CESEE: A time of moderate expectations Mario Holzner 2 A time of - - PowerPoint PPT Presentation

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CESEE: A time of moderate expectations Mario Holzner 2 A time of - - PowerPoint PPT Presentation

Nov 22, 2023 13 likes •251 views

Wiener Institut fr The Vienna Institute for www.wiiw.ac.at Internationale International Economic Wirtschaftsvergleiche Studies 21 st Austria webinar, 12 March 2015 New wiiw forecast for Central, East and Southeast Europe, 2015-2017 CESEE:

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Wiener Institut für Internationale Wirtschaftsvergleiche The Vienna Institute for International Economic Studies

www.wiiw.ac.at

Mario Holzner New wiiw forecast for Central, East and Southeast Europe, 2015-2017

CESEE: A time of moderate expectations

21st Austria webinar, 12 March 2015

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2 Source: wiiw (March 2015), Eurostat. Forecasts by wiiw and European Commission (Winter Report, February 2015).

GDP growth rate since 1995

A time of moderate expectations

  • 10
  • 8
  • 6
  • 4
  • 2

2 4 6 8 10 12 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 NMS-11 EU-15 Turkey Russia

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3 Source: wiiw (March 2015), Eurostat. Forecasts by wiiw and European Commission (Winter Report, February 2015).

Differential in GDP growth vis-à-vis EU-15 since 1995, in pp

Difference to EU-15 diminishing

  • 10
  • 8
  • 6
  • 4
  • 2

2 4 6 8 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 NMS-11 West Balkans - 6 CIS-4

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4 Source: Own calculations based on AMECO database.

Euro area (12 original members) – per capita GDP growth rate

The euro area seized by secular stagnation

  • 6
  • 4
  • 2

2 4 6 8 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014 GDP per capita 10-year average

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5 Source: Own calculations based on AMECO database.

GDP share of gross capital formation

Euro area investment and wage share tumbling

18 20 22 24 26 28 30 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014 50 53 56 59 62 65 68 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014

Adjusted GDP wage share

Euro area (12 original members) Euro area (12 original members)

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6

Disinflation → Deflation Unemployment high, or very high Diminishing role of trade balance Household consumption unimpressive Investment recovering only slowly

Insufficiency of aggregate demand also in CESEE

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7

  • 1.0
  • 0.5

0.0 0.5 1.0 1.5 2.0 2013m01 2013m05 2013m09 2014m01 2014m05 2014m09 2015m01 Energy Food Core inflation CPI, year-on-year growth in % Source: wiiw Monthly Database incorporating national and Eurostat statistics.

Apropos deflation: e.g. Poland

CPI growth and contribution of components, 2013-2015, in percentage points

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8 Source: wiiw Annual Database incorporating national and Eurostat statistics. Forecasts by wiiw.

Growth: unimpressive

GDP growth in 2014-2015, and contributions of individual demand components in pp

  • 8
  • 6
  • 4
  • 2

2 4 6 8 HR BG SI EE LV CZ HU LT RO SK PL Gross fixed capital formation Household final consumption Net exports GDP (growth in %)

‘14|‘15

  • 8
  • 6
  • 4
  • 2

2 4 6 8 UA RU BY RS BA AL KZ ME TR MK XK Gross fixed capital formation Household final consumption Net exports GDP (growth in %)

‘14|‘15

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9

Still depressed Unconstrained by the availability of funds Insensitive to interest rates Highly profitable Wage-led – not profit-led

Private investment

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10 Source: Own calculations based on AMECO database.

GDP share of private sector gross fixed capital formation, in %

Private investment still depressed

15 16 17 18 19 20 21 22 23 24 25 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 NMS-11 Germany

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11 Source: Own calculations based on AMECO database.

E.g. Poland: Net lending (+) or net borrowing (-): corporations and households, % GDP

Corporate investment unconstrained by availability of funds

  • 4
  • 2

2 4 6 8

Corporations 2001 Households 2001

Normality

  • 4
  • 2

2 4 6 8

Corporations 2007 Households 2007

Bubble

  • 4
  • 2

2 4 6 8

Corporations 2014 Households 2014

Distress

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12 Source: National bank statistics, wiiw own calculations.

Non-financial corporations, CESEE 2014

Corporate investment insensitive to interest rates

Slovenia Macedonia Czech Republic

  • 25
  • 20
  • 15
  • 10
  • 5

5 10 15 2 4 6 8 10 Growth rate of stock of loans Real interest on new loans

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13 Source: BIS, RBI, own calculations using USD/EUR exchange rate as of 30/09/2014.

Austrian banks’ exposure to CESEE substantial

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14 Source: National bank statistics, wiiw own calculations.

