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Animal Spirits and Slow Recovery
Vladimir Gligorov
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Contents
Recession and recovery
Issues
Growth models
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Recession and Recovery
Business cycle synchronisation
The better performers
The Balkans
The big neighbours
Return of domestic demand
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GPS: Greece, Portugal, Spain. ASEAN-5: Indonesia, Malaysia, Philippines, Thailand and Vietnam. NMS-11 incl. Croatia.
Source: wiiw Database incorporating national and Eurostat statistics. IMF,
World Economic Outlook, April 2013. European Commission, Spring Report, April 2013. wiiw forecast.
External environment: growth and growth forecastsDevelopment of GDP change in % against preceding year
-4
-2
0
2
4
6
8
10
12
2010 2011 2012 2013 2014 2010 2011 2012 2013 2014
USA NMS-11
EURO Area GPS
Germany SEE
Japan Russia
ASEAN-5* Ukraine
Latin America&Carrib. Turkey
China
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Source: World Economic and Financial Surveys, April 2013, Table 1. *The US figures for 2013 and 2014 are updated from IMF(2013b), June 2013.
Fiscal balances, 2010-2014
ProjectionsAdvanced economies 2010 2011 2012 2013 2014United States
-11.1
-10.0
-8.5
-5.9*
-4.8*
Euro area -6.2 -4.1 -3.6 -2.9 -2.6Germany -4.1 -0.8 0.2 -0.3 -0.1Japan -9.3 -9.9 -10.2 -9.8 -7.0United Kingdom -10.1 -7.9 -8.3 -7.0 -6.4
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Source: wiiw Monthly Database incorporating national and Eurostat statistics.
Exports of goods (nominal, euro-based)change in % against preceding year, 3-month moving average
-40
-20
0
20
40
60
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
CZ HU PL
SI SK
-40
-20
0
20
40
60
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
BG EE HR
LT LV RO
-40
-20
0
20
40
60
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
ES GR IE
IT PT
-50
0
50
100
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
AL BA
-50
0
50
100
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
ME MK RS TR
-50
0
50
100
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
KZ RU UA
Druck!
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Source: wiiw Monthly Database incorporating national and Eurostat statistics.
Exports of goods (nominal, euro-based)change in % against preceding year, 3-month moving average
-20
0
20
40
60
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
CZ HU PL
SI SK
-20
0
20
40
60
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
BG EE HR
LT LV RO
-20
0
20
40
60
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
ES GR IE
IT PT
-20
0
20
40
60
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
AL BA
-20
0
20
40
60
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
ME MK RS TR
-20
0
20
40
60
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
KZ RU UA
show
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Remark: Data refer to NACE Rev. 2. BA, ME, RU and UA until 2011 refer to NACE Rev.1. IE: Seasonally adjusted data. Source:wiiw Monthly Database incorporating national and Eurostat statistics.
Gross industrial productionchange in % against preceding year, 3-month moving average
-30
-20
-100
10
20
30
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
CZ HU PL
SI SK
-30
-20
-10
0
10
20
30
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
BG EE HR
LT LV RO
-30
-20
-10
0
10
20
30
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
ES GR IE
IT PT
-50
-25
0
25
50
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
ME MK RS TR
-30
-20
-10
0
10
20
30
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
BA
-30
-20
-10
0
10
20
30
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
KZ RU UA
Druck!
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Remark: Data refer to NACE Rev. 2. BA, ME, RU and UA until 2011 refer to NACE Rev.1. IE: Seasonally adjusted data.
Source: wiiw Monthly Database incorporating national and Eurostat statistics.
Gross industrial productionchange in % against preceding year, 3-month moving average
-20
-10
0
10
20
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
CZ HU PL
SI SK
-20
-10
0
10
20
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
BG EE HR
LT LV RO
-20
-10
0
10
20
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
ES GR IE
IT PT
-20
-10
0
10
20
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
ME MK RS TR
-20
-10
0
10
20
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
BA
-20
-10
0
10
20
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
KZ RU UA
show!
