Growth stabilises: Growth stabilises: investment a major driver, - - PowerPoint PPT Presentation

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Growth stabilises: Growth stabilises: investment a major driver, - - PowerPoint PPT Presentation

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Wiener Institut fr The Vienna Institute for www.wiiw.ac.at Internationale International Economic Wirtschaftsvergleiche Studies Press conference, 17 March 2016 New wiiw forecast for Central, East and Southeast Europe, 2016-2018 Growth

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

www.wiiw.ac.at

Press conference, 17 March 2016 New wiiw forecast for Central, East and Southeast Europe, 2016-2018

Growth stabilises: Growth stabilises: investment a major driver, except in countries plagued by recession

Gabor Hunya Hunya@wiiw.ac.at

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  • 2015 GDP growth
  • higher than expected in the EU-CEE and WB – reached peak
  • lower in the CIS-3 and UA – bottoming out

Main questions after a year of consumption revival/decline:

  • Will investments contribute more to future growth?
  • Can Russia and UA overcome the depression?

  • Future growth factors for EU-CEE and WB based on stability achieved :
  • household consumption the main driver – real wages rise (low inflation)
  • emigration leads to labour shortages and pressure on wages
  • reviving investments, both public and private – EU transfers cyclical
  • more fiscal space following rebalancing, except in HR, HU, RS, SI
  • current account balance will deteriorate within narrow margins
  • risks stemming from global and EU growth slowdown (assumptions: EC Winter Forecast)
  • CIS and UA depressed by low oil prices, depreciation, inflation, rebalancing

needs, conflicts and embargoes – future depends on oil prices and reforms

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Real GDP growth in %

More risks ahead if global economic growth falters

Commodity prices

Source: EC Winter Forecast 2016. World Bank Commodity Price Data (The Pink Sheet).

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Quarterly real GDP growth of the CESEE countries, change in % against preceding year

Divergence of economic growth: EU-CEE, WB and Turkey rise, CIS-3 and Ukraine fall

2 4 6 8 BG CZ HU PL RO SK 2 4 6 8 10 EE HR LT LV SI

Source: National and Eurostat statistics.

  • 6
  • 4
  • 2

1Q 10 1Q 11 1Q 12 1Q 13 1Q 14 1Q 15 4Q 15

  • 6
  • 4
  • 2

1Q 10 1Q 11 1Q 12 1Q 13 1Q 14 1Q 15 4Q 15

  • 10
  • 5

5 10 15 1Q 10 1Q 11 1Q 12 1Q 13 1Q 14 1Q 15 4Q 15 AL BA ME MK RS XK

  • 20
  • 15
  • 10
  • 5

5 10 15 1Q 10 1Q 11 1Q 12 1Q 13 1Q 14 1Q 15 4Q 15 BY KZ RU UA TR

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Greens and reds: real GDP growth forecast and revisions

2015 2016 2017 2018 2015 2016 2017 BG 3.0 2.5 2.5 2.7 0.7

  • 0.1
  • 0.5

HR 1.5 1.4 1.8 2.0 0.8 0.2 0.2 CZ 4.3 2.4 2.3 2.4 0.4 0.0 0.0 EE 1.2 2.2 2.4 2.6

  • 0.7
  • 0.4
  • 0.4

HU 2.9 2.2 2.3 2.9 0.0 0.1 0.3 LV 2.7 3.0 3.2 3.5 0.3 0.0 0.2 LT 1.6 3.0 3.4 3.5 0.0 0.0 0.0 PL 3.6 3.4 3.2 3.4 0.1 0.1

  • 0.1

RO 3.7 4.0 3.0 3.5 0.3 0.3 0.3 SK 3.6 3.0 3.2 3.3 0.4 0.0 0.3 Revisions, pp EU-CEE Forecast, %

Note: Current forecast and revisions relative to the wiiw Autumn 2015 Forecast Report. Colour scale reflects variation from the minimum (red) to the maximum (green) values. Source: wiiw forecast.

