Part 1: Growth has passed its peak Vasily Astrov astrov@wiiw.ac.at - - PowerPoint PPT Presentation

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Part 1: Growth has passed its peak Vasily Astrov astrov@wiiw.ac.at - - PowerPoint PPT Presentation

Dec 11, 2022 191 likes •412 views

Wiener Institut fr The Vienna Institute for wiiw.ac.at Internationale International Economic Wirtschaftsvergleiche Studies Press conference, 28 June 2018 New wiiw forecast for Central, East and Southeast Europe, 2018-2020 Part 1: Growth

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

wiiw.ac.at

Part 1: Growth has passed its peak

Vasily Astrov

astrov@wiiw.ac.at

Press conference, 28 June 2018 New wiiw forecast for Central, East and Southeast Europe, 2018-2020

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Note: Colour scheme: dark blue – strong growth slowdown (2018 vs 2017); blue – growth slowdown; red – growth acceleration; black – steady GDP growth. Source: wiiw, wiiw forecasts (June 2018).

2017 2018 2019 2020

Turkey 7.4 4.5 4.1 4.0 Romania 6.9 4.2 3.5 3.8 Slovenia 5.0 4.8 3.7 3.6 Estonia 4.9 3.5 3.1 3.0 Poland 4.7 3.8 3.5 3.3 Latvia 4.5 3.9 3.6 3.1 Czech Republic 4.4 3.7 3.3 3.2 Montenegro 4.4 3.2 3.2 3.0 Kazakhstan 4.0 4.0 3.0 3.0 Hungary 4.0 4.0 2.8 2.4 Albania 3.8 3.8 4.1 4.0

2017 2018 2019 2020

Lithuania 3.8 3.3 3.0 2.6 Kosovo 3.7 3.9 3.8 3.8 Bulgaria 3.6 3.5 3.4 3.1 Slovakia 3.4 3.8 4.2 3.3 Bosnia and Herzegovina 3.0 3.3 3.3 3.3 Croatia 2.8 2.5 2.7 2.8 Ukraine 2.5 3.3 3.1 2.0 Belarus 2.4 4.0 3.7 3.4 Serbia 1.9 3.6 3.0 2.8 Russia 1.5 1.5 1.6 1.7 Macedonia 0.0 3.5 3.1 3.3

Slowdown in EU-CEE and Turkey, upswing in the Western Balkans and parts of the CIS

Real GDP growth and forecast

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Source: wiiw Annual Database based on national statistics and Eurostat; own calculations. Forecast: wiiw.

GDP growth 2017-2020 in % and contribution of individual demand components in percentage points

Growth determinants in EU-CEE

  • 6
  • 4
  • 2

2 4 6 8 10 BG CZ EE HR HU LT LV PL RO SI SK Household final consumption Gross fixed capital formation Net exports GDP total

'17 '18 '19 '20

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Source: wiiw Annual Database based on national statistics and Eurostat; own calculations. Forecast: wiiw.

GDP growth 2017-2020 in % and contribution of individual demand components in percentage points

Growth determinants in the Western Balkans, Turkey, CIS and Ukraine

  • 6
  • 4
  • 2

2 4 6 8 10 AL BA ME MK RS XK TR

'17 '18 '19 '20

  • 6
  • 4
  • 2

2 4 6 8 10 BY KZ RU UA

'17 '18 '19 '20

Household final consumption Gross fixed capital formation Net exports GDP total

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Romania, Turkey: end of ‘overheating’

  • Tightening monetary policy in response to currency depreciation
  • Poor implementation of tax reform (Romania)

In general: only slight weakening

  • Shift in spending priorities towards real estate purchases
  • Increase in remittances transferred abroad (mainly to Ukraine)

Acceleration in only a few countries:

  • Kosovo (political crisis has been overcome)
  • Slovenia, Serbia, Bosnia and Herzegovina, Kazakhstan (fiscal

loosening, increase in bank lending)

  • Estonia (income tax cuts)

Private consumption growth is losing momentum

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Note: Rising line indicates currency depreciation. Source: wiiw Monthly Database based on national statistics and Eurostat.

Romania and Turkey depreciating, Czech Republic appreciating

Nominal exchange rate to the euro

January 2016 = 100

90 92 94 96 98 100 102 104 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 CZ PL HU HR RO 70 80 90 100 110 120 130 140 150 160 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 AL RS TR KZ RU UA

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Source: wiiw Monthly Database based on national statistics and Eurostat.