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Source: Eurostat and national statistics.
Development of quarterly GDPreal change in % against preceding year
-20
-10
0
10
20
1Q'08 1Q'09 1Q'10 1Q'11 1Q'12 1Q'13
CZ HU PL SI SK
-20
-10
0
10
20
1Q'08 1Q'09 1Q'10 1Q'11 1Q'12 1Q'13
BG EE HR LT LV RO
-20
-10
0
10
20
1Q'08 4Q'08 3Q'09 2Q'10 1Q'11 4Q'11 3Q'12
MK RS TR AL ME
-20
-10
0
10
20
1Q'08 1Q'09 1Q'10 1Q'11 1Q'12 1Q'13
KZ RU UA
Druck!
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Source: Eurostat and national statistics.
Development of quarterly GDPreal change in % against preceding year
-6
-4
-20
2
4
6
8
10
1Q'11 1Q'12 1Q'13
CZ HU PL SI SK
-6
-4
-20
2
4
6
8
10
1Q'11 1Q'12 1Q'13
BG EE HR LT LV RO
-6
-4
-2
0
2
46
8
10
1Q'11 3Q'11 1Q'12 3Q'12 1Q'13
MK RS TR AL ME
-6
-4
-2
0
2
4
68
10
1Q'11 1Q'12 1Q'13
KZ RU UA
show!
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GDP during the crisis2008=100
70
80
90
100
110
120
130
BG CZ EE HR HU LT LV PL RO SI SK ES GR IT PT*
1Q 12 1Q 13
* PT data 2013 refer to 4Q12.Source: Eurostat, national Statistics.
3Q 2008
70
80
90
100
110
120
130
ME MK RS TR AL BA RU UA KZ
1Q 12 1Q 13
1Q 2008
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Development of gross industrial production (real),September 2008 = 100
60
70
80
90
100
110
120
130
CZ HU PL SI SK BG EE HR LT LV RO ES EL IE IT PT BA*MEMK RS TR KZRU*UA
Mar-12 Mar-13
* NACE Rev. 1.Source: wiiw Monthly Database incorporating national and Eurostat statistics.
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GDO growth, 2013Revisions (November 2012, March 2013 and June 2013)
0
1
2
3
4
5
6
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
MK ME RS TR AL BA XK KZ RU UA
-4
-3-2-101234
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Eurozone BG HR CZ EE HU LV LT PL RO SK SI
2013
*Kosovo.Quelle: wiiw-Prognosen, Europische Kommission fr Eurozone.
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GDP growth, 2014Revisions (November 2012, March 2013 and June 2013)
-1
0123456
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Eurozone BG HR CZ EE HU LV LT PL RO SK SI
2014
*Kosovo.Quelle: wiiw-Prognosen, Europische Kommission fr Eurozone.
-1
0
1
23
4
5
6
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
Nov-12
Feb-13
Jun-13
MK ME RS TR AL BA XK* KZ RU UA
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Source: wiiw (June 2013).
GDP growth, wiiw forecast 2013-2015
2013 2014 2015 2013 2014 2015
Kazakhstan 5.0 6.0 6.5 Macedonia 1.2 2.2 2.6
Lithuania 3.5 3.8 4.2 Slovakia 1.0 2.4 3.0
Albania 3.5 2.5 3.0 Serbia 1.0 2.0 3.0
Turkey 3.4 4.5 5.0 Bulgaria 0.9 2.0 3.0
Kosovo 3.0 5.0 4.0 Bosnia and Herzegovina 0.8 2.0 3.0
Latvia 2.8 3.1 3.5 Ukraine 0.5 2.5 3.5
Russia 2.4 3.1 3.2 Hungary 0.0 1.2 2.3
Estonia 2.0 3.2 3.5 Czech Republic -0.8 1.4 2.4
Romania 1.9 2.0 2.1 Croatia -1.0 1.0 2.0
Montenegro 1.3 2.0 3.0 Slovenia -3.3 -0.4 1.0
Poland 1.2 2.7 3.5
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Divergent performances
Better performers: PL, SK, Baltics, RO, AL
Worse performers: HU, CZ, Sl, Balkans (BU, HR, RS)
Big neighbours: RU, UA, KZ, TR
Overall: dimmed prospects in most parts
Recession and recovery
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Issues
Interest rates and animal spirits
Growing out of debt
Liquidity trapped or not
The curious case of euro attraction
Dealing with imbalances
Searching for jobs
Social and political risks
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1.2 1.3 1.0
3.4 3.5
0.8
5.0
2.4
0.5
-6
-4
-2
0
2
4
6
MK ME RS TR AL BA KZ RU UA
Source:wiiw forecast (July 2013). European Commission, Spring Report 2013.
