Transition Report 2011

Crisis and Transition:The People’s Perspective

The 2011 Transition Report - Overview

Based on 2010 “Life in Transition Survey”y• Combined household and values survey of 1000-1500

households in 29 transition countries and 5 Westernhouseholds in 29 transition countries and 5 Western comparator countries. Conducted in late 2010.

• Comparisons with first round, conducted in 2006Comparisons with first round, conducted in 2006

Three thematic chaptersp• Chapter 2: The crisis from the household perspective

(emphasis on economic and social impact)(emphasis on economic and social impact)

• Chapter 3: Support for markets and democracy after crisis

Ch t 4 E t hi i th t iti i• Chapter 4: Entrepreneurship in the transition region

Region hit hard by crisis, many still recoveringg y , y g

SEE

SEE: Short term outlook is gloomySEE: Short‐term outlook is gloomy

GDP Growth 2010-2012 (%) 4.0

2.0

3.0

0 0

1.0

-1.0

0.0

-2.0Albania Bosnia Bulgaria Croatia FYR

MacedoniaMontenegro Romania Serbia

2010 2011 (forecast) 2012 (forecast)

Bosnia and Herzegovina : Main messagesBosnia and Herzegovina : Main messages

• Highlights of past year

• No progress toward EU approximation

• Roads are being improved and some reforms occurring

• Economy has stabilized but business environment conditions• Economy has stabilized but business environment conditions still difficult

• Challenges for 2012• Challenges for 2012

• Advancing EU process is vital

• Privatisation needs to be accelerated

• Reengagement with the IMF would be a positive signalg g p g

2. Crisis impact on households2. Crisis impact on households2. Crisis impact on households“Crisis impacted people more th i d h

2. Crisis impact on households“Crisis impacted people more th i d hthan economies…and much more than in the West”than economies…and much more than in the West”

SEE countries particularly hard hitSEE countries particularly hard hit

Distribution of responses to question "How much has the crisis affected your household?"

Macedonia

Croatia

Distribution of responses to question How much has the crisis affected your household?

Bosnia and Herzegovina

Bulgaria

Macedonia

Albania

Romania

g

Serbia

Montenegro

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Transition Average

A great deal A fair amount Just a little Not at all

Households in transition region much more impacted th th i th W tthan those in the West…

39%Reduction in

11%Reduction in

staple food consumption

Reduction in staple food consumption

Transition Region Western Europe

… and the impact on household consumption in BiH, hil ll till b t ti lwhile smaller, was still substantial

23%Reduction in

11%Reduction in

staple food consumption

Reduction in staple food consumption

BiH Western Europe

Consumption decline is larger in BiH for most categories, particularly in health care

50

nse

Western Europe Transition region BiH

35

40

45rt

ing

resp

o Western Europe Transition region BiH

25

30

35

hold

s re

por

15

20

e of

hou

seh

0

5

10

Perc

enta

ge

0Reduced

staple foodconsumption

Reducedconsumption

of luxury

Reducedconsumptionof alcohol and

Postponed orskipped visits

to doctor

Delayedpayments of

utilitiesgoods smoking after

becoming ill

Household response

Why do households hurt so much?

4 d i f i i i d d ti f ll

1 Large actual crisis shocks (job losses

4 drivers of crisis-induced consumption fall

11. Large actual crisis shocks (job losses, bankruptcies, wage reductions …)

1

2. Official safety nets not very effective

3 Larger use of less effective informal borrowing

233. Larger use of less effective informal borrowing

4. FX borrowing exacerbated the impact in crisis-hit t i

34

countries

“Crisis events” drove consumption response1

p ppt

ion

xurie

s,

cons

ump

s, c

ut lu

x, e

tc)

mbe

r of c

ut b

asic

ssm

okin

g

rage

num

nses

(cu

cut s

People not hit by many events not cutting

BiH

Aver

resp

o events, not cutting consumption much

Average number of crisis events (job loss, wage drop, etc)

Social safety nets used less less effective2

Social safety nets used less - less effective40

ved 

• Unemployment support in BiH is significantly weaker than the SEE and transition region 30

