AIECE General Report November 2011 Part I: Recent Trends Brussels, - - PowerPoint PPT Presentation
AIECE General Report AIECE General Report November 2011 Part I: Recent Trends Brussels, 21-22 November 2011 Presented by Rachel Whitworth National Institute of Economic and Social Research 1. Recent Developments A Summary Global
National Institute
Social Research
2 4 6 I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II 2007 2008 2009 2010 2011 Per cent 0.68 0.69 0.7 0.71 0.72 0.73 0.74 0.75 0.76 Billions of Euros Level (rhs) Quarterly, annualized (lhs) Year-on-year (lhs)
2 4 6 I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II 2007 2008 2009 2010 2011 Per cent 1.8 1.82 1.84 1.86 1.88 1.9 1.92 1.94 1.96 1.98 Billions of Euros Level (rhs) Quarterly, annualized (lhs) Year-on-year (lhs)
At the previous meeting in May it seemed that the worst of the ‘Great Recession’ was over. Since then, the European economy has been met with new problems surrounding the Euro Area debt crisis. These recent troubles have affected countries both within and outside of the Euro Area.
Figure 1.1 GDP profile, EA-17 (aggregate) Source: Eurostat Figure 1.2 GDP profile, Non-EA (aggregate) Source: Eurostat
The split between ‘emerging’ and ‘advanced’ economies remains pronounced, even just within Europe.
2 4 6 8 10 Portugal France Germany Slovenia Spain EA-17 Greece EU-27 Netherlands Luxembour Italy Cyprus Malta Belgium Finland Austria Slovakia Ireland Estonia Per cent per quarter
2 4 6 8 10 Hungary Czech Republic United Kingdom Romania EU-27 Bulgaria Switzerland Norway Non-EA Sweden Denmark Poland Lithuania Latvia Per cent per quarter
Figure 1.3 GDP growth, annualized 2011Q2, EA-17 countries Source: Eurostat Figure 1.4 GDP growth, annualized 2011Q2, Non-EA countries Source: Eurostat
There are clear distinctions between the drivers of growth in the Euro Area and the rest of Europe…
2 4 6 I II III IV I II III IV I II 2009 2010 2011 Percentage points Net export Gross fixed inv Changes in inventories Public cons Private cons. GDP
2 4 6 I II III IV I II III IV I II 2009 2010 2011 Percentage points Net export Gross fixed inv Changes in inventories Public cons Private cons. GDP
Figure 1.5 Contributions to annualized GDP growth, EA-17 (aggregate) Source: Eurostat, NIESR calculations Figure 1.6 Contributions to annualized GDP growth, Non-EA (aggregate) Source: Eurostat, NIESR calculations
…and also between different countries within these areas.
Figure 1.7 Contributions to quarterly GDP growth, average over 2011Q1 and Q2, EA-17 countries Source: Eurostat, NIESR calculations Figure 1.8 Contributions to quarterly GDP growth, average over 2011Q1 and Q2, Non-EA countries Source: Eurostat, NIESR calculations
1 2 3 4 5 Luxembourg Finland Estonia Netherlands France Austria Germany EA-17 EU-27 Belgium* Spain Italy Slovakia Greece* Slovenia Cyprus Portugal Ireland Malta * Data for 2011Q1 only Percentage points
Domestic demand Net trade
1 2 3 4 5 Romania Latvia Lithuania Norway Denmark EU-27 Poland Czech Rep. Non-EA Switzerland UK Bulgaria Hungary Croatia Percentage points Domestic demand Net trade
Labour market conditions vary widely across different European countries.
5 10 15 20 25 Austria Netherlands Luxembourg Germany* Malta Belgium Cyprus Finland Slovenia Italy EU-27 France EA-17 Portugal Estonia*** Slovakia Ireland Greece** Spain *August 2011 **July 2011 ***June 2011 Per cent Jan-08 Sep-11 2 4 6 8 10 12 14 16 18 Norway** Czech Denmark Sweden Romania UK** Poland EU-27 Hungary EA-17 Bulgaria Lithuania*** Latvia*** *August 2011 **July 2011 ***June 2011 Per cent Jan-08 Sep-11
Figure 1.8 EA-17 Unemployment Rates in January 2008 and September 2011, seasonally adjusted Source: Eurostat Figure 1.9 Non-EA Unemployment Rates in January 2008 and September 2011, seasonally adjusted Source: Eurostat
In some countries labour productivity has suffered as a result of adverse economic conditions.
1 2 3 4 France EA-17 Portugal Germany Austria Slovakia Spain Italy Netherlands Finland Estonia Slovenia Ireland Per cent per half year 2010 H1 2010 H2 2011 H1
1 2 3 4 5 Czech Rep. Poland UK* Norway Hungary Sweden Denmark Latvia Bulgaria Lithuania Per cent per half year 2010 H1 2010 H2 2011 H1
Figure 1.10 Semi-annual growth in output (market prices) per hour worked, EA-17 countries Source: Eurostat Figure 1.11 Semi-annual growth in output (market prices) per hour worked, Non-EA countries Source: Eurostat, *NIESR calculations
Short-run trends in productivity are explained by firms’ responses to uncertainty in the economy. Across different European countries firms have had mixed responses, including both labour-shedding and labour-hoarding.