GDP growth in 2013 (in %)and contribution of individual demand components in percentage points
0.9
-1.0 -0.8
2.0
0.0
2.83.5
1.2 1.5
1.0
-3.3
-6
-4
-2
0
2
4
6
BG HR CZ EE HU LV LT PL RO SK SI
Consumption Investment Trade balance GDP growth (%)
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Source:wiiw forecast (July 2013). European Commission, Spring Report 2013.
GDP growth in 2014 (in %)and contribution of individual demand components in percentage points
2.0
1.0
1.4
3.2
1.2
3.23.8
2.71.8
2.4
-0.3
-6
-4
-2
0
2
4
6
BG HR CZ EE HU LV LT PL RO SK SI
Consumption Investment Trade balance GDP growth (%)
2.2 2.02.1
4.5
2.5 2.0
6.0
3.1 2.5
-6
-4
-2
0
2
4
6
MK ME RS TR AL BA KZ RU UA
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Issues
Interest rates and animal spirits
Growing out of debt
Dealing with imbalances
The curious case of euro attraction
Liquidity trapped or not
Searching for jobs
Social and political risks
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Interest rates and animal spirits
Decompression and compression (sovereign)
Given the growth expectations, interest rates too high
even though they are mostly where they were before
the crisis (private)
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Source: ECB, National Banks; wiiw calculations.
Spreads of 10-year sovereign debt yields to the German
equivalent, %
0
5
10
15
20
25
30
CZ LV BG IE PL SK LT HR IT ES SI MK KZ RO PT HU TR RU CY AL UA GR RS
2012M6 2013M3
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Source: ECB, National Banks; wiiw calculations.
Spreads of 10-year sovereign debt yields to the German
equivalent, %
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
2007M1 2008M1 2009M1 2010M1 2011M1 2012M1 2013M1
BG CZ HU LV LT PL RO IIPS
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Spreads of 10-year sovereign debt yields to the German
equivalent, %
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
2007M1 2008M1 2009M1 2010M1 2011M1 2012M1 2013M1
IIPS HR MK TR AL RS
Source: ECB, National Banks; wiiw calculations.
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Source: ECB, National Banks; wiiw calculations.
Interest rates on loans to non-financial corporations, value
below 1 EUR million, maturity between 1 and 5 years, %
2.5
3.5
4.5
5.5
6.5
7.5
8.5
2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1
DE IE ES IT NL AT SI SK
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big-loan small-loan gfcf gfcfspread_lag 0.060***
(0.018) 0.140***(0.036)big-loan_lag -1.460***
(0.405)small-loan_lag -1.713***
(0.939)crisis -1.298***
(0.250) -1.046***(0.183) -10.455***(2.278) -10.320***(2.125)ecb -0.693**
(0.324) -0.342**(0.134) -0.793(2.253) -0.889(2.180)const 5.281***
(0.153) 5.498***(0.171) 10.366***(1.681) 12.682**(5.200)Number of observations 253 309 409 491R2 0.203 0.313 0.290 0.321Standard errors are in parentheses;
*** denotes 1% significance, ** 5% significance, * 10% significance
Impact of sovereign yield spread on interest rates(big loans and small loans); impact of interest rates on gross investment
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Remark: Croatia: Long-term. Montenegro: Over one year. Serbia: Refers to all currencies.
