| TABLE OF CONTENTS |
| Item |
Page |
Explanatory
notes |
viii |
Abbreviations |
ix |
Preface |
xi |
| Chapter 1 OVERVIEW AND
POLICY ISSUES |
1 |
| 1.1 Overview of the ECE economies in late 1998 |
1 |
| 1.2 Policy lessons from the Russian crisis |
7 |
| (i) Institution building |
8 |
| (ii) Political will in democracies |
10 |
| (iii) Second-best solutions |
10 |
| (iv) Broader implications |
11 |
| Chapter 2 RECENT
MACROECONOMIC DEVELOPMENTS IN THE ECE REGION |
15 |
| 2.1 The global context |
15 |
| (i) Turmoil in financial markets |
15 |
| (ii) Deteriorating performance of the world
economy |
17 |
| 2.2 The economic situation in western Europe
and North America |
20 |
| (i) Recent macroeconomic developments |
20 |
| (ii) Monetary conditions and fiscal policy |
26 |
| (iii) The short-term economic outlook |
28 |
| 2.3 The transition economies |
30 |
| (i) The global financial crisis and its impact
on the ECE transition economies |
30 |
| (ii) The economic pattern in the first three
quarters of 1998 |
48 |
| Chapter 3 FOREIGN TRADE OF
TRANSITION ECONOMIES |
71 |
| 3.1 Introduction |
71 |
| 3.2 Eastern Europe and the Baltic states |
75 |
| (i) Trade performance in the first half of
1998 |
75 |
| (ii) Trade balances |
81 |
| (iii) Outlook for trade in the wake of Russian
and global financial turmoil |
85 |
| (iv) Changes in relative factor intensities of
exports to western Europe |
88 |
| 3.3 Trade of the CIS countries |
94 |
| (i) Russian Federation: trade with non-CIS
countries |
94 |
| (ii) Other CIS countries: trade with non-CIS
countries |
97 |
| (iii) Intra-CIS trade |
99 |
| (iv) Recent trade policy developments in the
CIS |
103 |
| Chapter 4 EXTERNAL
FINANCIAL DEVELOPMENTS IN THE TRANSITION ECONOMIES |
107 |
| 4.1 Introduction |
107 |
| 4.2 Current account developments |
107 |
| (i) Current account balances |
107 |
| (ii) Growth of trade in goods and services |
109 |
| (iii) Current account imbalances and
vulnerability |
111 |
| 4.3 External financial developments in the
transition economies |
113 |
| (i) Net financial inflows |
113 |
| (ii) Funds raised on the international
financial markets |
117 |
| (iii) Foreign direct investment |
120 |
| (iv) Capital inflows after the partial Russian
default |
123 |
| Page |
|
| 4.4 Official reserves and external debt |
125 |
| (i) Foreign currency reserves |
125 |
| (ii) External debt |
125 |
| 4.5 Outlook for current account balances,
financing and FDI |
127 |
| Annex table to chapter 4 |
131 |
| Chapter 5 A NOTE ON
PRODUCTION SHARING IN RUSSIA |
135 |
| Abstract |
135 |
| 5.1 Introduction |
135 |
| 5.2 PSAs and their international application |
136 |
| 5.3 State of development of PSA projects in
Russia |
137 |
| 5.4 Russia’s PSA law |
140 |
| (i) Background and objectives of the initial
version |
140 |
| (ii) Obstacles to projects under the PSA law |
141 |
| (iii) The remaining legislative agenda |
143 |
| 5.5 The macroeconomic considerations |
144 |
| 5.6 Recent developments, prospects and policy
choices |
145 |
| (i) The stalling of PSA legislation |
145 |
| (ii) In the shadow of world commodity markets |
146 |
| (iii) Tighter financing constraints |
147 |
| (iv) Conclusions |
148 |
| STATISTICAL
APPENDIX |
151 |
|
LIST OF TABLES |
| Table |
Page |
2.1.1 World
commodity prices, 1996-1998 |
19 |
2.1.2
Depreciation and appreciation of east Asian curencies against the dollar, 1997-1998 |
20 |
2.2.1
Quarterly changes in real GDP, 1997-1998 |
22 |
2.2.2 Growth
contributions to quarterly changes in real GDP, 1997-1998 |
22 |
2.2.3 Consumer
prices in the developed market economies, 1997-1998 |
24 |
2.2.4
Standardized unemployment rates in the developed market economies, 1996-1998 |
25 |
2.2.5 Real GDP
in the developed market economies, 1996-1999 |
29 |
2.3.1 Selected
economic indicators in the Russian Federation, 1993-1998 |
35 |
2.3.2 Baltic
states’ and eastern Europe’s trade exposure to the CIS market, 1992, 1997 and
1998 |
45 |
2.3.3 Export
exposure of selected transition economies to the Russian Federation and CIS, as a share of
GDP, January-September 1998 |
46 |
2.3.4 General
government budget balance in selected ECE transition economies, 1992, 1996 and 1997 |
46 |
2.3.5 Basic
economic indicators for the ECE transition economies, 1996-1999 |
49 |
2.3.6
International trade and external balances of the ECE transition economies, 1996-1998 |
50 |
2.3.7 GDP and