SK 3.6 3.0 3.2 3.3 0.4 0.0 0.3 SI 2.9 2.0 2.3 2.8 0.2

  • 0.2

0.0 AL 2.6 3.2 3.5 3.6 0.0 0.0

  • 0.1

BA 2.3 2.9 2.9 3.1 0.5 0.6 0.5 XK 3.7 3.9 4.3 4.0

  • 0.6

0.4 0.2 MK 3.5 3.4 3.1 3.1 0.1 0.7 0.0 ME 3.4 2.8 2.8 3.1 1.0 0.2 0.0 RS 0.7 1.6 1.7 2.0 0.6 0.7 0.3 Turkey TR 3.3 3.2 3.1 3.0 0.3 0.1 0.0 BY

  • 3.9
  • 2.6

0.5 1.5

  • 0.1
  • 2.6
  • 0.9

KZ 1.2 1.0 2.5 3.5

  • 0.3
  • 1.5
  • 1.0

RU

  • 3.7
  • 0.8

0.8 1.8 0.0

  • 1.8
  • 0.6

Ukraine UA

  • 10.5

0.0 1.9 2.5 1.0 0.0 0.1 CIS-3 Western Balkans

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6 8 Household final consumption Government final consumption Gross fixed capital formation Change in inventories Net exports GDP total

GDP growth in 2015-2018 and contribution of individual demand components in the EU-CEE, in percentage points

Main growth drivers: household consumption and investment 

  • 4
  • 2

2 4 6 BG CZ EE HR HU LT LV PL RO SI SK

Source: wiiw Annual Database incorporating national and Eurostat statistics, own calculations. Forecasts by wiiw.

'15 '16 '17 '18

EU-CEE

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4 6 8 6 8

GDP growth in 2015-2018 and contribution of individual demand components in the WB, Turkey, CIS-3 and Ukraine, in percentage points

Westerns Balkans similar to EU-CEE; austerity in CIS+UA

Household final consumption Government final consumption Gross fixed capital formation Change in inventories Net exports GDP total

  • 16
  • 14
  • 12
  • 10
  • 8
  • 6
  • 4
  • 2

2 4 BY KZ RU UA

  • 4
  • 2

2 4 6 AL BA ME MK RS TR XK

Source: wiiw Annual Database incorporating national and Eurostat statistics, own calculations. Forecasts by wiiw.

Western Balkans + TR CIS-3 + UA

'15 '16 '17 '18 '15 '16 '17 '18

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Gross fixed capital formation in % of GDP

Investment revival after temporary decline

25 30 BG CZ HU PL RO SK 25 30 EE HR LT LV SI

Source: wiiw Annual Database incorporating national and Eurostat statistics, wiiw forecasts.

15 20 2012 2013 2014 2015 2016 2017 2018 15 20 2012 2013 2014 2015 2016 2017 2018 10 15 20 25 30 35 40 2012 2013 2014 2015 2016 2017 2018 AL BA ME MK RS XK 10 15 20 25 30 35 40 2012 2013 2014 2015 2016 2017 2018 BY KZ RU TR UA

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Stock of private bank loans, % GDP, 2010-2015

Conditions for private investment started improving (1): bank loans from deleveraging to recovery

80 90 100 2010 2012 2014 2015

Note: Private bank loans comprise loans of non-financial corporations and households taken from banking statistics. Source: National Bank statistics, wiiw own calculations.

10 20 30 40 50 60 70 BG CZ EE HR HU LT LV PL RO SI SK AL BA ME MK RS TR KZ RU UA

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Bank non-performing loans, % of total loans

Conditions for private investment started improving (2): shrinking non-performing loans rate

20 25 30 2015 2014

Note: Loans more than 90 days overdue. EE, LT - loans that are more than 60 days overdue. RU - Russian Accounting Standards: debt service overdue, not fully comparable with other countries. Source: National Bank statistics, wiiw own calculations.

5 10 15 20 BG CZ EE HR HU LT LV PL RO SI SK AL BA ME MK RS TR KZ RU UA

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Fiscal stance of the CESEE countries, 2015

Conditions for public investment: fiscal space dependent

  • n debt level …

AL HR HU RS SI UA

70 80 90 100

  • ss debt,

Note: Axes denote the limits included in the EU Excessive Deficit Procedure: for debt 60% of GDP, for deficits 3% of GDP. Source: wiiw Annual Database incorporating national and Eurostat statistics.