Source: Eurostat, National bank statistics.
Interest rates - loans to non-financial corporationsdomestic currency, amount outstanding, maturity >5 years, % p.a.
0
5
10
15
20
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
CZ HU PL SI SK
0
5
10
15
20
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
ES GR IE IT PT
0
5
10
15
20
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
BG EE HR
LT LV RO
0
5
10
15
20
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
MK ME RS KZ
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Remark: Kazakhstan: Loans to individuals.
Source: Eurostat, National bank statistics.
Interest rates - loans to households for housingin domestic currency, amount outstanding, maturity >5 years, % p.a.
0
5
10
15
20
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
CZ HU PL SI SK
0
5
10
15
20
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
BG EE LT LV RO
0
5
10
15
20
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
ES GR IE IT PT
0
5
10
15
20
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
KZ
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Source: Eurostat, National Bank statistics.
Interest rates on loans outstandingdomestic currency, maturity > 5 years, % p.a.
0
5
10
15
20
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
CZ HU PL SI SK
0
5
10
15
20
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
BG EE HR LT LV RO
loans to non-financial corporations
0
5
10
15
20
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
CZ HU PL SI SK
0
5
10
15
20
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
BG EE LT LV RO
loans to households for housing
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Source: National banks statistics, wiiw calculations.
Non-performing loans
% total loans
0
510
15
20
25
30
35
BG HR CZ EE HU LV LT PL RO SK SI
2009 2010 2011 2012 Mar-13
0
5
10
15
20
25
30
35
MK ME RS TR AL BA KZ RU UA
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-60.0
-40.0
-20.0
0.0
20.0
40.0
60.0
1Q'08 1Q'09 1Q'10 1Q'11 1Q'12 1Q'13
KZ RU UA
Source: Eurostat and national statistics.
Gross fixed capital formationreal change in % against preceding year
-60
-40
-20
0
20
40
60
1Q'08 1Q'09 1Q'10 1Q'11 1Q'12 1Q'13
CZ HU PL SI SK
-60
-40
-20
0
20
40
60
1Q'08 1Q'09 1Q'10 1Q'11 1Q'12 1Q'13
BG EE HR LT LV RO
-60.0
-40.0
-20.0
0.0
20.0
40.0
60.0
1Q'08 1Q'09 1Q'10 1Q'11 1Q'12 1Q'13
MK* RS TR
KZ 71.5
* Macedonia: Gross Capital Formation
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Estonia 2012: 39.7%
Source: National and Eurostat statistics, wiiw own calculations.
Gross fixed capital formation, public sectorreal change in % against preceding year
-30
-20
-10
0
10
20
30
BG CZ EE HU LV LT PL RO SK SI MK TR KZ UA
2011 2012
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Private and public investments,average growth p.a., 2006-2012
Source: Eurostat, wiiw own calculations.
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
-15.0 -10.0 -5.0 0.0 5.0 10.0 15.0
private
public
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Fiscal policy, public debt, public and private investment
Fiscal policy largely restrictive
Public debt situation depends on growth: 5 percent
nominal growth would largely resolve the sovereign debtissue
Mostly negative developments in public investments
Private investment gets no/little stimulus from public
investment
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ESA'95 definition for all EU countries, national definition for the rest of the countries.
Sources: Eurostat, Government Finance Statistics (IMF), National Ministries of Finance, National Banks.
Total fiscal revenues,in % of GDP
20
30
40
50
60
2007 2008 2009 2010 2011 2012
CZ HU PL
SI SK
20
30
40
50
60
2007 2008 2009 2010 2011 2012
BG EE HR
LT LV RO
20
30
40
50
60
2007 2008 2009 2010 2011 2012
AT DE ES GR
IE IT PT
20
25
30
3540
45
50
55
2007 2008 2009 2010 2011 2012
AL BA ME MK RS
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Remark: Ireland: 2010 66.1%. ESA'95 definition for all EU countries, national definition for the rest of the countries.Sources: Eurostat, Government Finance Statistics (IMF), National Ministries of Finance, National Banks.
