new bank of albania annual conference tirana, november 2017 · 2017. 11. 21. · opportunities and...
TRANSCRIPT
Opportunities and Risks for Western Balkans
Bank of Albania Annual ConferenceTirana, November 2017
Bas B. Bakker Senior Regional Resident Representative
for Central and Eastern Europe
Life in Western Balkans has become brighter
2
Nightlights intensity
2002 2013 Change 2002-2013
-6
-4
-2
0
2
4
6
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
After recessions in 2009 and 2012, the region is growing again, supported by activity in main trading partners
3
GDP Growth in Western Balkans(Percent)
ITADEU
Max
Min
Western Balkans average
And unemployment is finally coming down—although it remains too high
4
0
5
10
15
20
25
30
35
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
MKD
BIH
SRB
ALB
Unemployment Rate(Percent)
MNE
Immediate outlook is good
5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
EuroArea
USA BIH MKD MNE SRB UVK ALB
Real GDP growth(Percent)
2018
2017
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
MKD UVK EuroArea
BIH ALB USA MNE SRB
CPI Inflation(Percent)
2018
2017
What are the remaining challenges and vulnerabilities?
Address overhang of the 2009-12 crisis, including in The banking system The public finances
Complete transition Speed up convergence
6
The Banking System
(This is discussed in depth in upcoming REO)
7
In run up to global financial crisis large inflows of foreign bank funding fueled and financed a credit boom.
8
0
1
2
3
4
5
6
7
8
SRB MKD BIH MNE ALB
GDP Growth (Percent)
2002 2008
Bank funding dropped in the global crisis
9
1/ Does not include Kosovo; includes Serbia and Montenegro from 2007.
0
5
10
15
20
25
2000 2002 2004 2006 2008 2010 2012 2014 2016
Capital Inflows to Western Balkans 1/(Percent of GDP)
The result was a sharp drop in credit growth, in large part supply driven
10
NPLs rose and profits plunged
11
NPLs have come down, but remain high
12
0
5
10
15
20
25
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
MKDUVK
MNEBIH
SRB
ALB
Non-Performing Loans to Total Loans(Percent)
Banking sector challenges
Banks need to address NPLs Banks need to manage deleveraging and expand
funding sources Address non-bank obstacles to credit
13
Dealing with NPLs require multipronged approach
14
Summary of Key Policy Actions and Recommendations Fostering Bank Balance Sheet Repair
ALB SRB BIH MNE UVK MKD
Loan classification and provisioning
Write-offs
Sale/Transfer of NPLs
Bankruptcy Law
Private bailiffs law
Taxation
Cadastral information
Policy measure completed Policy measure ongoingPolicy measure recommended Source: Regional Economic Outlook, CESEE, November 2017
Banks need to manage deleveraging and expand funding sources
Deleveraging: Monitor banks; ensure that bank maintain
contingency plans Remain in close communication with parent
banks and home supervisors New funding:
Tackling overbanking to attracting fresh foreign capital
Develop local capital markets
15
Governments need to address non-bank obstacles to credit
Improve land and property titling Accelerate slow court procedures Upgrade insolvency frameworks:
Personal bankruptcy Limit power of minority holdouts in corporate
restructuring
16
Public finances
17
Fiscal deficits have come down, particularly in countries with IMF Programs
18
-8
-7
-6
-5
-4
-3
-2
-1
0
1MNE MKD UKV ALB SRB BIH
8.5 7.0
General Government Balance(Percent of GDP)
trough
2007
2017
Countries with ongoing or recently completed IMF programs
However, public debt is far above pre-crisis levels
19
Public Debt(Percent of GDP)
0
10
20
30
40
50
60
70
80
UKV MKD BIH ALB SRB MNE
peak
2007
2017
Much of which is financed externally
20
External Public Debtin Western Balkans(Percent of GDP)
0
5
10
15
20
25
30
35
40
45
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
External Public Debt(Percent of GDP)
0
10
20
30
40
50
60
70
BIH MKD ALB SRB MNE
2017
2007
-7
-6
-5
-4
-3
-2
-1
0MNE MKD UKV ALB SRB BIH
Unfortunately, little further consolidation is planned
21
-8
-6
-4
-2
0
2
4
6
8
10
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
GG Balance in Western Balkans(Percent of GDP)
Average
Min
Max
2017
2019
External vulnerabilities
22
Current account deficits have come down and are now almost fully financed by FDI
23
-20
-15
-10
-5
0
5
10
15
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Current Account and Capital Flows (-) in Western Balkans(Percent of GDP)
FDI
Reserves
CA
PortfolioOther
External debt remains relatively high as lower bank funding has been offset by higher public debt
24
External Debtin Western Balkans(Percent of GDP)
0
10
20
30
40
50
60
70
80
90
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Offi
cial
Bank
Oth
er
Completing transition
25
In past two decades Western Balkans have not done as well as the NMS: at similar income levels they have grown less
26
GDP PPP per capita in 1996 vs. its change in 1996-14
Note: Data for UVK not available.Source: Penn World Tables.
