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Eastern Balkans Economic update: Bulgaria’s and Greece’s new data for 2020

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The pandemic-induced crisis has hit it the world in highly unequal manners both across borders and within countries. Most economies slid in a recession that has wretched livelihoods in some countries and macro-regions, whereas others are mostly unaffected. These differences clearly stand out at the global scale, but they can be massive also when comparing otherwise-similar, neighbouring countries.

Lately, an heterogenous set of behemoth and middle-sized economies has come back strongly in terms of both GDP and unemployment. Leading them, for different reasons and in different ways, stand the two largest economies ever: China and the US. These superpowers are steaming their way out of the crisis like locomotives on an uphill railway, boosting the global economy.

Yet, a piece is missing in this rosy mosaic of recovery and growth: the European Union. As the largest and richest market in the world, the EU could contribute massively to a worldwide rebound. However, internal unbalances, other structural weakness, and political indecisiveness are holding the Union back. This has had dramatic reverberances of the weakest economies of the EU and on those that depend on the block. This piece explores recently-released quarterly data for 2020 to understand what has happened on the EU’s periphery through two cases.

Bulgaria — Failing to escape the fall

Bulgaria’s economy took a heavy hit in the beginning of 2020, when in just four months GDP slid by 21.89%. Notably, these data marked the sharpest decreases since the hyperinflation of 1996–1997.The situation got worse in the last quarter of 2020, when the economy began slowing down. Between October and December, about 280,000 people lost their job, a spad of about 8.5% on the previous quarter. A dire economic trend thrust most of these workers to inactivity, thus ‘softening’ total unemployment’s growth year on year.

Gross Domestic Product

The economy’s dynamic turned around and stayed positive for the rest of the year leading to a strong recovery (Chart1). In the following three quarters, Bulgaria added grew its added value by 6.85%, 14.05% and 4.69%respectively. By the end of the year, GDP equalled 99.66% of its 2019 level, against the Euro Area’s (EA) 96.86%.

Un/Employment

Interestingly, unemployment figures for most of 2020 do not mirror Bulgaria’s generally positive economic performance — all the contrary (Chart 2). Unemployment decreased in the first quarter of 2020, but rose fast in the ensuing nine months despite overall growth. Due to the pandemic-induced crisis, employment decreased by 64,260 units year-on-year in 2020 Q4, or almost 2%.However, these data actually mask a feature of the Bulgarian labour market that most of its Eurozone partners lack. In fact, Bulgarian enterprises have a rather more flexible approach to starting and ending employment than other EU workers. Thus, the growth in unemployment is mostly due to new people entering the job market during 2020 Q2–Q3. All in all, in September 2020 the number of employed people had grown by 6.42% in Bulgaria compared to 2019 Q3. Yet, these figures were insufficient to absorb an outpour of new potential workers — pushing unemployment up.

Greece — Summer boom or double-dip recession?

The crisis struck Greece’s economy sensibly in the first half of 2020, especially in the spring, when tourism was inhibited. Like in Bulgaria, the situation got worse in the last quarter of 2020 and the economy shrunk again. The data indicate that half of the new workers lost their job in the last quarter of 2020. Unfortunately, a large chunk of them stopped looking for a job and became inactive — making unemployment statistic even more misleading.

Gross domestic product

In the first quarter, GDP slid by over a tenth in comparison to March 2019 (Chart 3). As such, the pandemic induced a recession the likes of which Greeks last witnessed in the early 2010s.Yet, during the summer of 2020 many countries reopened their borders and Greece enjoyed increasing influxes of tourists. This reflected positively on the economy’s dynamic in the third quarter, when Greece added six billion euros to its GDP.  This 20% growth on the previous quarter was partly dissipated over the last part of 2020. By the end of December, that gain halved and GDP was about 7% lower than a year before.

Un/employment

Contrarily to Bulgaria, for most of 2020unemployment figures do not resent of Greece’s unsatisfying overall performance (Chart 4). Unexpectedly, unemployment decreased by almost 5% in the first quarter of 2020 compared to December 2019. The decrease is even more spectacular in comparison to the same quarter of the previous year: 1.8%. In total, during the summer quarter (July–September), Greece’s economy added 73,800 jobs in comparison to the previous three months. However, these figures were still lower than last year’s levels by about 74,700 units or 1.6%. Moreover, Greece’s population is not very active in the labour market. In effect, on average Greeks less likely to be looking for a job than their Eastern Balkans peers in Bulgaria and Romania. Moreover, lower participation rates mean that the seasonal gains failed miserably in trickling down to the working class. Thus, it is possible that economic growth has been relatively weaker than GDP statistics may indicate.