Total fiscal expenditures,in % of GDP
20
30
40
50
60
2007 2008 2009 2010 2011 2012
CZ HU PL
SI SK
20
30
40
50
60
2007 2008 2009 2010 2011 2012
BG EE HR
LT LV RO
20
30
40
50
60
2007 2008 2009 2010 2011 2012
AT DE ES GR
IE IT PT
20
30
40
50
60
2007 2008 2009 2010 2011 2012
AL BA ME
MK RS
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Source: Eurostat, IMF, wiiw own calculations.
Public debt in % of GDP, 2002, 2008 and 2012
0
2040
60
80
100
BG HR CZ EE HU LV LT PL RO SK SI
2008 2012
0
20
40
60
80
MK ME RS TR AL BA KZ RU UA
2008 2012
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Implicit interest rates on public debt compared with GDP
growth
Source: Eurostat, AMCEO.
-10
-5
05
10
15
20
25
30
2000 2002 2004 2006 2008 2010 2012 2014
Greece
-10
-5
0
5
10
15
20
25
30
2000 2002 2004 2006 2008 2010 2012 2014
Germany
-10
-5
0
5
10
15
20
25
30
2000 2002 2004 2006 2008 2010 2012 2014
Serbia
-10
-5
0
5
10
15
20
25
30
2000 2002 2004 2006 2008 2010 2012 2014
Croatia
-10
-5
0
5
10
15
20
25
30
2000 2002 2004 2006 2008 2010 2012 2014
Czech Republic
-10
-5
0
5
10
15
20
25
30
2000 2002 2004 2006 2008 2010 2012 2014
Hungary
IIR GDP
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M1 rising but not M2 and M3 in reserve currencies
(liquidity trap)
But not in non-reserve currency countries
Liquidity trapped or not
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Source: wiiw Monthly Database incorporating National bank statistics.
Money M1
change in % against preceding year
-40
-20
0
20
40
60
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
CZ HU PL SI SK
-40
-20
0
20
40
60
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
BG EE HR LT LV RO
-40
-20
0
20
40
60
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
AL BA ME MK RS
-40
-20
0
20
40
60
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
KZ RU UA
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Source: wiiw Monthly Database incorporating National bank statistics.
Money M2
change in % against preceding year
-40
-20
0
20
40
60
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
CZ HU PL SI SK
-40
-20
0
20
40
60
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
BG EE HR LT LV RO
-50
0
50
100
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
AL BA ME MK RS
-40
-20
0
20
40
60
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
KZ RU UA
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Source: wiiw Monthly Database incorporating National bank statistics.
Money M3
change in % against preceding year
-40
-20
0
20
40
60
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
CZ HU PL SI SK
-40
-20
0
20
40
60
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
BG EE HR LT LV RO
-10
0
10
20
30
40
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
MK
-40
-20
0
20
40
60
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
KZ UA
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Reserves mostly in euro very high: on average 35
percent of GDP
Less in Russia, Turkey, other big neighbours
Euro and nominal vs. real stability
Exchange rate regime and trade
Euro attraction
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* positive values indicates real appreciation
Source: wiiw Monthly Database incorporating national and Eurostat statistics.
Exchange rates, consumer prices and wages 2005-2013
change in % against preceding year
Real exchange rates, EUR per NCU, CPI-deflated* Consumer price inflation Real gross monthly wages
-30
-20-10
0
10
20
30
Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
Czech Republic
-30
-20-10
0
10
20
30
Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
Hungary
-30
-20
-10
010
20
30
Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
Slovakia
-30
-20
-10
010
20
30
Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
Bulgaria
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* positive values indicates real appreciation
Source: wiiw Monthly Database incorporating national and Eurostat statistics.
Exchange rates, consumer prices and wages 2005-2013
change in % against preceding year (ctd.)
