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 economic prospects have deteriorated markedly over the last six months - much of this is due to the heightened uncertainty surrounding Europe's sovereign debt crisis. • This section will look at recent developments concerning: – GDP Growth – Labour markets and productivity – Public Deficit and debt • Debt and deficit attributable to financial bailouts – Inflation – Housing markets – Topic for discussion – are we being too gloomy?
1.1 GDP Growth (1) Figure 1.1 GDP profile, EA-17 (aggregate) Figure 1.2 GDP profile, Non-EA (aggregate) Source: Eurostat Source: Eurostat 6 0.76 6 1.98 4 0.75 4 1.96 Billions of Euros 2 1.94 2 0.74 Billions of Euros 0 1.92 Per cent 0 0.73 Per cent -2 1.9 -2 0.72 -4 1.88 -4 0.71 -6 1.86 -6 0.7 -8 1.84 -8 0.69 -10 1.82 -10 0.68 -12 1.8 I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 Level (rhs) Level (rhs) Quarterly, annualized (lhs) Quarterly, annualized (lhs) Year-on-year (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.
1.1 GDP Growth (2) Figure 1.3 GDP growth, annualized 2011Q2, Figure 1.4 GDP growth, annualized 2011Q2, EA-17 countries Non-EA countries Source: Eurostat Source: Eurostat Estonia Latvia Ireland Lithuania Slovakia Poland Austria Finland Denmark Belgium Sweden Malta Cyprus Non-EA Italy Norway Luxembour Switzerland Netherlands EU-27 Bulgaria Greece EU-27 EA-17 Romania Spain Slovenia United Kingdom Germany Czech Republic France Hungary Portugal -2 0 2 4 6 8 10 -2 0 2 4 6 8 10 Per cent per quarter Per cent per quarter The split between ‘emerging’ and ‘advanced’ economies remains pronounced, even just within Europe.
1.1 GDP Growth (3) Figure 1.5 Contributions to annualized GDP growth, Figure 1.6 Contributions to annualized GDP growth, EA-17 (aggregate) Non-EA (aggregate) Source: Eurostat, NIESR calculations Source: Eurostat, NIESR calculations 6 6 4 4 Percentage points Percentage points 2 2 0 0 -2 -2 -4 -4 -6 -6 -8 -10 -8 -12 -10 -14 -12 I II III IV I II III IV I II I II III IV I II III IV I II 2009 2010 2011 2009 2010 2011 Net export Net export Gross fixed inv Gross fixed inv Changes in inventories Changes in inventories Public cons Public cons Private cons. Private cons. GDP GDP There are clear distinctions between the drivers of growth in the Euro Area and the rest of Europe…
1.1 GDP Growth (4) Figure 1.7 Contributions to quarterly GDP growth, Figure 1.8 Contributions to quarterly GDP growth, average over 2011Q1 and Q2, EA-17 countries average over 2011Q1 and Q2, Non-EA countries Source: Eurostat, NIESR calculations Source: Eurostat, NIESR calculations Malta Croatia Ireland Hungary Portugal Cyprus Bulgaria Slovenia UK Greece* Switzerland Slovakia Italy * Data for 2011Q1 only Non-EA Spain Czech Rep. Belgium* Poland EU-27 EA-17 EU-27 Germany Denmark Austria France Norway Netherlands Lithuania Estonia Latvia Finland Luxembourg Romania -4 -3 -2 -1 0 1 2 3 4 5 -4 -3 -2 -1 0 1 2 3 4 5 Percentage points Percentage points Domestic demand Net trade Domestic demand Net trade …and also between different countries within these areas.
1.2 Labour markets and productivity (1) Figure 1.8 EA-17 Unemployment Rates in January 2008 Figure 1.9 Non-EA Unemployment Rates in January and September 2011, seasonally adjusted 2008 and September 2011, seasonally adjusted Source: Eurostat Source: Eurostat 25 18 16 20 14 12 15 Per cent Per cent 10 8 10 6 5 4 2 0 0 Austria Luxembourg Germany* Malta Cyprus Finland Slovenia Italy EU-27 France EA-17 Portugal Estonia*** Slovakia Ireland Greece** Spain Netherlands Belgium Norway** Czech Denmark Sweden Romania UK** Poland EU-27 Hungary EA-17 Bulgaria Lithuania*** Latvia*** *August 2011 **July 2011 ***June 2011 *August 2011 **July 2011 ***June 2011 Jan-08 Sep-11 Jan-08 Sep-11 Labour market conditions vary widely across different European countries.
