The International Monetary Fund is giving high marks on economic policy to five Central European countries aspiring to join the European Union.
IMF staff papers suggest that, from a technical standpoint, the Czech Republic, Hungary, Poland, Slovakia and Slovenia probably will be ready to join the European Union as early as 2004. But the papers make clear that in terms of income per capita the five countries are way behind their EU neighbors to the west. IMF economists say it is likely to take three decades or more for these five countries to catch up. They say under the most optimistic scenario it is likely to take up to 24 years for the applicant countries to catch up with Greece, Portugal and Spain, the lowest income EU members.
Robert Feldman headed the IMF team that studied the five Central European economies. He notes some of the EU applicants are registering growth rates higher than those of the EU. "Hungary is certainly a case in point," he said. "There has been a slowdown in the growth in the Czech Republic. And some slowdown also in Poland, where the Fund [IMF] is advocating a tightening of fiscal policy because of medium term fiscal issues and current account issues, also a loosening of monetary policy because of our concern in improving the growth forecast."
The IMF staff papers show that since the transition from communism to capitalism began, from 1991 to 1999, output growth in Poland grew 48 percent, compared to 26 percent in Slovenia, 22 percent in Slovakia, 17 percent in Hungary, and nine percent in the Czech Republic.
IMF staff say the applicant countries should strengthen their financial systems so that financial crises can be avoided, enhance the rule of law, and move towards lower tax rates.
These five countries, along with Estonia, are front runners to be the first East European countries to join the 15 nation European Union. The EU has indicated that expansion will not take place until 2004 at the earliest.