Real exchange rates, EUR per NCU, CPI-deflated* Consumer price inflation Real gross monthly wages
-30
-20-10
0
10
20
30
Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
Croatia
-30
-20-10
0
10
20
30
Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
Latvia
-30
-20
-10
010
20
30
Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
Romania
-20
-10
0
10
20
30
Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
Serbia
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Exchange regime, trade and GDP growth,
average p.a., 2009-2012
Note: Currency boards (BG, LT, LV, BA); Fixed (HR, MK); Float (CZ, PL, HU, RU, RS, AL);
Euro (EE, SI, SK); Other (KZ, UA; RU, TR).
Source: wiiw Annual Database incorporating national and Eurostat statistics, wiiw own calculations.
-2
0
2
4
6
8
10
12
-1.5 -1 -0.5 0 0.5 1 1.5 2 2.5
exportsandimpo
rts
GDP
exports imports
Fixed
Other
Euro
Float
Currency
boards
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Non-optimal currency area policies
Contain imbalances
External, fiscal, financial, labour market
Dealing with imbalances
The Macroeconomic Imbalance Procedure (MIP)
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1) Year 2011. - 2) Real exchange rate with CPI deflators. - 3) Gross wages per employee relative to labour productivity (real GDP per employed person, LFS). - 4) We do not have
data, but it is likely that house prices have fallen. - 5) We don't have the data, but it is highly likely that private credit flows are well below the threshold.
Sources: Eurostat, National Statistics, wiiw calculations.
Year 2012 3 year
average of
Current
Account
Balance
as % of GDP
Net
International
Investment
Position
as % of GDP
% Change
(3 years) of
Real Effective
Exchange Rate
with HICP
deflators
% Change
(5 years) in
Export Market
Shares
% Change
(3 years) in
Nominal unit
labour cost
% y-o-y change
in deflated
House Prices
Private Sector
Credit Flow
as % of GDP
Private Sector
Debt
as % of GDP
General
Government
Debt
as % of GDP
Unemployment
rate
3-year average
y-o-y % change
in Total
Financial
Sector
Liabilities, non-
consolidated
data
Thresholds -4%/+6% -35% 5% & 11% -5% +9% & +12% +6% +15% 160% 60% 10% 16.5%
Bulgaria -0.9 -80.8 3.1 1) 5.0 9.0 -5.3 -6.7 1) 146.0 1) 18.5 11.3 5.6 1)
Croatia -0.6 -88.1 -3.3 2) -24.1 -3.9 3) . 4) . 5) 144.2 53.0 13.7 2.9 1)
Czech Republic -3.0 -49.7 0.3 1) -3.8 3.3 -3.6 2.8 1) 78.6 1) 45.8 7.0 4.4 1)
Estonia 1.3 -53.0 0.8 1) 6.8 -2.3 3.7 6.8 1) 132.9 1) 10.1 13.1 -4.4 1)
Hungary 1.2 -103.3 -3.3 1) -16.6 5.7 -8.5 -7.8 150.1 79.2 11.0 -7.5
Latvia -0.3 -65.1 -0.6 1) 12.0 -5.9 0.7 -2.5 1) 125.1 1) 40.7 16.7 -4.5 1)
Lithuania -1.4 -52.2 3.6 1) 30.0 -5.2 -3.4 -0.8 1) 70.1 1) 40.7 15.5 8.9 1)
Poland -4.5 -65.7 -10.9 1) 0.6 3.3 -5.8 1) 7.1 1) 79.5 1) 55.6 9.8 4.4 1)
Romania -4.3 -64.5 -2.4 1) 4.9 4.8 -9.2 1.8 1) 71.8 1) 37.8 7.2 4.3 1)
Slovakia -1.2 -63.8 4.3 1) 4.7 -1.2 -5.7 3.3 1) 76.3 1) 52.1 14.0 1.2 1)
Slovenia 0.6 -44.6 -0.3 1) -19.5 0.5 -8.6 -4.1 125.2 54.1 8.1 -0.8
Austria 2.2 0.5 -1.0 1) -20.5 4.1 -7.9 1) 4.1 1) 160.7 1) 73.4 4.3 -0.3 1)
