, adoption of the Law on
Public Prosecution and the Law on Council of public
prosecutors)
 Laws on Litigations and Enforcement (private
enforcement agents)
 Non court mediation - already nominated 60 mediators
 The Law on Judicial Council, May 2006 - already
organised first elections and judges elected
Labour market reforms
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Improvement of labour market flexibility and streamlined
Government action towards reducing unemployment
further harmonisation with the EU acquis,
employment policy reforms towards more active concept of
flexibilisation including active labour market policies,
greater security - the concept of flexicurity
micro level reforms to improve business environment and
support job creation.
Policies and measures to reduce unemployment defined and
coordinated in the following documents:
National Strategy for Employment
National Action Plan for Employment 2006 -2008
Operational Plan for Active Policies for 2007
Reforms in the Public Finance Management
Objectives:
 To increase fiscal responsibility, accountability and
transparency
 To further improve budget planning and enforcement
 To ensure a complete harmonisation and consistency of
definitions with widely accepted international methodologies
for fiscal planning and notification
 Better coordination between the central and local
governments
 Reforms of the Budget process - focus on medium term
budgeting
 Tax administration reforms - to complete computerisation of
data base in the Public Revenue Office, to ensure greater
fiscalisation of businesses, to improve assessment and
collection of taxes (established LTO)
Reforms in the management of the Health
sector
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In the primary health care transformation was made of parts
of the public health by privatizing pharmacies
In the hospital health care – management by two directors
(professional and financial). Third training of healthcare
managers was completed, attended by over 300 experts so
far.
Clinical Centre reforms – transformation from a bulky
structure, difficult to manage, into several legal entities.
Law on Health Insurance amended in terms of:
Transformation the role of the HIF from financing the
healthcare infrastructure into a role of a buyer of healthcare
services
Medical map was created
Financial System Reforms
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Banking system improvement through application of the
Basel standards
Further enhancement of the NBRM capacity for
implementation of monetary policy
Promotion of credit register of the NBRM connected with
the relevant data bases
Introduction of modern techniques for managing the
exchange reserves
Developing secondary market for public securities
Enabling the entry of foreign banks in a form of branch
offices by 2008
Education System Reforms
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To provide education system that produces greater human
capital with better quality
To ensure better alignment between education and labour
market
Recent and ongoing reforms:
Changes in the curriculum (entrepreneurship, foreign
languages, career guidance)
Changes in the examination system - unified external
examination to improve education signals
Further reforms in the vocational education and training
Introduction of a compulsory upper secondary education to
increase the quantity of human capital and to improve social
inclusion
Implementation of Bologna process in higher education
Future prospects 2007 - 2008
 GDP growth above potential (about 6%)
 Imports growth of intermediate goods and
equipment – 18%
 Expected growth of credit to enterprises –
30%
 Better than expected economic
developments in the first quarter of 2007
(GDP growth 7% in Q1- almost in all sectors)
Future prospects
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Low inflation rate between 2-3% (within the
Maastricht criteria)
Exports growth of 12% (need to be revised)
Imports growth of 11% (need to be revised)
Employment growth of 4%
Unemployment to decline by 2 p.p per year
Slight widening of the trade deficit
Stable and low current account deficit