Private sector, CESEE 2014

Profits and risks unevenly distributed

HR CZ HU PL RO SK RU UA 5 10 15 20 25 30

  • 20
  • 15
  • 10
  • 5

5 10 15 20 25 Non-performing loans Stock of bank loans to non-financial private sector growth

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15 Source: AMECO.

Net returns/net capital stock ratios for 2011-2014 (base period index 2000-2003), percentage change

Profitability of the capital stock mostly increasing

  • 26.2% -26.1% -22.7%

1.9% 3.6% 8.5% 22.0% 24.8% 36.5% 61.7% 10.1%

  • 40%
  • 20%

0% 20% 40% 60% 80% 100% BG SI EE HR HU CZ LV LT SK PL RO DE 152.4%

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16 30 35 40 45 50 55 60 1994 1999 2004 2009 2014 NMS-11 Germany 12 14 16 18 20 22 24 1994 1999 2004 2009 2014 NMS-11 Germany Source: Own calculations based on AMECO database.

GDP shares of employee compensation, in %

Investment is wage-led (and not profit-led)

Share of the corporate sector in private gross disposable income, in %

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17 1 2 3 4 5 6 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 NMS-11 Germany Source: Own calculations.

GDP shares of public gross fixed capital formation, 2001-2014, in %

EU-funded public investment partly counterbalances private investment

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18

Nominal wages important … … but exchange rate as well Fiscal deficits and net lending abroad absorb

excessive private savings in the NMS Macroeconomic round-up

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19 2004

2009

2014

  • 30
  • 20
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10 20 30 40 HR EE LV SI SK RO PL BG DE LT CZ HU Note: Over- or undervaluation in the price level in relation to the GDP per capita level. Source: Own calculations.

Percentage levels of overvaluation (positive) or undervaluation (negative) of NMS currencies vs. euro, 2004, 2009, 2014

Exchange rate regimes do matter

Fixers Floaters

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20 Remark: Bulgaria: -26.3. Source: wiiw Annual Database incorporating national and AMECO statistics, own calculations.

Net lending (+) or net borrowing (–), 2007, 2014, in % of GDP

Fiscal deficits and net lending abroad absorb excessive private savings in the NMS

  • 20
  • 15
  • 10
  • 5

5 10 Hungary Romania Croatia Slovakia Lithuania Czech Republic Latvia Slovenia Poland Estonia Bulgaria Germany

2007

General government Total economy

  • 20
  • 15
  • 10
  • 5

5 10 Slovenia Croatia Poland Bulgaria Slovakia Hungary Romania Latvia Czech Republic Lithuania Estonia Germany

2014

General government Total economy

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21

Weak wage growth, limited investment growth NMS & candidates: No substantial growth speed-up NMS growth differential vis-à-vis euro area diminishing from ~3%

before crisis to ~1.5%

Current account deficit quite low (NMS) or quite high (candidates) Inflation gradually returns to normalcy: energy prices stabilise,

more borrowing (?)

Unemployment recedes (NMS) or stays high (candidates) CIS hopefully recover in 2016 EU economic paradigms need to be adjusted 2015-2017: A time of moderate expectations

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22 Source: wiiw forecast, February 2015.

GDP growth, wiiw forecast for 2015-2017

2015 2016 2017 Kosovo 3.6 2.9 3.8 Poland 3.5 3.2 3.2 Macedonia 3.5 2.9 2.6 Turkey 3.3 3.5 3.5 Romania 2.5 3.0 3.0 Slovakia 2.5 2.7 3.0 Lithuania 2.4 2.9 3.2 Czech Republic 2.3 2.4 2.4 Hungary 2.3 2.0 2.0 Montenegro 2.3 2.6 2.9 Latvia 2.1 2.8 2.8 2015 2016 2017 Estonia 2.0 2.5 3.1 Albania 2.0 2.2 2.4 Kazakhstan 2.0 3.5 4.5 Slovenia 1.7 1.8 2.0 Bosnia and Herzegovina 1.6 2.1 2.4 Bulgaria 1.5 1.9 2.3 Croatia 0.3 1.1 1.5 Serbia

  • 0.5

1.0 1.4 Belarus

  • 2.0

1.3 2.0 Russia

  • 3.9

1.9 2.0 Ukraine

  • 5.0

0.0 1.8

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23

Country codes

AL Albania ME Montenegro BA Bosnia and Herzegovina MK Macedonia BG Bulgaria PL Poland BY Belarus RO Romania CZ Czech Republic RS Serbia EE Estonia RU Russia HR Croatia SI Slovenia HU Hungary SK Slovakia KZ Kazakhstan TR Turkey LT Lithuania UA Ukraine LV Latvia XK Kosovo CESEE Central, East and Southeast Europe CIS Commonwealth of Independent States NMS New Member States SEE Southeast Europe