industrial output in the ECE transition economies, 1997-1998 |
52 |
2.3.8 Retail
trade in selected transition economies, 1997-1998 |
53 |
2.3.9 Consumer
prices in the transition economies, 1997-1998 |
58 |
2.3.10
Producer prices in industry in the transition economies, 1997-1998 |
62 |
2.3.11 Wages
and unit labour costs in industry in the transition economies, 1997-1998 |
63 |
2.3.12 Total
employment in transition economies, 1995-1998 |
65 |
2.3.13
Registered unemployment in the transition economies, 1997-1998 |
67 |
3.1.1 Foreign
trade of the ECE transition economies by direction, 1996-1998 |
72 |
3.1.2 Trade
balances of the ECE transition economies, 1993-1998 |
73 |
3.1.3 Changes
in the volume of foreign trade in selected transition economies, 1995-1998 |
74 |
3.2.1 Foreign
trade of the CEFTA countries by direction, 1996-1998 |
76 |
3.2.2 Foreign
trade of south-east European countries by direction, 1996-1998 |
77 |
3.2.3 Foreign
trade of the Baltic states by direction, 1996-1998 |
78 |
3.2.4 Trade by
commodity in the CEFTA countries, 1994-1998 |
79 |
3.2.5 Trade by
commodity in south-east European countries, 1994-1998 |
80 |
3.2.6 Trade in
selected commodity groups in the Baltic states, 1994-1998 |
82 |
3.2.7 Foreign
trade price developments in selected east European countries, January-June 1998 |
83 |
3.2.8 Baltic
states’ and eastern Europe’s exports to the Russian Federation by commodity,
1994-1997 |
87 |
3.2.9 East
European and Baltic countries’ exports to western Europe in respect of factor
intensity, 1993-1996/97 |
90 |
3.2.10 East
European and Baltic countries’ exports of manufactures to western Europe in respect
of factor intensity, 1993-1996/97 |
91 |
3.3.1 CIS
countries’ total trade, 1996-1998 |
95 |
3.3.2 CIS
countries’ trade with CIS and non-CIS, 1996-1998 |
96 |
3.3.3 Non-CIS
trade of the Russian Federation by selected commodities, 1994-1998 |
97 |
3.3.4 CIS
countries’ trade with the Russian Federation, 1994-1997 |
101 |
3.3.5
International barter trade of selected CIS countries, 1995-1997 |
102 |
4.2.1 Current
account balances of eastern Europe, the Baltic states and the CIS, 1995-1998 |
108 |
4.2.2 Foreign
trade in goods and non-factor services of eastern Europe, the Baltic countries and
European members of the CIS, 1996-1998 |
110 |
4.2.3 Shares
of current account deficits covered by FDI inflows, 1996-1998 |
112 |
4.3.1 Net
capital flows into eastern Europe, the Baltic countries and European members of the CIS,
1995-1998 |
114 |
4.3.2 Net
capital flows into eastern Europe, the Baltic countries and three European members of the
CIS, by type of capital, 1995-1998 |
114 |
4.3.3 Foreign
portfolio investment in east European, Baltic and European CIS countries, 1996-1998 |
115 |
4.3.4 Medium-
and long-term funds raised on the international financial markets by eastern Europe, the
Baltic countries and the CIS, 1993-1998 |
118 |
4.3.5 Bond
issues planned for completion in 1998 |
121 |
4.3.6
International equity issues of eastern Europe, the Baltic countries and the CIS, 1994-1998 |
121 |
4.3.7
International credit ratings of eastern Europe, the Baltic countries and the CIS |
122 |
4.3.8 Foreign
direct investment flows of east European, Baltic and European CIS countries, 1996-1998 |
123 |
4.3.9
Indicators of foreign direct investment in east European, Baltic and European CIS
countries, 1996-1998 |
124 |
4.4.1 Official
reserves and total external debt of eastern Europe, the Baltic countries and European
members of the CIS, 1996-1998 |
126 |
4.4.2
Indicators of external debt of eastern Europe, the Baltic countries and European members
of the CIS, 1995-1998 |
127 |
5.2.1
International petroleum agreements: distribution of production sharing agreements and
concessions in the 1990s |
138 |
5.3.1
Production sharing agreements in the Russian oil and gas industry on which negotiations
were initiated prior to PSA law |
139 |
5.4.1 Taxation
system applying to oil production in the Russian Federation under the concession (T/RA)
system |
141 |
5.4.2 Lists of
subsoil blocks to be developed under PSA legislation |
143 |
5.5.1
Estimated impact of the production sharing regime on oil production and tax revenue |
145 |
A.1 Real GDP
in the ECE market economies, 1983-1997 |
152 |
A.2 Real
private consumption expenditure in the ECE market economies, 1983-1997 |
153 |
A.3 Real
general government consumption expenditure in the ECE market economies, 1983-1997 |