1.2 Labour markets and productivity (2) Figure 1.10 Semi-annual growth in output (market Figure 1.11 Semi-annual growth in output (market prices) per hour worked, EA-17 countries prices) per hour worked, Non-EA countries Source: Eurostat Source: Eurostat, *NIESR calculations 4 5 4 3 Per cent per half year Per cent per half year 3 2 2 1 1 0 0 -1 -1 -2 -2 Czech Rep. Poland UK* Norway Hungary Sweden Latvia Bulgaria Lithuania Denmark France EA-17 Portugal Germany Austria Slovakia Spain Italy Netherlands Finland Estonia Slovenia Ireland 2010 H1 2010 H2 2011 H1 2010 H1 2010 H2 2011 H1 In some countries labour productivity has suffered as a result of adverse economic conditions.
1.2 Labour markets and productivity (3) 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 Austria Denmark Czech Republic Finland France Germany Greece Hungary Ireland Italy Norway Netherlands Poland Slovakia Serbia Slovenia Spain Sweden Switzerland United Kingdom
1.3 Public deficit and debt (1) Figure 1.12 General government debt, EA-17 countries Figure 1.13 General government debt, Non-EA countries Source: Eurostat Source: Eurostat Greece Hungary Italy UK Belgium Ireland Poland Portugal German Latvia France Denmark Austria Malta Sweden Netherla Cyprus Lithuania Spain Finland Czech Rep. Slovakia Romania Slovenia Luxemb Bulgaria Estonia 0 50 100 150 0 50 100 150 Per cent of GDP Per cent of GDP 2007 2010 2007 2010 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.
1.3 Public deficit and debt (2) Figure 1.14 General government budget balance, Figure 1.15 General government budget balance, EA-17 countries Non-EA countries Source: Eurostat Source: Eurostat Greece Hungary Italy UK Belgium Ireland Poland Portugal German Latvia France Denmark Austria Malta Sweden Netherla Cyprus Lithuania Spain Czech Rep. Finland Slovakia Romania Slovenia Luxemb Bulgaria Estonia -15 -10 -5 0 5 -40 -30 -20 -10 0 10 Per cent of GDP Per cent of GDP 2007 2010 2007 2010 Almost uniformly across Europe, government budgets are in deficit, and exceed 3 per cent of GDP.
1.3 Public deficit and debt (3) 1.3.1 Debt and deficit attributable to financial bailouts 120 100 Per cent of GDP 80 60 Figure 1.16 Government support to financial institutions, share of debt 40 20 Source: Eurostat 0 -20 Sweden Austria Luxembourg Netherlands Germany France Spain Portugal UK Latvia Greece Ireland Belgium Denmark Percentage point change in government debt stock (share of GDP) 2007-2010 Liabilities, 2010 Contingent liabilities, 2010 Costs of financial bailouts have contributed significantly to the debt stock in many countries.
1.4 Inflation Figure 1.17 Consumer price inflation (measured by Figure 1.18 Consumer price inflation (measured by HICP), Core and Headline rates, September 2011, HICP), Core and Headline rates, September 2011, EA-17 countries Non-EA countries Source: Eurostat Source: Eurostat Iceland Estonia Lithuania Slovakia Austria UK* Luxembourg Latvia *Aug 11/Aug 10 Italy Hungary Finland Portugal Romania Belgium Poland EA-17 EU (EICP) Netherlands Spain Bulgaria Greece Denmark Germany Czech Rep. Malta Cyprus Norway France Sweden Slovenia Switzerland Ireland -2 0 2 4 6 -2 0 2 4 6 Per cent per annum Per cent per annum Headline Core Headline Core Headline inflation has been high in most European countries, but this is chiefly attributable to high oil prices.
1.5 Housing markets (1) 15 10 Per cent 5 0 -5 Figure 1.19 Change in real house -10 prices between 2006 and 2010 -15 Source: AIECE Survey responses -20 -25 -30 Ireland UK Hungary Netherlands Hungary Spain Greece Denmark France Switzerland Norway Sweden Slovenia Finland Belgium 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.
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