Survey responses to Question 5a: Is there any evidence of labour hoarding [in your country]? YES NO
Belgium Denmark Finland Germany Hungary Italy Netherlands Slovakia Slovenia Spain Sweden Switzerland United Kingdom Austria Czech Republic France Greece Ireland Norway Poland Serbia
With the exception of Bulgaria, all European countries saw a rise in government debt relative to GDP between 2007 and 2010, although Euro Area countries tend to have larger debt stocks than non-Euro Area countries.
50 100 150
Estonia Luxemb Slovenia Slovakia Finland Spain Cyprus Netherla Malta Austria France German Portugal Ireland Belgium Italy Greece
Per cent of GDP
2007 2010
50 100 150 Bulgaria Romania Czech Rep. Lithuania Sweden Denmark Latvia Poland UK Hungary Per cent of GDP 2007 2010
Figure 1.12 General government debt, EA-17 countries Source: Eurostat Figure 1.13 General government debt, Non-EA countries Source: Eurostat
Almost uniformly across Europe, government budgets are in deficit, and exceed 3 per cent of GDP.
10 Estonia Luxemb Slovenia Slovakia Finland Spain Cyprus Netherla Malta Austria France German Portugal Ireland Belgium Italy Greece Per cent of GDP
2007 2010
5 Bulgaria Romania Czech Rep. Lithuania Sweden Denmark Latvia Poland UK Hungary Per cent of GDP 2007 2010
Figure 1.14 General government budget balance, EA-17 countries Source: Eurostat Figure 1.15 General government budget balance, Non-EA countries Source: Eurostat
1.3.1 Debt and deficit attributable to financial bailouts
Costs of financial bailouts have contributed significantly to the debt stock in many countries.
20 40 60 80 100 120 Sweden Austria Belgium Luxembourg Denmark Netherlands Germany France Spain Portugal UK Latvia Greece Ireland Per cent of GDP
Percentage point change in government debt stock (share of GDP) 2007-2010 Liabilities, 2010 Contingent liabilities, 2010 Figure 1.16 Government support to financial institutions, share of debt Source: Eurostat
Headline inflation has been high in most European countries, but this is chiefly attributable to high oil prices.
2 4 6 Ireland Slovenia France Cyprus Malta Germany Greece Spain Netherlands EA-17 Belgium Portugal Finland Italy Luxembourg Austria Slovakia Estonia Per cent per annum Headline Core
2 4 6 Switzerland Sweden Norway Czech Rep. Denmark Bulgaria EU (EICP) Poland Romania Hungary Latvia UK* Lithuania Iceland *Aug 11/Aug 10 Per cent per annum Headline Core
Figure 1.17 Consumer price inflation (measured by HICP), Core and Headline rates, September 2011, EA-17 countries Source: Eurostat Figure 1.18 Consumer price inflation (measured by HICP), Core and Headline rates, September 2011, Non-EA countries Source: Eurostat
Most European housing markets were significantly hit by the crisis, but began to recover in 2010. The current economic downturn is challenging this recovery in many economies.
5 10 15 Ireland UK Hungary Netherlands Hungary Spain Greece Denmark France Switzerland Norway Sweden Slovenia Finland Belgium Per cent
Figure 1.19 Change in real house prices between 2006 and 2010 Source: AIECE Survey responses
The crisis revealed the important role of housing markets in influencing financial stability. Many institutes consider house prices to be overvalued, despite downwards corrections in many countries.
Country Institution Are house prices overvalued?
Austria WIFO No Belgium FPB No Czech Republic CCSF No Denmark DEC Yes (5-10%) Finland ETLA No Germany DIW No (with exceptions) Hungary GKI No Ireland ESRI No Netherlands CPB No Serbia FTRI Yes Slovakia SAVBA Yes Slovenia SKEP Yes Spain CEPREDE Yes Sweden CSE Yes Switzerland KOF Yes United Kingdom NIESR Yes
While forecasts for GDP growth in the Euro Area were more or less accurate for 2011Q2 and Q3, the Q1 forecast was overly pessimistic. Similarly, the outturns for many individual countries may appear more positive than expected, given the air of pessimism hanging
EA-17 growth; AIECE May forecasts compared with actual outturns
Source: Actual outturn estimate from Eurostat
Date May 2011 forecast (annualized) May 2011 forecast (implied quarterly) Actual outturn 2011 Q1 1.7 0.4 0.8 2011 Q2 1.5 0.4 0.2 2011 Q3 1.3 0.3 0.2
0.5 1 1.5 2 Cyprus Portugal Netherlands Belgium Bulgaria Czech Rep. Spain EA17 EU27 Austria Finland France Germany Hungary UK US Slovakia Estonia Latvia Lithuania Japan Romania Per cent per quarter
2 4 6 8 Greece* Portugal Cyprus Japan UK Spain Netherlands* Bulgaria EA17 EU27 Czech Rep. Hungary France US Belgium Germany Austria Finland Slovakia Romania Latvia Lithuania Estonia* *Calculated from non seasonally-adjusted data Per cent
Figure 1.20 Real GDP growth, 2011Q3 Source: Eurostat Figure 1.21 Real GDP growth in 2011Q3 (year-on-year) Source: Eurostat