Evaluation of the 2001 pre-accession economic programmes of candidates countries

Directorate-General For Economic And Financial Affairs

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Construction of Europe
Economic policy - Economic and Monetary Union
Target audience: All

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• Publié par: DIRECTORATE-GENERAL-FOR-ECONOMIC-AND-FINANCIAL-AFFAIRS
• Nombre de lectures: 7
• Langue: English
• Poids de l'ouvrage: 2 Mo

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EUROPEAN
ECONOMY N COMMISSION
DIRECTORATE-GENERAL FOR ECONOMIC
AND FINANCIAL AFFAIRS
ENLARGEMENT PAPERS
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ISSN 1608-9022
http://europa.eu.int/economy_finance
Number 7 January 2002
Evaluation of the 2001 pre-accession
economic programmes of
candidate countries
by
Directorate General for
Economic and Financial Affairs Enlargement Papers are prepared by the services of the European Commission or by experts working
in association with them.
The Enlargement Papers are intended to provide information on the economies of the candidate
countries and on the economic implications of EU enlargement.
Comments and enquiries should be addressed to:
European Commission
Directorate-General for Economic and Financial Affairs
Publications
BUI
Β - 1049 Brussels, Belgium ENLARGEMENT PAPERS
ISSN 1608-9022
http://europa.eu.int/economy_finance
Number 7 January 2002
Evaluation of the 2001 pre-accession
economic programmes of
candidate countries
by
Directorate General for
Economic and Financial Affairs
ECFIN/40/02 - EN This paper only exists in English. TABLE OF CONTENTS
Foreword 4
The 2001 Pre-accession Economic Programmes of Candidate Countries:
Comparison of the Main Results 5
Bulgaria 21
Cyprus9
Czech Republic 37
Estonia 4
Hungary 5
Latvia 66
Lithuania 73
Malta 82
Poland 9
Romania 10
Slovak Republic 11
Slovenia. 12
Turkey 133 FOREWORD
This Enlargement Paper brings together into a single document the Directorate-General
for Economic and Financial Affairs Evaluation of the first Pre-Accession Economic
Programmes (PEPs) of the candidate countries. The content of this paper was discussed
on June 27 and November 27, 2001, in the High-Level Meetings between the members of
the Economic and Financial Committee of the EU (EFC) and their counterparts from
candidate countries. On December 4, 2001, the document was presented to the Council of
Economic and Financial Ministers of the EU (ECOFIN). It was also presented to the
ministerial meeting between the ECOFIN and their counterparts from candidate
countries.
One of the economic priorities of the 1999 and 2000 Accession Partnerships was the
establishment of an annual fiscal surveillance for the candidate countries. This gave birth
to the so-called Pre-Accession Fiscal Surveillance Procedure, which aims at preparing the
candidate countries for the participation in the multilateral surveillance and economic
policy co-ordination procedures currently in place in the EU as part of the Economic and
Monetary Union. The Pre-Accession Economic Programmes (PEPs) are part of this
procedure.
The PEPs have two objectives. First, to outline the medium-term policy framework,
including public finance objectives and structural reform priorities needed for EU
accession. Second, they offer an opportunity to develop the institutional and analytical
capacity necessary to participate in EMU with a derogation from the adoption of the euro
upon accession, particularly in the areas of multilateral surveillance and co-ordination of
economic policies. The development of the institutional capacity to co-ordinate between
the various ministries, government agencies and the central bank is a particularly
important aspect ensuring the success of the Pre-Accession Fiscal Surveillance
Procedure. THE 2001 PRE-ACCESSION ECONOMIC PROGRAMMES OF
CANDIDATE COUNTRIES: MAIN RESULTS
1. SUMMARY
All candidate countries have submitted their first Pre-accession Economic Programme
(PEP) in 2001, in accordance with the priorities of the Accession Partnerships. For
administrative reasons, the PEPs were submitted in two groups, in alphabetical order.
The governments of Bulgaria, Cyprus, the Czech Republic, Estonia, Hungary and Latvia
submitted their PEP in May 2001, while the governments of Lithuania, Malta, Poland,
Romania, Slovakia, Slovenia and Turkey submitted theirs in October 2001. In the future,
all PEPs will be updated on an annual basis and submitted simultaneously. In 2002, the
updated PEPs are expected by 15 August. This note gives an overview and some
assessment of the entire set of 13 programmes. Specific summaries and assessments of
the individual country programmes are contained in the Annex to this document.
The economic environment has worsened significantly between the submission dates of
