As rising consumer inflation and energy costs present challenges to policymakers across the globe, the economies in which the EBRD invests have opted for a different set of stimulus measures from those favoured by advanced economies.
In 2022 policymakers in the EBRD regions have used more price controls and fewer food or energy vouchers compared with advanced economies, which were more intent on introducing windfall taxes on abnormal profits of energy producers.
The data were published as part of the EBRD’s latest Regional Economic Prospects (REP) report, which looks at the 36 economies where the EBRD actively invests, from north Africa to central and eastern Europe and Central Asia. Research focused on the measures that were introduced before early August 2022.
According to EBRD economists, policymakers in the Bank’s regions generally avoided making changes to taxation regimes to tackle rising prices, but favoured mechanisms such as export restrictions or price controls.
In contrast, advanced markets chose to tax the artificially high profits of energy companies, including oil and gas producers.
Three out of eight advanced economies, which were used as comparators in the research, introduced windfall taxes (Italy, United Kingdom and the United States of America). Only 4 of the 36 EBRD economies did so, all of them EU members: Greece, Hungary, Romania and the Slovak Republic.
An EU-wide windfall tax on fossil fuel producers, which generated high earnings because of oil and gas price increases, is being considered.
Emerging markets did not generally change income tax rates, with the exception of Ukraine where it was slashed, and Albania where it was reduced. Vouchers, or one-off payments for households, were favoured by the advanced economies but shunned in the EBRD regions; they have preferred price controls on energy, and price or profit margin caps on basic foodstuffs.
The EBRD regions also avoided touching their strategic energy reserves (which, for instance, Japan and the USA dipped into).
While fuel subsidies are endemic in both developed and developing economies, including via reduced VAT or VAT holidays on fuel, the EBRD regions used them slightly less (about 70 per cent of countries compared with 7 out of 8 advanced comparators).
Some other stimulus measures were equally popular, including means-tested support to the poorest households, introduced by over half of EBRD economies and comparators.
Mandatory restrictions on energy use, although widely discussed, have not yet been introduced in either category of country (except in the public sector in Albania and in Kosovo, with the latter also banning energy-intensive cryptocurrency mining).
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