Substantial progress in transition over the past year was achieved by central Europe, where the markets have responded favourably to previous reforms, and by the Commonwealth of Independent States, which benefited from political change in some countries.
Economic growth across the transition countries has slowed but is still forecast to reach 5.3 per cent in 2005. Sustained expansion of the financial sector is boosting demand but also increasing potential risks.
The business environment has improved on average but business obstacles are still much more severe than in mature market economies. The most dynamic firms, such as new private companies, are the most severely affected.
Foreign-owned and new private firms tend to be more efficient than privatised and state-owned enterprises. This difference in performance has remained constant over time.