Conclusion: Pandemic management matters

There are two lessons that one can draw from these figures and by comparing the cases of Bulgaria and Greece. The first, relates to the pandemic and how its management can affect economic performances. Whereas the second sheds a light on the future prospects of these countries.

In a way, the data arguably corroborate the hypothesis that the lockdowns-recession cycle admits inversion. In fact, Bulgaria performing better than Greece for most of 2020 despite political instability suggests that less lockdowns favour growth. Obviously, the rather lenient anti-pandemic measures that Sofia has opted for explain this gap only partly. Yet, it is a fact that Bulgarian authorities were quite unwilling to adopt stricter measures since the pandemic begun. The necessity to appease the protestors who took the street in July–September contributed to a more relaxed approach. It was only during the winter that the Bulgarian government resorted to though restrictions and shut down so-called ‘non-essential’ activities. And Bulgaria’s data only start to worsen – converging on Greece’s and the Eurozone’s trends – in the last quarter of 2020.On the contrary, Greece went from a harsh lockdown to the next one almost without solution of continuity. The government only released its grip over the summer — and, in fact, the economy benefitted greatly. 

Furthermore, these data confirm that the periphery of the EU has suffered more during the last year. True, the EU has put on the table billions of euros over the next several years for nationally-defined Recovery plans. And both Athens and Sofia expect to spend much of that money to jumpstart their economies and support employment. However, fiscal policy is not that effective in either of the two countries as this crisis has proven once again. In effect, both countries have spent massively on furloughs and other support schemes to keep people employed — without many results. Political contingencies and vote-seeking behaviours are likely to dictate the allocation of further spending, thus capping policies’ positive potential impact.

Fabio A. Telarico was born in Naples, Southern Italy. Since 2018 he has been publishing on websites and magazines about the culture, society and politics of South Eastern Europe and the former USSR in Italian, English, Bulgarian and French. As of 2021, he has edited two volumes and is the author of contributions in collective works. He combines his activity as author and researcher with that of regular participant to international conferences on Europe’s periphery, Russia and everything in between. For more information, visit the Author’s website (in English and Bulgarian).

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Economy

Mosul’s recovery moves towards a circular economy

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Five years since the end of the ISIL(so-called Islamic State in Iraq and the Levant) conflict in 2017, the International Organization for Migration (IOM) in Iraq and the UN Environment Programme (UNEP), with funding from the Government of Japan, has established a debris recycling centre in Mosul. After its initial use, the centre has now been handed over to Mosul Municipality for its continued, sustainable operation.

“On behalf of the Iraqi Government, the Ministry of Environment expresses its gratitude to the Government of Japan for generously supporting this important project and to UNEP and IOM for enabling the sustainable management of the huge quantities of conflict debris and restabilization of the liberated areas in an environmentally sustainable manner,” said Iraq’s Minister for Environment, Dr. Jasim Abdulazeez Humadi.

The handover of the Mosul debris recycling centre marks a significant step in the sustainable management of the huge volumes of debris — an estimated 55 million tonnes — created by the ISIL conflict. It also opens the way for the recycling of routine construction and demolition waste, contributing to ‘building back better’ and an increased circularity in Iraq’s development.

UNEP West Asia Regional Director, Sami Dimassi, emphasized that “by reducing waste, stimulating innovation and creating employment, debris recycling also creates an important business opportunity.” Indeed, construction companies in Mosul have expressed interest in purchasing the recycled aggregate, thereby underscoring the longer-term sustainability of debris recycling.

“This project supports recovery and livelihoods by drawing on principles of a circular economy, wherein waste and land pollution is limited through production processes that reuse and repurpose materials for as long as possible,” explained IOM Iraq Chief of Mission, Giorgi Gigauri. “Collaboration and sustainability are key priorities in IOM’s work toward durable solutions to displacement, and we are pleased to have partnered with UNEP and the Government of Japan so that this is represented not only in the function of the plant itself, but also in its functioning, by supporting local authorities to be prepared to effectively operate the plant moving forward.”

