Open Lecture: Infrastructure in Central, Eastern, and Southeastern Europe: Benchmarking, Macroeconomic Impact, and Policy Issues

Tuesday, October 12 

Presenters
Ms. Petia Borissova Topalova, International Monetary Fund
Mr. Gabriel Di Bella, International Monetary Fund

Moderator
Ms. Elisabeth Hagen, Senior Research Associate, The Vienna Institute for International Economic Studies


Scaling up infrastructure investment as part of the recovery from the COVID-19 pandemic presents a unique opportunity to lift long-term growth in a sustainable manner, and accelerate the digital and green transformation in Central, Eastern, and Southeastern Europe (CESEE). With the crisis stretching budgets, achieving value for money will be even more relevant.

Petia Topalova and Gabriel Di Bella, both from IMF’s European Department, have done a study on Infrastructure in CESEE, together with several co-authors. This webinar was based upon the results of their study. It highlighted the region's infrastructure gaps (see graph 1) and showed estimations of the investment necessary to close this gap. The investment needs range between 2.8% and 8.4% of GDP per annum for the next 10 years.

Graph 1

The lecture also presented the positive macroeconomic effects from infrastructure investments, which are sizeable. Raising infrastructure investment by 1% of GDP for 10 years can increase GDP up to 2.5% at the end of the 10 year horizon.

However, achieving those benefits will require policies that can help countries to select the best projects. Surveys in participating countries in the form of Public Investment Management Assessments indicate significant scope for improving infrastructure governance in CESEE (see graph 2). Focusing on the role of infrastructure governance to ensure spending efficiency, stimulate more cross-border collaboration and greater private sector participation are therefore crucial. The current crisis may present an opportunity to enhance long-term resiliency by shifting growth towards green and digital infrastructure.

Graph 2 IMF Public Investment Management Assessments (PIMA)

Source: IMF staff calculations based on Public Investment Management Assessments (PIMA) completed as of March 2020.

In the discussion the authors pointed out that there are large variations in the effectiveness of public investment management across the region. The importance of cross-border cooperation was mentioned as well as the related challenges.

Elisabeth Hagen, Senior Research Associate, Vienna Institute for International Economic Studies

Presentation

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