154 |
A.4 Real gross
domestic fixed capital formation in the ECE market economies, 1983-1997 |
155 |
A.5 Real total
domestic demand in the ECE market economies, 1983-1997 |
156 |
A.6 Real
exports of goods and services in the ECE market economies, 1983-1997 |
157 |
A.7 Real
imports of goods and services in the ECE market economies, 1983-1997 |
158 |
A.8 Industrial
output in the ECE market economies, 1983-1997 |
159 |
A.9 Total
employment in the ECE market economies, 1983-1997 |
160 |
A.10
Standardized unemployment rates in the ECE market economies, 1983-1997 |
161 |
A.11 Consumer
prices in the ECE market economies, 1983-1997 |
162 |
B.1 Real
GDP/NMP in the transition economies, 1980, 1984-1997 |
163 |
B.2 Real total
consumption expenditure in the transition economies , 1980, 1984-1997 |
164 |
B.3 Real gross
fixed capital formation in the transition economies, 1980, 1984-1997 |
164 |
B.4 Real gross
industrial output in the transition economies, 1980, 1984-1997 |
165 |
B.5 Total
employment in the transition economies, 1980, 1984-1997 |
166 |
B.6 Registered
unemployment in the transition economies, 1990, 1993-1997 |
167 |
B.7 Consumer
prices in the transition economies, 1989-1997 |
168 |
B.8 Producer
price indices in the transition economies, 1989-1997 |
169 |
B.9 Nominal
gross wages in industry in the transition economies, 1990-1997 |
170 |
B.10
Merchandise exports of the transition economies, 1980, 1985-1997 |
171 |
B.11
Merchandise imports of the transition economies, 1980, 1985-1997 |
172 |
B.12 Balance
of merchandise trade of the transition economies, 1980, 1985-1997 |
173 |
B.13
Merchandise trade of the transition economies by direction, 1980, 1985-1997 |
174 |
B.14 Exchange
rates of the transition economies, 1980, 1985-1997 |
175 |
B.15 Current
account balances of the European transition economies, 1990-1997 |
176 |
B.16 Inflows
of foreign direct investment in the transition economies, 1990-1997 |
177 |
|
LIST OF CHARTS |
| Chart |
Page |
2.1.1
International share prices, January 1997-October 1998 |
17 |
2.1.2 World
commodity prices, January 1996-October 1998 |
18 |
2.1.3 Average
monthly nominal exchange rates against the dollar, January 1997-October 1998 |
19 |
2.2.1 Business
cycle indicators for the European Union and the United States, January 1994-October 1998 |
21 |
2.2.2
Quarterly changes in real GDP in the developed market economies, 1995 QI-1998 QII |
23 |
2.2.3 Nominal
short-term interest rates, January 1996-September 1998 |
27 |
2.3.1 Forex
reserves, central bank refinancing rate and yield on T-bills in the Russian Federation,
1995-1998 |
32 |
2.3.2 Ex-post real interest rates on short-term commercial credit in the Russian Federation, 1995-1998 |
36 |
2.3.3 Share of
barter and share of loss-making enterprises in Russian industry, 1993-1998 |
37 |
2.3.4 Indices
of real gross industrial output in the Russian Federation, 1993-1998 |
37 |
2.3.5 Russian
Federation: stock of payables arrears as percentage of 12-month GDP, 1995-1998 |
38 |
2.3.6 Wage
arrears in the Russian Federation as percentage of the economy-wide monthly wage fund,
1993-1998 |
38 |
2.3.7 Measures
of Russian domestic debt burden, 1994-1998 |
40 |
2.3.8 Measures
of the relative weight of Russian domestic debt, 1994-1998 |
41 |
2.3.9 Stock
market indices in selected transition economies, 1 January-31 October 1998 |
42 |
2.3.10 Indices
of the nominal exchange rates of selected transition economies against the dollar, 1
January-31 October 1998 |
44 |
3.1.1 Specific
western demand for selected transition countries’ exports, 1993-1998 |
74 |
3.2.1 Dynamics
of indicators of export competitiveness in selected countries of eastern Europe, 1994-1998 |
84 |
3.2.2 Changes
in composition of east European and Baltic countries’ exports to western Europe in
respect of factor intensity, 1993, 1996 and 1997 |
93 |
4.3.1 Interest
rate differentials in selected transition economies, 1995-1998 |
116 |
4.3.2 Interest
premia on sovereign bond issues of selected emerging market economies, 1997-1998 |
119 |
4.3.3 Bonds
and loans arranged by the transition economies, 1997-1998 |
120 |
5.1.1
Investment and output of the Russian Federation oil and gas industry, 1990-1998 |
136 |
5.2.1
Financial structure of the Priobskoe PSA project |
137 |
|
LIST OF CHARTS |
| Box |
Page |
1.1.1
Humanitarian aid for Russia |
4 |
2.3.1
Goskomstat revision of Russian unemployment |
68 |