Ministry of National Economy of the Republic of Kazakhstan;
JSC “Economic Research Institute”
Joint Vienna Institute
Several countries in the Caucasus and Central Asia (CCA) will need a new growth model to restart economic convergence in a fast changing global environment. Following years of extraordinarily high growth rates in commodity exporting countries prior to the global financial crisis, the region may have exhausted easy convergence possibilities. It has recently faced several parallel, possibly long lasting shocks, including growth declines in major trading partners (e.g., Russia and China), plummeting commodity prices, and depreciating exchange rates in the context of a stronger U.S. Dollar. All of these hit commodity exporters particularly hard, and uncertainty around further rises in U.S. policy rates is another challenge.
Estimates of potential growth in the CIS region have declined from above 7 percent, prior to the global financial crisis, to about 3 percent over the medium term. Such significant deceleration is in part driven by the economic recession in Russia and Ukraine, and negative spillover effects on other countries in the region. Potential growth in Kazakhstan has slowed from a pre-crisis 8 per cent to about 4 per cent.
The panel session, organized in partnership by the Economic Research Institute (ERI) and the Joint Vienna Institute (JVI) will analyze current challenges facing the region and discuss policies to overcome them as well as policies to increase potential growth. More specifically, the session will cover:
• Is there a “New Normal” with low commodity prices and weak growth in trading partners?
• What is the appropriate policy response to temporary as well as longer-lasting shocks in the region, in terms of fiscal and monetary policies and exchange rate adjustments?
• What is the role of structural reforms in raising potential growth and shifting the gears of economic development? What are reform priorities?
The first session will be organized in the format of a panel with a keynote speech delivered by Prof. Jeffrey Sachs, Senior UN advisor and Director of the Earth Institute at Columbia University. The keynote speaker will open the session by analyzing the overall economic situation in the region with particular reference to Kazakhstan and the region’s place in the world economy (25-30 minutes speech). Each consecutive speaker of the panel will address selected challenges and discuss policies (measures, solutions) to overcome these. The discussion will be concluded with a Question and Answer (Q&A) session followed by a coffee break.
After the coffee break, the JVI and ERI will conduct an interactive workshop for officials, researchers and experts from the region to discuss structural reform priorities for the countries in CCA/CIS.
The aim of the workshop will be to identify key structural bottlenecks for the region and suggest reform priorities. There is ample empirical macroeconomic and microeconomic cross-country evidence that structural reforms are beneficial for growth; however, it is less clear what reform priorities should be.
The workshop will be kicked off with short introductory presentations by Aset Irgaliyev, Chairman of Economic Research Institute, and Norbert Funke, Director of Joint Vienna Institute. Areas to be considered include institutions, infrastructure, goods market efficiency, and financial markets. Following the kick-off presentations, participants will split into small groups of about 6-8 people each. Each group will discuss one reform area, with a view to identify three policy recommendations. Following the discussion in small groups, each group will present its findings to other workshop participants. The session will conclude with a general discussion of political economy considerations and implementation constraints.
The workshop is primarily concerned with identifying reform priorities, promoting partnership, and networking.
Session 1. A New Growth Model for the Region & Kazakhstan
Interactive session. Thinking about Structural Reforms in the Region to Reset Economic Growth