The gross general government debt-to-GDP ratios in many advanced economies have reached the highest levels in peacetime history and continue to grow, putting into question sovereign solvency in these economies. In case of new adverse shocks, whether economic or political, global or country-specific, which result in the deterioration of growth prospects or higher real interest rates, or both, the situation could easily get out control. Apart from the risk of sovereign default, excessive public debt might also have a negative impact on the stability of financial sector and on economic growth in the medium and long term. Debt sustainability simulations for the group of highly-indebted advanced economies – those in which the general government gross public debt-to-GDP ratio exceeded 80 percent in 2015 – suggest that benefits of the current record-low interest rates and post-crisis growth recovery should be used for fiscal consolidation. The aim of this should be not only to stop further expansion of debt-to-GDP ratios, but also to gradually reduce them. Such corrective measures are needed in six out of seven G7 members (Germany being the exception) and in 10 out of 19 euro-area members. The fiscal situation of Japan, where gross debt has reached 250 percent of GDP, is particularly precarious. In addition, unless there are reforms of public pension, health and long-term care systems, fiscal consolidation in advanced economies must also create room for the higher spending levels in these areas that will result from aging populations.
Central Asia, despite being referred to as a single region, represent five countries with diverse cultural and ethnic backgrounds and different ways in which political and economic transformation took place in the last twenty five years since independence from the Soviet Union. Within these countries, Kazakhstan and Kyrgyzstan have relatively advanced in market reforms, while Turkmenistan and Uzbekistan still have not completed their transition to a market economy and Tajikistan represents a middle case.
In many respects, historical legacy of the 20th century and unique geographical and geopolitical location did not help Central Asian countries in their efforts for economic development and integration.
After experiencing more than a decade of growth based on hydrocarbon boom, Central Asian countries are faced with increasing challenges resulting from declining commodity prices, trade and migrant remittances. The main policy challenge is to move away from commodity-based growth strategies to macro-oriented diversification and adoption of a broad spectrum of economic, institutional and political reforms. However, structural diversification is easier said than done.
Major obstacles to the political reform and economic diversification efforts in the five Central Asian economies are posed by internal and external geopolitical factors and deeply embedded institutional weaknesses within countries, particularly in areas where economic management interacts with authoritarian political systems and legal institutions. Our analysis suggests five key policy lessons that could serve as points of departure as these countries move ahead.
This Policy Contribution analyses the Ukrainian economic, institutional and political reforms of 2014-17 in terms of their sustainability and completeness, and evaluates what remains to be done. Compared to previous attempts, the current reform round has proved more successful and some politically difficult decisions have been taken (for example, the elimination of gas subsidies), but it remains incomplete in many important areas