Executive Summary

The breakdown of the socialist system late in the 20th century gave the countries of central and eastern Europe (CEE) and the Commonwealth of Independent States (CIS) (together: CEE-CIS) the opportunity to establish the prerequisites for sustainable economic development and improved human welfare. Many countries benefited from the new possibilities that became available, as exemplified by the 2004 accession to the European Union (EU) by eight formerly socialist countries and the 2007 accession of Bulgaria and Romania.

Outside the enlarged EU, however, progress was less smooth. Dramatic economic decline in the early 1990s produced widespread poverty. More than 100 million people (20% of the population) were living in absolute poverty by 1998/1999, according to the World Bank’s definition of poverty for the Region (living on less than US$ 2.15 a day). Another 160 million people (about 33%) were economically vulnerable (living on between US$ 2.15 and US$ 4.15 a day). Some relief came between 1998 and 2003 as more than 40 million people moved out of poverty, bringing absolute poverty rates down to about 12%. Still, the figure for economically vulnerable people held firm. Today, more than 60 million remain poor and more than 150 million are economically vulnerable: a long road still lies ahead. That road will require developing economic growth that will be sustained over decades in order to lift large numbers of people out of poverty and vulnerability.

Yet a large share of the recent growth is likely of a transitory nature. According to the World Bank and other financial institutions, part of the remarkable recent growth is but a simple correction of the earlier huge economic decline, either caused by efficiency gains from partial market reforms that are thus far insufficient to affect the long-term rate of economic growth, or by windfalls from natural resources that are probably not being reinvested to maximize long-term growth. Expectations of sustained growth from these causes cannot be encouraged.

Where, then, can these countries turn for sustained improvements to their economies? The key message here is that investing in health offers a hitherto neglected opportunity to contribute to growth and poverty reduction in the CEE-CIS Region – albeit not the panacea. This discussion has four platforms as its base, as follows.


1. The Region’s health status is unfavourable as shown by many standards.

  • Health suffered substantially during the transition, when measured, for instance, by official life expectancy data. Comparing health status in western European high-income countries with that in the CEE-CIS Region reveals a widening gap, probably even wider than official figures suggest.
  • Adult mortality – an important health indicator of the working-age population – is much higher in this Region than in other countries with a
    similar level of economic development.
  • The transition health crisis tends to be portrayed as predominantly affecting male mortality, but female morbidity is also in crisis.
  • Noncommunicable disease and injuries cause the greatest share of morbidity and mortality in the Region, although communicable diseases and child and maternal health concerns must also be taken seriously.

2. Neither domestic nor international policy has made sufficient effort to address
the Region’s health problems.

  • Policies to improve health in this Region have been limited, leaving much scope for investing more in health and doing so more effectively, through the health system itself and other channels.
  • Public expenditure in general and expenditure on health in particular declined in the Region in the 1990s to levels that make running a basic system virtually impossible in several countries. More recently, funding levels have stabilized or even increased, but significant improvements in health outcomes have not followed.
  • One indication of a likely shortcoming of health policy can be seen in the significant and rising socioeconomic inequalities in health and health care access. Rising inequalities in access are largely due to rises in informal payments, but inequalities in health are only partly explained by unequal access. The available evidence suggests that public expenditures in CEE-CIS have done little to redress the inequities embodied in health systems, although this should be a primary aim.
  • Catastrophic health expenditures threaten to impoverish households in certain subregions, such as the low-income CIS countries. Here, health systems rely heavily on household contributions, and households are largely poor. Outside the eight CEE countries that joined the EU in 2004, simulations
    suggest that catastrophic health spending can increase the size of the poor
    population by 3–9%.
  • Comparing the development assistance for health received in these countries with that for other countries with similar levels of health need shows
    that the international community has neglected health in this Region. This neglect may spring from global neglect of noncommunicable disease in health targets defined, for example, in the Millennium Development Goals.
  • There is significant opportunity to more firmly integrate health and health
    investment in the countries’ national development strategies, as reflected in
    the Poverty Reduction Strategy Papers.

3. Health does matter for the economies of the CEE-CIS Region and beyond.

  • This analysis offers abundant evidence from CEE-CIS that health significantly affects economic outcomes at individual and household levels, even
    when other relevant determinants are taken into account. Ill health is shown to play an important role in determining people’s labour market performance,
    on top of other potentially important economic effects.
  • Improving health, measured by reducing mortality rates, is projected to bring substantial macroeconomic benefits in terms of gross domestic product
    (GDP) per capita. Given the enormous expected economic benefits, any well-designed, effective initiative to invest in health in the Region is likely
    to be well worth the money.
  • Improving health would also improve the population’s welfare, a goal that
    should be the prime aim of economic policy.

4. Evidence-based, cost-effective interventions exist to improve the health situation through policy measures within and outside the health system.

  • Even from a purely economic perspective, any government has a role to play in improving the health of its population. While such role has long been recognized in the domains of communicable disease and child and maternal health and with regard to the establishment of a health system, it also applies to noncommunicable disease.
  • Countries of this Region need to develop a broader public health perspective that will allow them to identify existing and emerging health needs and to develop effective policies to address them.
  • Much could be gained from investing in health in ways that go beyond the traditional forms of health care investment: investments in the quality of governance and in social capital are highlighted as two such examples.

In light of the evidence, national policy-makers – particularly those outside the health system – might achieve their economic objectives more efficiently by investing in health. While investing in health is not the panacea for achieving sustained economic growth and poverty reduction in the CEE-CIS Region, it should certainly be an integral component of the overall development strategy, not marginalized by decision-makers whose purview seems – at first glance – not to overlap with health concerns. The traditional view has been that health is but an automatic by-product of economic development, but the evidence here reveals a causal effect that also runs from health to economic outcomes. This bidirectional characteristic means that one problem cannot be solved without simultaneously solving the other. Thus, governments are better
off investing a given amount of resources in both health and economies, rather than in just one, thereby creating a mutually reinforcing upward cycle. Thus far in CEE-CIS, the focus has been on traditional economic investment strategies.


In addition to national policy-makers, the findings here apply to the international community, which seems to be neglecting the Region’s serious health challenges and thereby the attendant consequences for economic development. Both the health challenges and their consequences are a matter of vital interest to both the nearby EU and the United States, which has strategic interests in the Region. To the extent that the limited international efforts directed at these challenges are due to the global neglect of noncommunicable diseases in the international development agenda, the agenda must be broadened and interpreted more flexibly.