On 28 July 2022, Mosul Municipality hosted an event to officially hand over the debris recycling centre, attended by senior government officials and academia, as well as representatives from IOM, UNEP and the United Nations Assistance Mission for Iraq (UNAMI).

Masamoto Kenichi, Charge d’Affaires, Embassy of Japan to Iraq stated: “We are glad to know that the project funded by the government and people of Japan has contributed to cleanup of debris and reconstruction of Mosul. We would like to commend UNEP, IOM and the city of Mosul for their tremendous efforts of turning the legacy of ISIL’s devastation into building blocks of reconstruction”.

Through the rubble recycling project, nearly 25,000 tonnes of debris have been recovered and sorted, of which around half was crushed into recycled aggregate. Material testing of the recycled aggregate endorsed by the National Center for Structural Tests of the Ministry of Planning confirms its compliance with the Iraqi State Commission for Roads and Bridges design standards for road foundational layers and its suitability for several low strength end-use applications such as concrete blocks and kerbstones.

The project created 240 much-needed jobs through cash-for-work schemes targeting vulnerable persons, including 40 women.

Building on this experience, IOM has set up two other debris recycling operations in Sinjar and Hamdaniya in Ninewa Governorate, and a third in Hawija in Kirkuk Governorate, where a pilot phase using a mobile crusher was implemented in al-Buwaiter Village in 2021. In addition, two other conflict-affected governorates — namely Salah al-Din and Anbar — have  also shown a high-level of interest in replicating and scaling up debris recycling in their own regions. 

UNEP has been supporting Iraq in cleaning up the huge volumes of debris created by the ISIL conflict since June 2017. Initially, this included carrying out technical assessments and planning workshops with UN-Habitat, and subsequently designing and implementing debris recycling pilot projects to support returns in Mosul, Kirkuk and other conflict-affected areas in cooperation with IOM.

UNEP

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Economy

Digital Futures: Driving Systemic Change for Women

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Authors: Erin Watson-Lynn and Tengfei Wang*

As digital technology continues to unlock new financial opportunities for people across Asia and the Pacific, it is critical that women are central to strategies aimed at harnessing the digital financial future. Women are generally poorer than men – their work is less formal, they receive lower pay, and their money is less likely to be banked. Even when controlling for class, rural residency, age, income, and education level, women are overrepresented among the world’s poorest people in developing countries. Successfully harnessing digital technology can play a key role in creating new opportunities for women to utilise formal financial products and services in ways that empower them. 

Accelerating women’s access to the formal economy through digital innovations in finance increases their opportunity to generate an income and builds resilience to economic shocks. The recently issued ESCAP guidebook titled, Harnessing Digital Technology for Financial Inclusion in the Asia Pacific, highlights the fact that mechanisms to bring women into the digital economy are different from those for other groups, and that tailored policy responses are important for women to fully realise their potential in the Asia-Pacific region.

Overwhelmingly, the evidence tells us that how women utilise their finances can have a beneficial impact on the broader community. When women have bank accounts, they are more likely to save money, buy healthier foods for their family, and invest in education. For women who receive Government-to-Person (G2P) payments, there is significant improvement in their lives across a range of social and economic outcomes. Access to safe, secure, and affordable digital financial services thus has the potential to significantly improve the lives of women.

Despite the enormous opportunity, there are numerous constraints which affect women’s access to financial services. This includes the gender gap in mobile phone ownership across Asia and the Pacific, lower levels of education (including lower levels of basic numeracy and literacy), and lower levels of financial literacy. This complex web of constraints means that country and provincial level diagnostics are required and demands agile and flexible policy responses that meet the unique needs of women across the region.

Already, across Asia and the Pacific, governments are implementing innovative policy solutions to capture the opportunities that come with digital finance, while trying to manage the constraints women often face. The policy guidebook provides a framework to examine the role of governments as market facilitators, market participants and market regulators. Through this framework, specific policy innovations drawn from examples across the region are identified which other governments can adapt and implement in their local markets.  

A good example of how strategies can be implemented at either the central government or local government levels can be found in Pakistan. While central government leadership is important, embedding tailored interventions into locally appropriate strategies plays a crucial role for implementation and effectiveness. The localisation of broader strategies needs to include women in their development and ongoing evaluation. In the Khyber Pakhtunkhwa province, 50,000 beneficiary committees comprising local women at the district level regularly provide feedback into the government’s G2P payment system. The feedback from these committees led to a biometric system linked to the national ID card that has enabled the government to identify women who weren’t receiving their payments, or if payments were fraudulently obtained by others.

