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Polish Economy to Slow Slightly, Fiscal Deficit to Grow

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Poland’s economic growth rate is projected to slow to 4.0% in 2019, down from over 5.0% in 2018, according to the World Bank’s latest Economic Update for Europe and Central Asia, released today.

Poland’s growth rate, which is robust compared to other European economies, will be driven by strong domestic consumption and accelerating investments, supported by low interest rates and the availability of European Union funds. On the other hand, the growth dynamics of Poland’s economy will be hindered by a slowing global economy, most importantly in the euro zone, as well as domestic labor shortages.

A proposed expansion in fiscal expenditures for social programs may accelerate economic growth in Poland in the short run – however, it would most likely lead to a widening of the budget deficit, which is already projected to increase to 1.4% of GDP in 2019, compared to 0.5% last year, and further to 1.6% in 2020.

“The Polish economy is still growing at a rate significantly above the EU average. The low unemployment rate and strong wage growth are still driving private consumption; investments, both public and private, are growing too. In 2018, the fiscal budget was close to a balance. We do expect, however, that Poland’s fiscal situation may deteriorate soon,” says Carlos Piñerúa, World Bank Country Manager for Poland and the Baltic States. “One characteristic of new social expenditure initiatives is that they tend to be irreversible in nature, for political reasons among others. That is why we are concerned that, given the growth rate slowdown, a deterioration in the fiscal and external accounts may eventually limit the country’s ability to react flexibly to emerging challenges, such as a more acute than expected global economic downturn, for example.”

The World Bank estimates that Poland’s GDP growth in 2020 will amount to 3.6%, and will slow to 3.3% in 2021. Forecasts for 2019, as well as for the period 2020-21, are the same as those released earlier, in January this year.

The expected slowdown in Poland would result from a gradual economic downturn worldwide, but more importantly in the euro zone, Poland’s biggest trade partner. The World Bank projects economic growth in the euro zone to slow to 1.6% in 2019, down from 1.8% last year, and in 2020-21 to only average 1.4%.

“The Europe and Central Asia region faces several long-term challenges including aging populations, declining productivity, weakening investments, and climate change. The good news is there are a range of policy options available to boost growth and mitigate these challenges,” says Cyril Muller, World Bank Vice-President for Europe and Central Asia. “Countries should close investment gaps, improve governance, participate more in global value chains, and ensure more people have access to financial services including bank accounts and digital payments.”

The World Bank report indicates that, in many countries of the Europe and Central Asia region, low availability of banking services is a significant barrier to economic development. In 2017, about 116 million adults in the region had no bank account. Owning a bank account is the first step to taking advantage of the full range of banking services, such as deposits or loans, which stimulate economic development. In Poland, as much as 87% of the populations own bank accounts, which is higher than the average for the entire region.

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Uganda Can Create Higher Labor Productivity Jobs by Improving Trade and Business Environment

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Uganda’s economy needs to gradually create more jobs for its fast-growing and youth population. To accelerate economic growth and drive transformation, these jobs will need to bring higher labor productivity, says a new World Bank report launched today.

The report, “Uganda: Jobs Strategy for Inclusive Growth,” identifies ten challenges to achieving this, including slowing trends in economic growth.  Labor force growth is quickening, urbanization is sluggish, as is the transition from non-wage to wage employment, notes the report.

With a median age of just 15.9, Uganda is the world’s second youngest country, whereas around 700,000 young people reach working age every year. This number will rise to an average of a million in the decade from 2030-2040, potentially exacerbating the mismatch between labor demand and supply. While Uganda’s youth are renowned for being highly enterprising, there is not enough demand for all of them to be producing for the domestic market. Fewer than 4 percent of the self-employed are employers (job creators), 52 percent are working for themselves, and 43 percent work as unpaid family workers.

Nearly two thirds of Ugandans remain employed in agriculture, and almost three quarters of young Ugandans enter the workforce on their family farm, according to data from the 2016/17 Uganda National Household Survey. Global experience published in a report by the World Bank Jobs Group titled, “Pathways to Better Jobs in IDA Countries,” suggests waged employment allows economies to grow faster; reduces poverty faster; and brings more reliable earnings and hours. Moreover, as people switch from agriculture they move to urban areas and shift from being self-employed to working for a wage.

The strategy recommends improving trade by investing in initiatives that enable businesses to compete favourably, grow and thrive; attract more foreign direct investment; implement policies that facilitate regional trade; promote urban development through investing in secondary cities; and incentivize commercial agriculture by encouraging collaboration across income-elastic value chains. The strategy also calls on government to realign youth employment programs to prepare graduates for semi-skilled work.

Agribusiness is particularly promising. Demand for food is rising, and as urbanization continues, and incomes rise, the demand for higher value produce; like meats, dairy produce, fresh vegetables, fresh fruits and juices will expand fast.

Agribusiness and agro-processing can create many productive jobs in the food system, from transport, storage, and warehousing, to retail and restaurants. Blessed with good weather and soil, Uganda can be a food basket for Africa while closing the employment gap,” said Tony Thompson, World Bank Country Manager for Uganda.

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First Road Safety Profile Report to Help Save Lives on the Road

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The World Bank’s Global Road Safety Facility (GRSF) presented the Guide for Road Safety Opportunities and Challenges: Low- and Middle-income Country Profiles during the 3rd Global High-Level Conference on Road Safety in Stockholm. The guide gives a precise assessment on the magnitude and complexity of road safety challenges faced by low-and middle-income countries (LMICs) and helps policy makers understand the road safety framework in context of their own country systems and performance. The guide also helps countries to build and appreciate the business case for vital road safety investment.

