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Eastern Europe: EBRD Says New Laws And Institutions Will Combat Corruption

Prague, 3 November 1997 (RFE/RL) - The European Bank for Reconstruction and Development (EBRD) today urged governments across Eastern Europe to create new laws and market institutions that will boost competition and crack down on corruption. It also forecast that 1997 will be the first year of collective growth in the region's GDP.

In its Transition report for 1997, which was released today, the EBRD says there must be more controls over managers of state firms and recently privatized companies that are still under the direction of former state managers. The EBRD also calls for changes to allow outside investors to have a greater role in corporate management.

The EBRD forecasts that 1997 will be the first year of collective growth in Gross Domestic Product (GDP is the the value of goods and services produced in an economy) across the transition countries. The expected growth figures are put at 3.1 percent for Eastern Europe, including the Baltics, but only 0.8 percent for the Commonwealth of Independent States.

Overall regionwide GDP growth is expected in spite of anticipated declines in Bulgaria, Romania, Ukraine, Moldava, Albania, Tajikistan and Turkmenistan. The EBRD said it expects positive GDP growth in all of Eastern Europe and the Commonwealth of Independent States (CIS) during 1998.

The report says: "The general trend remains one of robust growth in Eastern Europe and the Baltic states and a gradual return to growth in the CIS, most importantly in Russia." It says most transitional economies are now expanding in contrast with the situation of a few years ago, when many were experiencing extreme economic dislocation and rapid falls of output.

On the whole, the EBRD expects GDP in the former communist world to increase by 1.7 percent in 1997. This follows seven years of continuous decline in the overall output of goods and services.

Prospects for next year are even better. Real growth in all Eastern countries has been forecast, with the overall GDP expected to increase by 4.3 percent in Eastern Europe and the Baltics, and by 4 percent in the CIS.

One of the report's most important conclusions is that the contraction of the Russian economy -- by far the region's largest -- has finally come to an end, with forecasters predicting "mildly positive growth" for this year. If they are right, the expansion of the Russian economy will act like a "locomotive" for other regional economies.