In Cambodia and the Philippines, governments have implemented new and innovative solutions to support remittance payments through public-private-partnerships and policies that enable access to non-traditional banks. In Cambodia, Wing Money has specialised programs for women, who are overwhelmingly the beneficiaries of remittance payments. Creating an enabling environment for a business such as Wing Money to develop and thrive with these low-cost solutions is an example of a positive market intervention. In the Philippines, adjusting banking policies to enable access to non-traditional banking enables women, especially those with micro-enterprises in rural areas, to access digital products.

While facilitating participation in the market can yield benefits for women, so can regulating in a way that drives systemic change. For example, in Lao People’s Democratic Republic and India, different mechanisms for targets are used to improve access to digital financial products. In Lao People’s Democratic Republic, the central government through its national strategy, introduced a target of a 9 per cent increase in women’s access to financial services by 2025. In India, their targets are set within the bureaucracy to incentivise policy makers to implement the Digital India strategy and promotions and job security are rewarded based on performance.

These examples of innovative policy solutions are only foundational. The options for governments and policy makers at the nexus of market facilitation, participation and regulation demands creativity and agility. Underpinning this is the need for a baseline of country and regional level diagnostics to capture the diverse needs of women – those who are set to benefit the most of from harnessing the future of digital financial inclusion.

*Tengfei Wang, Economic Affairs Officer

This article is the second of a two-part series based on the findings of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) Policy Guidebook: Harnessing Digital Technology for Financial Inclusion in Asia and the Pacific, and is jointly prepared by ESCAP and the Griffith Asia Institute.source: UNESCAP

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Empowering women-led small businesses in Nepal to go digital

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People walk down a street of shops in Kathmandu, Nepal. (file) photo World Bank/Peter Kapuscinski

Authors: Louise Anne Sophie Lavaud and Mitch Hsieh*
Throughout the years, Laxmi Shrestha and her husband saw the opportunities that opening an online shop could bring to her family business.

“Looking at the trend of TikTok and other sites, we thought selling online could help us but we weren’t technically sound,” said Laxmi, the owner ofLaxmi Hastakala Store, in Banepa, Nepal, and part of a family of artisans.

As she learned about selling online, she picked up on how to market her shop digitally and, according to Laxmi: “It has surely given our business a push we always wanted. Recently we started selling our products online and we also receive payments online.”

Laxmi Hastakala Store is among the 1,800 women-led micro, small and medium enterprises (MSMEs) in Nepal being trained on digital and financial literacy by Sparrow Pay – one of the winners of the Women Fintech MSME Innovation Fund launched in 2019 by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) and the United Nations Capital Development Fund (UNCDF).

Sparrow Pay has created a local digital marketplace where women-led MSMEs can offer products and services to its existing 800,000+ digital payment service users. Additionally, Sparrow Pay is supporting these women entrepreneurs in adopting digital payments and creating a payment history to support access to additional financial services.

MSMEs are a vital source of employment and a significant contributor to a country’s GDP. However, more than 45 per cent of MSMEs in Asia and the Pacific are constrained from accessing finance and other support for their businesses. Socio-cultural norms mean women-led enterprises have to overcome gender-specific barriers to access institutional credit and other financial services.

ESCAP and UNCDF aim to encourage easy access to digital finance for MSMEs in Asia and the Pacific, break the financial barriers surrounding women-led enterprises and support entrepreneur-centric growth and inclusiveness throughout the region. Initiatives by the 10 winning fintech companies are currently supporting more than 9,000 women-led MSMEs in Bangladesh, Cambodia, Fiji, Myanmar, Nepal, Samoa and Viet Nam.

Just like Laxmi, these women business owners plan on successfully growing their companies in the digital area.

The Women Fintech MSME Innovation Fund is part of a regional programme “Catalyzing Women’s Entrepreneurship: Creating a Gender-Responsive Entrepreneurial Ecosystem,” which seeks to support the growth of women entrepreneurs in Asia and the Pacific by enabling a policy environment for such business owners, providing them with access to finance and expanding the use of ICT for entrepreneurship.

*Mitch Hsieh Chief, Communications and Knowledge Management Section

UNESCAP

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