Romania and Serbia are still on their way when it comes to competitiveness and knowledge in Central and Eastern Europe and could exploit more efficiency reserves to become innovative economies, according to a recent report issued by Erste Group. The Czech Republic, Slovakia and Poland are the frontrunners for competitiveness and knowledge, with Hungary falling after this group of countries.

Over the next decade CEE countries will have to move from old fashioned catching up by imitation to a knowledge-based system with more value added and more diversified exports. “Pure cost competitiveness is not enough when countries are approaching the technological frontier; CEE countries will need to increase productivity of capital and labor by their own means and this makes investments in education and R&D crucial,” explains Birgit Niessner, Chief Analyst of CEE Macro Research at Erste Group.

Measuring exports as share of GDP puts Romania in the middle range, together with Poland and Croatia. This is partly due to the size of the markets, as larger countries tend to export less, but is also hampered by non-competitive structures. However, their performance is still superior to the Southern European countries, according to the Erste report.

Romania is among the countries that have become more efficient in the last six years in its manufacturing industry, but the country, alongside Poland, seems to still have too high a share of people working in agriculture. Meanwhile, Slovakia and the Czech Republic have been highly successful in shifting labor from agriculture to industry.

On the wages segment, Serbia and Romania are in the efficiency-driven stage of development, when they must “begin to develop more efficient production processes and increase product quality, because wages have risen and they cannot increase prices,” according to Erste.

The full Convergence 2.0 report from Erste is here 2013-02-20 Growth Special Report Final (1).

editor@romania-insider.com

photo source: sxc.hu