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World Bank Says Integration Accelerating

Washington, May 7 (RFE/RL) - The World Bank says that integration into the global economy by the nations of Central and Eastern Europe and the former Soviet Union, as a region, is close to the world average and is accelerating."

The bank, in its annual "Global Economic Prospects" report issued today in Washington, says that world-wide economic integration has "accelerated dramatically" over the past five years and is proving to be directly linked to national economic growth.

"Recent developments underscore the virtuous circle linking stabilization, integration, and growth for the leading reformers among the Central and Eastern European countries," says the report.

"By contrast," it says, "conditions akin to a vicious cycle of continued rapid inflation and output losses have afflicted countries that have been slow or lagging reformers."

The Bank's Chief Economist, Michael Bruno, who is also Senior Vice President for Development Economics, told reporters that global economic integration has been "very uneven," even within regions.

In Central and Eastern Europe and the former Soviet Union, the bank says that nations, such as Poland and the Czech Republic, have recorded both strong growth and bold integration. In those countries, the report says, their "sound policies" have fostered an environment that supports private sector activity, which boosts creditworthiness, which brings in foreign investment and encourages trade. The end result, it says, is even greater integration, greater growth and increased trade.

"Indeed, integration through trade with the west has progressed rapidly," in the most advanced reforming states, says the report, with "60 percent of the region's exports and imports now traded with EU (European Union) countries."

The bank did not break down specific nations, but assessed each region of the world in broad terms. In it's Europe and Central Asia category, it ranked the Czech Republic, Poland and Hungary as "fast integrators," Romania as a "moderate integrator" and Bulgaria and the nations of the former Soviet Union as "slow integrators."

Even then, the bank says, the prospects for growth in the region are very good. "Strong exports and private investment are likely to support 4 to 5 percent growth for the Central and Eastern European countries during 1996," it says, "a milestone for Poland since it means that real incomes will return to pretransition levels."

"As the benefits of stabilization in Bulgaria and the Baltics materialize more fully," says the bank, "as Hungary emerges from near-term adjustment and as the war-torn republics of the former Yugoslavia are given respite, regional growth is likely to be maintained near 4 percent in the medium term."

As a region, the bank projects annual growth of GDP (Gross Domestic Product) over the next 10 years to average around 4.1 percent. It says that despite political and other uncertainties, and assuming sustained efforts at stabilization, "Russia should achieve positive growth in 1996 and Ukraine in 1997." As in Eastern Europe, the report adds, "consumer spending may provide the initial impetus for growth."

From a positive scenario, says the bank, it can be projected that the leading reforming nations "will have achieved pretransition income levels by 1998, and that by 2005 all the Central and Eastern European countries will have done so."

However, the bank warns, for growth to be sustained over the longer run, "domestic and foreign investment will need to be supported by successful stabilization, fiscal reform and a credible legal and institutional environment."

In the end, observes Bruno, economic stabilization and strong reforms are the keys to success. The report notes that the initial results of stronger reform efforts and rising economic activity in Armenia, Georgia and Moldova "are becoming evident," efforts in Kazakhstan and the Kyrgyz Republic are showing "stronger results" while there is "little progress" in Tajikistan and Turkmenistan and "slippage" in Uzbekistan.