ALB
BIH
MKD
MNESRB
BGR
CZE
EST
HRVHUN
LTU
LVA
POL
ROU
SVK
SVN
BLR
MDA
RUS
TURAUT
BEL
CYPDNK
FIN
FRA DEUGRCISL
ITA
MLT NLD
PRTESP
SWE
GBR
0
50
100
150
200
250
0 5 10 15 20 25 30 35
Chan
ge in
GD
P PP
P pe
r cap
ita 1
996-
2014
(Per
cent
)
Real GDP PPP per capita in 1996(in thousands of 2011 USD)
Western Balkans are poor because relatively few people work and capital stock per worker is low (TFP is low as well)
27
ALB
AUT
BELBGR
BIH
CZE
DEU DNK
ESP
EST
FIN
FRA
GBR
GRC
HRV
HUN IRL
ITA
LTULVA
MDA
MKD MNE
NLD
POL
PRTROU
RUS
SRBSVK SVN
SWE
TUR
UKR
20
25
30
35
40
45
50
0 100 200 300 400 500 600 700
Empl
oym
ent t
o po
pula
tion
ratio
in 2
016
(Per
cent
)
Capital per worker in 2014(Thousands of PPP dollars)
Capital per Worker vs. Employment to Population Ratio
Note: Data for UVK not available.Source: ILO and Penn World Table.
2.0
2.5
3.0
3.5
4.0
BLR
UVK BIH
SRB
MD
A
UKR RU
S
MN
E
ALB
MKD SVN
ROU
BGR
HRV CZ
E
HU
N
LVA
LTU
SVK
POL
EST
EU accession process should lead to improved institutions / completion of transition
28
Average of Six EBRD Transition Indicators in 2014
EU countries
non-EU countries
Note: 2007 for Czech Republic.
Better policies would help, whether or not WB become EU members
What can be done to boost investment and create jobs so people stay?
Improve investment climate Better protection of property
rights Improve legal systems and
other government services Address infrastructural gaps
Address efficiency gaps in public investments and tax collection
29
Boosting government effectiveness would also help
30
ALB
AUT
BLR
BEL
BIH
BGR HRV
CYP
CZE
DNK
EST
FINFRA
DEU
GRCHUN
ISL
ITA
LVALTU
MKD
MLT
MDA
MNE
NLD
POL
PRT
ROU
RUS
SRB
SVKSVN
ESP
SWE
CHE
TUR
UKR
GBR
y = 17.19x + 17.55R² = 0.78
0
10
20
30
40
50
60
-1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5
Government Effectiveness vs. GDP per capita in PPP dollars, 2015
GD
P pe
r cap
ita
(Tho
usan
ds o
f PPP
dol
lars
)
Government Effectiveness (WGI)Ranges from approximately -2.5 (weak) to 2.5 (strong) governance performance
Note: Data for UVK not available.
Thank you