LMICs are facing a major challenge in road safety. Each year, 1.35 million people are killed on the worlds’ roads, and a further 50 million are injured, with the vast majority of these (over 90 percent) occurring in LMICs.

One major barrier to improving this situation is a lack of understanding of the problem due to deficient information. Many vital metrics of road safety performance are not measured effectively in most LMICs, including the actual number of road crash fatalities and serious injuries. Measures of progress such as safety rating of roads, age and safety of vehicles, and safety behaviors such as helmet or seatbelt use are also commonly not known. This limits every aspect of road safety management and delivery, including resource allocation, advocacy, intervention selection, and prioritization of resources.

Information is required to guide progress across all pillars of road safety—management, roads, speed, vehicles, road users, and post-crash care— in order to understand deficiencies and opportunities, set ambitious targets for improvement, monitor progress and develop advocacy and commitment for interventions that work.

The Road Safety Country Profiles present information on all these pillars along with information on the current status for each country and region along with extensive information on key risk factors, issues and opportunities. This report provides a baseline for monitoring progress on vital metrics for road safety. It will be updated to measure progress on evidence-based road safety measures during the current decade.

The report also guides action: Clear advice and references regarding robust policies and other interventions are provided to countries facing specific challenges, allowing them to take direct action on priority issues and opportunities.

“The road safety agenda is critical for development, from building and maintaining human capital, to ensuring long-term growth and poverty reduction prospects. This groundbreaking report responds to the urgent need to collect and document road safety performance data—an important step toward a clear understanding of the problem,” said Makhtar Diop, Vice President for Infrastructure, World Bank. “As the road safety challenge moves into a new decade, this report will help build on achievements at the local, regional and national levels, and strengthen the foundation for a new phase of action.”

The guide was developed by GRSF together with the World Bank, with funding support from UK Aid and the World Bank. GRSF has been a leading global actor for the global road safety agenda and plays a vital role in providing guidance, leadership, and funding to LMICs, international partner organizations, academia, and NGOs via a wide range of research studies, guidance documents and technical support.

The GRSF gratefully acknowledges the many sources employed to calculate various measure. In particular, we thank to the World Health Organization (WHO); the Institute for Health Metrics and Evaluation (IHME); the International Road Assessment Programme (iRAP); and the United Nations Environment Programme (UNEP) for the significant use we have made of their data.

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Germany’s ambitious efforts to advance its clean energy transition

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The International Energy Agency released its latest in-depth review of German energy policies today, welcoming the country’s bold approach to its clean energy transition.

Since the last IEA review of German energy policies, the Energiewende, German for “energy transition,” has been the defining feature of the country’s energy landscape. It is an impressive plan for transforming the country’s energy system to a more efficient one supplied mainly by renewable energy. It aims to phase out electricity generation from nuclear power by the end of 2022. More recently, the government announced plans for a phase out of coal by the end of 2038.

Germany’s national climate change strategy is defined in the Climate Action Plan 2050, which sets out a longer-term pathway for sector-specific emissions reductions, as part of the Energiewende. Compared with the base year of 1990, the key goals are to achieve at least a 40% cut in greenhouse gas emissions by 2020 and 80-95% by 2050. Germany has made notable progress in cutting its emissions. In 2019, it had the largest decline in energy-related carbon dioxide emissions of any EU country, according to IEA data released last week.

“The Energiewende has been successful in electricity generation, where it has been effective at substantially increasing the share of renewable electricity supply. To further support the role of renewables, the government will need to ensure a transmission grid expansion and promote the development of hydrogen technology,” said the IEA’s Executive Director, Dr Fatih Birol, who launched the report in Berlin with Peter Altmaier, Germany’s Federal Minister for Economic Affairs and Energy.

However, given the requirement for additional renewable capacity, the IEA review highlights the need for Germany to ensure a continued strong investment environment for wind generation, including to address recent social acceptance and permitting issues impacting the onshore wind sector, as well as repowering ageing wind facilities. In addition, the review urges the government to facilitate the smooth system integration of renewables, in particular through a buildout of much-needed additional transmission capacity to carry wind resources from the north to the south.

Despite the extraordinary progress in renewable electricity, the report notes that the nuclear phase-out as well as higher electricity exports have offset some of the emissions benefits. Still, the government’s planned coal phase-out could help the country remain on track to achieving its longer-term emissions targets in the electricity sector.

To date, the electricity sector has been shouldering a sizeable share of the Energiewende’s costs and progress; other sectors need to follow suit. “Building on success in the electricity sector, now the government must focus its efforts on achieving stronger emissions reductions in the transport and heating sectors. The IEA welcomes the recently adopted Climate Action Programme 2030, which includes a carbon price in the transport and heating sectors, as an important step in the right direction,” Dr Birol noted.

Beyond that, the programme includes a focus on technology development to support the energy transition, such as the use of more electric vehicles and hydrogen-based energy systems. It is also mindful of the distributional impacts of climate policies and aims to ensure a level playing field across sectors and stakeholders.

Energy security remains a focus area for the IEA, and Germany has maintained a high degree of oil, natural gas, and electricity supply security. As the nuclear and coal phase-outs increase Germany’s reliance on natural gas, the review finds it will be increasingly important for the country to continue efforts to diversify its gas supply options, including through the import of liquefied natural gas.

“I would like to thank Minister Altmaier for his collaborative spirit and commitment to building a secure and sustainable energy future. It is my hope that this report will help Germany as it undertakes this very important energy transition,” said Dr Birol. 

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