CEE needs to speed up transition to new growth model, argues GLOBSEC report

CEE needs to speed up transition to new growth model, argues GLOBSEC report
Slovenia ranks top of GLOBSEC's CEE Strategic Transformation Index (STI) 2021 rankings.
By bne IntelliNews October 12, 2021

The annual Tatra Summit Insight Report published by the Slovak think-tank GLOBSEC says that coronavirus (COVID-19) has magnified the shortcomings of Central Europe’s growth model and that the post-pandemic rebuild – partly financed by the EU’s Recovery and Resilience Facility – is the ideal opportunity for countries to transform their economies.

“[Central Europe] has by and large reached the frontier of its development policy, failing to transition to a high-income bracket due to rising costs and declining competitiveness,” the report argues.

It calls for a shift to a knowledge-intensive, technology-proficient, low-carbon, sustainable growth model. GLOBSEC listed improving education, moving to higher value-added production and promoting innovation as the main challenges for the region if it wants to avoid the middle-income trap.

Its annual GLOBSEC CEE Strategic Transformation Index (STI) 2021 ranking – using pre-pandemic data – attempts to measure countries’ readiness for the economy of the future. This year it again put Slovenia top in CEE (after Austria) with 57.0 points out of 100, followed by Czechia (56.0, up 2.5 points), Poland (51.9), Hungary (51.2, up 3 points) and Slovakia bottom with 47.8 points. In Southern Europe, Croatia ranked next with 41.1, followed by Romania (40.3) and Bulgaria bringing up the rear with 35.6. Estonia was also ranked as a comparison, with 53.4, up 3.6 points.

GLOBSEC said all countries had improved their scores and CEE performed relatively well on the economic structure and resilience pillar of the index, but it lagged well behind Western Europe on the innovation economy pillar. Here it said weak venture capital investment and capital markets, as well as lagging business environments, held innovation back.

On innovation, Estonia was top in CEE at 59.7, then Slovenia on 56.9, followed by Czechia on 49.7, Poland on 45.1 and Hungary on 43.9. In the lower half of the rankings, Croatia ranked higher at 42.9 than Slovakia (41.5), with Bulgaria (28.3) higher than Romania (26.5).

GLOBSEC CEE Strategic Transformation Index (STI) Innovation Economy pillar rankings 2021.