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Former USSR: IMF Says Economic Gaps Increase Among New Countries

Washington, 23 April 1997 (RFE/RL) - The International Monetary Fund's (IMF) annual World Economic Outlook says the gap is widening between the countries which moved quickly and comprehensively into the transition to a market economy and those which have lagged in implementing reforms.

The report, released today in Washington, says Poland, the Baltic countries, Croatia, the Czech Republic, Hungary, the Slovak Republic and Slovenia are now "reaping the rewards" of early and deep reforms, "experiencing relatively robust economic growth, moderate inflation and promising progress in their reintegration into the world economic and financial system."

Those nations which are "less advanced" in the transition are struggling with a number of challenges, says the report, although several -- Armenia, Azerbaijan, Georgia, Kazakhstan and the Kyrgyz Republic -- have made progress and may see growth resume in 1997.

In Russia and Ukraine, says the IMF report, inflation has also fallen, but "a clear turnaround in output has yet to emerge."

It says Russia's fiscal position remains "fragile, with revenue collection particularly weak," but adds that recent indicators suggest the long-awaited recovery of output may materialize in 1997.

All of these countries, says the report, "need to consolidate progress with stablization, including by reforming tax systems, improving revenue" and dealing with "pervasive" problems with arrears in the payment of pensions and public sector wages.

Many as well need to deal with "fragile" banking systems, says the IMF report.

The annual report says growth in the global economy quickened during 1996 and conditions seem "generally propitious" for the global expansion to continue in 1997.

It says the nations in transition in 1996 generally "bottomed out" in their economic contraction, with output expected to expand by three percent in 1997, with all but four countries -- Bulgaria, Romania, Tajikistan and Turkmenistan -- projecting growth of at least two percent this year.

Interestingly, the report says that on the other end of the scale, the Czech and Slovak republics must watch that their economies do not overheat in the next year, due to relatively high wage increases which are helping to fuel domestic demand.

The World Economic Outlook says the "reintegration of the transition countries into the world economy is an essential element of their transformation process" and notes that most are further along in opening to trade with the rest of the world than in making financial connections.

Despite progress, however, it says, barriers remain to trade among the transition countries, even for trade within free trade areas, with restrictions concentrated on products which are an important part of transition country exports.

As for financial integration into the global economy, progress is less far along mostly because of the need for such a complete revamping of domestic financial systems to fit with the rest of the world. Still, this is a vital need for the countries in transition because "the resources needed to modernize the industrial structure and infrastructure vastly exceed domestic saving capacities," says the IMF report.

The report is released at the start of the spring meetings of the leadership committees of the IMF and the World Bank in Washington.