35

o receiv

gaverage

• In BiH only 3.4% of the unemployed received benefits20

25

ed who

fits

1015

employe

bene

f

05

of une

WesternEurope

New EUmembers

WesternBalkans

BiH CIS,GeorgiaSh

are 

andTurkey

andMongolia

Informal borrowing used more – less effective3

Informal borrowing used more – less effective

45

354045

that  • In BiH informal borrowing was

lower than the transition region but higher than W. Europe

• But informal borrowing only half

253035

seho

lds 

mally 

• But informal borrowing only half as effective

152025

hit h

ous

d inform

510

f crisis‐h

orrowe

0

Western BiH New EU Western CIS,Share of bo

Europe members Balkansand

,Georgia

S

Support forSupport forSupport for democracy and

k t Th

Support for democracy and

k t Thmarkets: The impact of the crisismarkets: The impact of the crisispact o t e c s spact o t e c s s

Democracy support was similar across regions in 2006…

70%

porters

50%

60%

cy sup

p

40%

50%

emocrac

30%

40%

re of d

e

30%

New EUmembers

CIS, Georgiaand Mongolia

WesternBalkans and

BiHShar

gTurkey

..but dropped in new EU and SEE, rose in CISpp ,

+6-10% 8% 19%+6-10% -8% -19%Decline in BiH largest in SEE; second largest in

70%ers

second largest in transition region

60%

uppo

rt

50%

cracy su

40%

f dem

o

30%

New EU CIS, Georgia Western BiHShare of

members, g

and Mongolia Balkans andTurkey

S

Support for markets started off virtually equal in 2006…

60%

orters

40%

50%

ets supp

30%

40%

of m

arke

20%

30%

Share o

20%

New EUmembers

CIS, Georgiaand Mongolia

WesternBalkans and

BiH

Turkey

..but dropped in new EU and SEE, rose in CIS..but dropped in new EU and SEE, rose in CIS

+5 -4%-10% +2%

In BiH support for

60%

ters

In BiH support for markets increased, unlike in most SEE

50%

supp

ort

40%

markets s

20%

30%

are of m

20%

New EUmembers

CIS, Georgia andMongolia

WesternBalkans and

BiH

Sha

members Mongolia Balkans andTurkey

Why?

3 key drivers of changes in attitudes1. Those hit harder by the crisis turned away from

democracy, markets 1

y,

• New EU countries hit harder

2. Those who experienced more severe past crises turned away less from democracy, markets

2

• CIS countries saw harder hits after 1990

3 P l “t d i t th t th h d”33. People “turned against the system they had”

• New EU countries turned against markets, 3

g ,democracy, CIS countries vice versa

3. Entrepreneurship and better business 3. Entrepreneurship and better business environment: Post-crisis opportunityenvironment: Post-crisis opportunity

Much less likely to start business than in West…

20% of respondents who successfully set up a business

14

16

18

10

12

14

4

6

8

0

2

4

Mongolia

Albania

Czech R

epu

Slovak R

epu

FYR

Maced

Slovenia

Serbia

Hungary

Bulgaria

Croatia

Montenegro

Turkey

Estonia

Poland

Rom

ania

Georgia

Kazakhstan

Uzbekistan

Kyrgyz R

ep

Moldova

Latvia

Lithuania

Russia

Bosnia and

Ukraine

Belarus

Tajikistan

Azerbaijan

Arm

enia

ublic

ublic

onia

ublic

Herz.

…lower success rate among those who tried

Country wealth correlated with success rate…

…but individual variables are more importantp

Women more than 6% less likely than men to try to set up a Women more than 6% less likely than men to try to set up a business… but equally likely to succeed once they try

Policies to support female entrepreneurs Policies to support female entrepreneurs

Those with university education 5-7 per cent more likely to try even though no more likely to succeed once they trytry, even though no more likely to succeed once they try

More business-relevant education – trial and success

Same factors / policies support “opportunity” entrepreneurs and “necessity” entrepreneurs

For opportunity entrepreneurs (driver of innovation) business environment and lower corruption matter more

Learn more at: www.ebrd.com/transitionreport