Belgium -0.2 66.8 -0.5 1) -15.7 6.2 -0.4 9.4 241.3 99.6 7.7 -4.2
Germany 6.5 40.5 -3.9 1) -12.7 3.2 1.4 1) 4.8 1) 127.8 1) 81.9 6.2 2.1 1)
Greece -7.7 -114.1 3.1 1) -27.0 -8.1 -5.1 1) -6.4 130.3 156.9 18.2 -3.9
Ireland 2.4 -95.8 -9.1 1) -15.7 -9.4 -12.8 4.0 1) 309.5 1) 117.6 14.4 -0.7 1)
Italy -2.4 -24.4 -2.1 1) -23.4 3.0 -5.3 2.6 1) 128.6 1) 127.0 9.2 3.8 1)
Portugal -6.4 -116.7 -1.9 1) -15.5 -5.7 -9.1 -6.1 255.6 123.6 13.3 -3.6
Spain -3.1 -93.0 -1.3 1) -14.2 -6.7 -15.8 -4.1 1) 218.1 1) 84.2 22.3 3.7 1)
Macedonia -3.0 -55.8 0.6 2) -7.3 0.4 3) . 4) . 5) 47.1 36.0 31.5 4.9
Montenegro -19.5 . -0.1 2) -12.8 0.2 3) . 4) . 5) 54.7 51.9 19.7 7.0
Serbia -9.0 -92.5 -1.6 2) -0.5 9.8 3) . . 5) 56.3 58.9 22.1 10.2
Turkey -7.3 -51.3 . 11.9 . . . 46.3 36.8 9.2 14.4
Albania -11.7 -41.4 1) -3.9 2) 4.5 3.7 3) . . 5) 41.3 58.6 14.2 5.1
Bosnia and Herzegovina -7.9 -59.3 1) 0.1 2) -29.6 0.5 3) . . 5) 58.1 43.1 27.6 4.2
Kazakhstan 3.8 -12.2 21.2 2) 44.4 33.8 3) . . 39.5 12.7 5.5 10.2
Russia 4.6 7.8 1) 24.7 2) 16.6 30.9 3) . . 49.9 9.6 6.4 21.5 1)
Ukraine -5.6 -32.9 16.4 2) 8.5 45.7 3) . . 56.0 36.6 7.8 13.1 1)
( )
Scoreboard with values for 2012
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Adjustment processes take place through declining employment
Employment rates in some instances at very low levels
High youth and long-term unemployment
Expected prolonged correction of real wages
Labour markets
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Employment rates either fall or stagnateEmployment rates total (15-64, LFS)
30
35
40
45
50
55
60
65
70
CZ HU PL SI SK BG EE HR* LT LV RO ME* MK TR
1Q 08 1Q 13
* Data 1Q 2013 refer to 4Q 2012.
Source: wiiw Monthly Database incorporating national and Eurostat statistics.
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Two directions:
In less democratic polities, polarisation between autocratic
tendencies and popular/ist demands for democratisation
In more stable democracies either collapse of the existing party
systems or more intense ideological competition (emergence of
more radical parties)
Examples: Balkans (BU, Sl, RS, Bosnia); HU, CZ, TR, RU; EU-South: Greece, Italy
Social tensions and political adjustments
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voters
left right
EU and stability vs. polarisation or a shift in policy space
58
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Stress on imbalances
The implication is that there should be more reliance on domestic
savings and investments
Not much support for cross-border investments until bank union
and fiscal union issues are resolved
Significant national action on sustainability of balances needed to
switch to the new growth model
Whither convergence growth?
59
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This year and the next:
- some recovery with downside risks
Medium term:
- continued growth below potential
- restructuring to adapt to new growth model
Longer term:
- some succeed, others do not- most likely scenario: club convergence, inter-club divergence
Returning to forecasts