BA BG BY CZ EE KZ LT LV ME MK PL RO RU SK TR XK

10 20 30 40 50 60 70

  • 8.0
  • 6.0
  • 4.0
  • 2.0

0.0 2.0 General government gros in % of GDP General government balance in % of GDP

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General government net lending (+) or net borrowing (-), in % of GDP, 2015

… but not all make use of it

Albania Macedonia Montenegro Serbia Interest Primary balance

Source: AMECO.

  • 10
  • 5

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

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General government GFCF and capital transfers received in % of GDP, change 2016/2015

Public investments temporarily curtailed due to less EU transfers in 2016

BG EE HR LV LT PL

  • 0.5

0.0 0.5 pital formation

Source: AMECO.

BG CZ HU RO SI SK

  • 3.0
  • 2.5
  • 2.0
  • 1.5
  • 1.0
  • 2.0
  • 1.5
  • 1.0
  • 0.5

0.0 0.5 General government gross fixed capita in % of GDP General government: capital transfers received, in % of GDP

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Average net financial position of the EU-CEE-10 in 2007-2014 and wiiw forecast, in per cent of GDP

Temporary decline in EU transfers in 2016; Juncker Plan no substitute

Period per cent of GDP 2007-2008 1.3

Note: Net financial position is defined as the operating budgetary balance calculated by the European

  • Commission. The EU-CEE-10 aggregate does not include Croatia.

Source: European Commission, wiiw forecast.

2009-2011 2.5 2012-2014 2015 3.2 up to 6 2016-2017 forecast 1.0 – 2.5 EFSI loans forecast 2016-2017 0.5 – 1.5

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Demography and emigration lead to labour shortages in EU-CEE

Cumulative net migration and natural population change, 2011-2014, in % of 2014 population

2 4 Migration Natural

Source: wiiw Annual Database incorporating national and Eurostat statistics.

  • 8
  • 6
  • 4
  • 2

BG CZ EE HR HU LT LV PL RO SI SK

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Unemployment rates decline and vacancy rates increase in response to economic recovery

Demography and emigration lead to labour shortages in EU-CEE

2.5 BG CZ EE HR LV LT HU PL RO SI SK Unemployment rate Vacancy rate 20 BG CZ EE HR HU LT LV PL RO SI SK

Source: wiiw Annual Database incorporating national and Eurostat statistics.

0.0 0.5 1.0 1.5 2.0 2.5 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2 4 6 8 10 12 14 16 18 20 2013m03 2013m09 2014m03 2014m09 2015m03 2015m09

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GDP per capita, at PPS, EU-28 average = 100

Catching up at 1-2 pp p.a. except HR, RS, BY, RU, UA

70 80 90 100 2010 2015 2018

Source: wiiw Annual Database incorporating national and Eurostat statistics. 10 20 30 40 50 60 BG CZ EE HR HU LT LV PL RO SI SK AL BA ME MK RS TR XK BY KZ RU UA

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  • GDP growth in 2015 was either peak or trough
  • 2016-2018 GDP in EU-CEE, Western Balkans and Turkey +3% p.a.
  • In CIS+UA anaemic growth returns
  • dependent on oil price and structural reforms
  • Household consumption the main growth driver but investments will recover

Main messages 

  • Household consumption the main growth driver but investments will recover
  • Temporary decline in EU transfers in 2016; Juncker Plan no substitute
  • Conditions of private investments improve in EU-CEE
  • Demography and emigration lead to labour shortages in EU-CEE
  • More risks ahead if global economic growth falters; China, EU stumble;

commodity prices fluctuate

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Press conference, 17 March 2016 New wiiw forecast for Central, East and Southeast Europe, 2016-2018

 Thank you for your attention!

Gabor Hunya Hunya@wiiw.ac.at

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Country codes (in alphabetic order) and abbreviations

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 EFSI European Fund for Strategic Investments CESEE Central, East and Southeast Europe CIS Commonwealth of Independent States EU-CEE European Union – Central and Eastern Europe