and time bound policies, and even more importantly shift the focus back to structural and transformational policies, which are key for lifting the growth potential and building resilience. the latter is particularly relevant for the countries in the region that are faced with slow real convergence and stagnant growth potential. the slower catching up of the region is not a new phenomenon as it came on the surface right after the global financial crisis. most of the post transition real convergence ( around 60 % ) occurred in the 5 - year period preceding the gfc, against the backdrop of the remarkably growth - conducive global context, rising globalisation and trade integration, as well as favourable terms of financing. afterwards the convergence slowed down, and it took twelve years since 2008 up to the pandemic to achieve the pace pertinent for the five years pre gfc period. now, with the global environment becoming highly uncertain, risk of deglobalisation and supply chains defragmentation becoming more certain, and tightening of the global financial conditions already in place, faster real convergence seems even more complex issue. in this vein, there are estimates that crisis has adversely affected growth potential of the cesee region with average decline of 0. 7 pp in 2020. 3 / 4 bis - central bankers'speeches what are the main structural hurdles that prevent lifting of the growth potential and resilience? growth accounting framework reveals that in the last decade the slowdown was mostly through the total factor productivity, while the growth in the region became more reliant on capital accumulation. given the wide capital stock gaps compared to the more advanced countries, the accumulation of capital is warranted, and preferable way to grow. yet, the fact that the other sources of growth seem to be muted, gives ground for concerns. the contribution of labour is negligible, bringing to the fore the question on declining labour participation in the region, underpinned by the demographics and the intensive emigration of young and skilled workers. but, the marked slowdown in tfp, which is an indicator on how efficiently production factors are used, is worrisome. there are many forces that can influence total factor productivity and they are all endogenously interlinked. the competiveness of the economy, the quality of human capital, quality of institutions, innovation and technological readiness are just some of them. unfortunately, the region is not well positioned along those dimensions. the average ranks for quality of institutions and human capital

being. it is important for us economists to be humble when forecasting the future. debating concepts such as ‘ secular stagnation ’ may be fashionable now, but we should remember only a decade ago it was fashionable to debate the ‘ great moderation ’. by the same token, the observed 2 / 7 bis central bankers'speeches resilience of a moderate economic recovery and strong confidence indicators should not lead to complacency. respondents to survey questions can be influenced by what they consider to be a normal benchmark. if the new normal after the great recession is below its pre - crisis level, the same levels of confidence indicators can point to lower growth rates than before the crisis. 3 indeed, measures of capacity utilisation are high in an environment of persistent economic slack. how resilient the recovery really is to policy uncertainty is also not known. the world bank ’ s global trade watch4 report suggests that policy uncertainty is already weighing on world trade. of course, uncertainty about the future has always been with us. the incidence of natural disasters such as droughts, floods and earthquakes, the doubt of whether contractual promises will be honoured and the fear of your possessions being taken by force are all factors that can affect economic activity. humankind, over the millennia, has put in place various mechanisms to help cope with uncertainty. for example, putting in place narratives to filter and process the vast array of information available and arrange it in order – a cognitive trick to make sense of an uncertain world. building institutions has been key to providing economic stability. inclusive institutions are essential for economic development. 5 the importance of economic narratives following financial crises, political uncertainty is often elevated. according to a recent study, 6 votes for extreme parties can increase by on average 30 %, while government majorities shrink, parliaments end up with a larger number of parties and become more fractionalised. thus the political landscape becomes more gridlocked at precisely the moment when decisiveness is typically required. this can delay necessary policy responses, such as cleaning up the financial sector, which prolongs the post - crisis recovery. and such uncertainty, reflected in the media, can gradually build a narrative of doom and gloom around the economy or around the existing institutions – a seeping pessimism, which over time alters investors ’ and consumers ’ expectations, and thereby their behaviour. robert schiller7 has recently elaborated on the epidemiology of narratives relevant to economic fluctuations, ranging from the great