Productivity Surge Boosts Growth and Living Standards in Eastern Europe and the former Soviet Union

Study urges countries to further cut red tape and barriers to entrepreneurs

BRUSSELS, May 14, 2008 — Big gains in the productivity of workers in Eastern Europe and the former Soviet Union during the past decade have helped boost growth and living standards, but more must be done to eliminate red tape and barriers to enable firms to become more productive in a rapidly globalizing world, says a new World Bank report.

The rapid surge in the Region’s productivity – the amount each worker produces in a period of time – has boosted economic growth, raising income per capita by more than 50 percent between 1999 and 2007, while lifting about 50 million people out of poverty, says the new report, Unleashing Prosperity – Productivity Growth in Eastern Europe and the former Soviet Union.

“The transition from centrally planned to market economies has freed up an entrepreneurial energy that always existed, but rarely had the chance to make itself felt,” said Shigeo Katsu, Vice-President for the World Bank’s Europe and Central Asia Region. “The rise in productivity in the region has brought higher sales and more profits to businesses so they can pay more in wages and invest in new technologies. At the same time, it is critical that the countries of the region do not relax, but rather, build on this success and become even more productive, thus competitive, so that they can achieve their aspiration of catching up with Western European living standards.”

In the 1990s, the countries of the Region, particularly in the Commonwealth of Independent States (CIS), saw their output and productivity plummet during the early phase of transition to market economies. But since 1999, output per capita recovered strongly in many countries, especially in the countries of the former Soviet Union. In most countries of the Region, improved domestic polices and greater trade and global integration have played a big role in stimulating investment, spurring innovation, and promoting productivity and growth.

Source: World Bank

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