the two groups of PEPs. Candidate countries are now confronted with a worldwide
economic slowdown. In particular, growth perspectives in the EU, the main trading
partner for all candidate countries, have been revised downwards considerably. In
general, this is reflected in a lower short-term growth outlook in the second group of
PEPs, even though most of these programmes have been finalised before the economic
effects of the 11 September events could be assessed and integrated.
The objectives of the PEPs are to identify the appropriate economic policies and reforms
needed to prepare for EU accession, and to develop the institutional and analytical
capacity necessary to participate in the multilateral surveillance procedures of EMU upon
accession. Most PEPs meet broadly these objectives. Nevertheless, further capacity
building is still required.
Overall, the programmes reflect the main challenges ahead for these countries and their
economies on the road to accession. With macroeconomic stability attained in most
countries, the focus shifts to the achievement of conditions for sustainable and
sufficiently large economic growth, in order to embark on substantial real convergence
towards European Union levels. The envisaged share of investment seems in most
countries sufficiently high for this objective. However, the challenge is to create market
conditions allowing for efficient public and private investments in sectors that will
maximise growth. Under strong growth and with free capital flows, the efficiency and
stability of financial intermediation will need to improve as well as the level of domestic
savings. The financing of the ensuing current account deficit will need sound financial
systems and access to external finance compatible with sustainability. The completion of
structural reforms will be crucial to strengthen the supply side of the economy. These also
include measures raising the efficiency of the economy, by strengthening competition,
reducing barriers to market entry, defining and reinforcing property rights and promoting
productivity enhancing research and development. The institutional and regulatory
environment must follow these developments. In general, the programmes reflect a good effort to develop a credible medium-term
macroeconomic and fiscal framework. They also contain many concrete measures of
policy action directed at strengthening the competitiveness and stability of the respective
economies. The degree of detail naturally differs across countries and policy areas, as
does the specificity and credibility of the medium-term economic and fiscal scenarios. A
rather general problem is that the costs of structural reforms are insufficiently quantified
and integrated in the budgetary framework.
To some extent, it seems that the countries of the second group of PEPs have benefited
from the experience of the first group. They have tried to remedy some of the main
weaknesses that were identified in the Commission's evaluation of the first PEPs. For
example, the PEPs of the second group tend to present more detailed macroeconomic
scenarios and are more explicit on underlying assumptions.
The Bulgarian PEP has a plausible if somewhat optimistic medium-term outlook, but is
hard to evaluate because of a lack of detail in many areas and the assumptions behind the
projection remain unclear. The Cypriot PEP represents a coherent economic strategy in
the run-up to EU accession and includes a major tax reform. The Czech PEP represents a
credible document dealing with fiscal and structural challenges related to sustainable
economic growth. The Estonian PEP gives clear indications of policymakers' priorities
and pre-occupations. Continued budgetary consolidations and a slowly decreasing role of
the state in the economy are main goals. The Hungarian PEP represents a consistent and
credible macro-economic framework. However, it is already somewhat outdated because
of recent drastic changes in the monetary and exchange rate policies. The Latvian PEP
clearly identifies main problems in the economy and appropriate economic priorities.
Emphasis is put on the reduction of the fiscal deficit, and the establishment of a stable tax
system. The Lithuanian PEP is in general well-structured and provides estimates of the
costs of most reforms. The macroeconomic framework seems to be consistent, but it
might be based on fairly optimistic international assumptions. The Maltese PEP
represents a consistent and credible medium-term macroeconomic scenario, in the
framework of ongoing structural reforms and the dismantling of import levies. The Polish
PEP aims at the completion of the present reform agenda and at the return of the
economy to its potential output trajectory. However, it suffers from a lack of
quantification in some aspects of the