Goods exports (nominal, euro basis), 2016-2018 Change against preceding year in %, moving 3-month average

Export dynamics slightly weakening

  • 10
  • 5

5 10 15 20 25 30 Jan-16 Jan-17 Jan-18 CZ SK PL HU SI HR

  • 10
  • 5

5 10 15 20 25 30 Jan-16 Jan-17 Jan-18 BG RO EE LV LT

  • 40
  • 30
  • 20
  • 10

10 20 30 40 50 60 Jan-16 Jan-17 Jan-18 AL MK ME RS BA

  • 40
  • 30
  • 20
  • 10

10 20 30 40 50 60 Jan-16 Jan-17 Jan-18 TR KZ RU UA

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  • Explains half of the GDP growth in half of the CESEE countries
  • Reasons:
  • labour force shortages
  • high capacity utilisation
  • low interest rates
  • EU-CEE: EU transfers important
  • Western Balkans: increasingly attractive for foreign direct investors
  • in addition: infrastructure investments (also related to ‘New Silk Road’)
  • Macedonia: political crisis has been overcome
  • Ukraine: recovery from the slump of 2014-2015

Investment demand continues to be strong

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BG CY CZ EE EL ES HR HU IT LT LV MT PL PT RO SI SK

500 1000 1500 2000 2500 3000 500 1000 1500 2000 2500 3000

MFF 2021-2027 MFF 2014-2020

Note: ESIF – European Structural and Investments Fund. MFF – Multiannual Financial

  • Framework. MFF 2021-2027 data are in 2018 prices.

Source: European Commission, Smart Specialisation Platform.

ESIF, planned allocations, in EUR per capita

Post-Brexit EU budget: cuts for most EU-CEE countries

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Note: The fifth criterion (exchange rate stability) requires participation in the European Exchange Rate Mechanism (ERM2). Since no EU-CEE country is currently participating in ERM2, none of the countries comply with this criterion. Source: European Commission (2018), Convergence Report, Institutional Paper No. 078, May.

Criteria for euro introduction, May 2018 (‘+’ = criterion has been met)

Prospects for euro introduction generally dim

with the exception of Croatia

Criterion BG CZ HU PL RO HR Price stability +

  • +
  • +

Soundness and stability

  • f public finances

+ + + + + + Long-term interest rate + + +

  • +

Legislation, in particular on the role of the central bank

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

wiiw.ac.at

Julia Grübler

gruebler@wiiw.ac.at @JuliaGruebler

Part 2: Austria’s economic relations with Central, East and Southeast Europe (CESEE)

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AL BY BA BG HR CZ EE HU KZ XK LV LT MK ME PL RO RU RS SK SI TR UA EU28 AT DE IT US CH CN

20 40 60 80 100 120 140 160 180 200 8.5 9.0 9.5 10.0 10.5 11.0

Note: Bubble size in relation to population. GDP = gross domestic product, PPP = purchasing power parity, i.e. accounting for the local price level. Source: wiiw Annual Database, Eurostat, WDI World Bank.

Context Austria’s EU Presidency and paradigm shift on the world economic stage

ln (GDP per capita at PPP) Trade openness (exports + imports)/GDP

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DE IT CN CH CZ US NL HU FR PL RU Other CESEE Rest of World

2017

DE US IT FR CH CZ HU PL UK CN RU Other CESEE Rest of World

2017

Source: Statistik Austria.

V-4 the only export destination gaining shares since the economic and financial crisis. Germany’s dominance increases concerns about US trade policy. 141,918

EUR bn Exports

147,615

EUR bn Imports

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Austria among the top 5 export destinations for Slovenia (7.4%), Croatia (6.2%) and Hungary (5.0%) in 2017 …

Note: Ranking by share in total exports 2017. Source: wiiw Database incorporating national and Eurostat statistics.

3

4

6

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… and among the top 5 countries of origin for imports of Slovakia (10.2%), Slovenia (9.3%), Croatia (7.5%) and Hungary (6.3%)

4

4

8

Note: Ranking by share in total imports 2017. Source: wiiw Database incorporating national and Eurostat statistics.

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New record with 29 million arrivals and 106 million overnight stays, with growing shares for CESEE and China

Source: Statistik Austria.

0% 20% 40% 60% 80% 100% 2005 2007 2009 2011 2013 2015 2017

DE NL CH UK IT CZ BE PL HU FR US CN RU Other CESEE Rest of World

Overnight stays of foreign tourists in Austria

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Austria remains top investor in CESEE (stock: 32.5%) and makes above-average profits in the region (income: 40.7%)

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Note: Ranking by share in total FDI stock, 2016. Data for 2017: AL, BG, EE, KZ, XK, HR, LV, LT, UA. Source: wiiw Database incorporating national and Eurostat statistics.

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The share of non-performing loans has decreased for countries with the largest claims. Ukraine (+24pp NPL) ranks 23rd by its share in Austrian claims.

Note: Non-performing loans (latest available data): Loans more than 90 days overdue. Sources: Foreign claims: BIS. Non-performing loans: national statistics for CESEE, IMF for other countries.

CZ DE SK RO HR PL HU RU US RS SI BG BA UA CN

1 2 4 8 16 32 64 128 5 10 15 20 25 Non-performing loans (logarithmic scaling) Austrian banks' consolidated claims

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Austria vs China as economic partners of CESEE

Note: TOP 5 TOP 10. Data refer to shares from the perspective of CESEE. FDI data: 2017 for AL, BG, EE, XK, HR, LV, LT; 2016 for all other countries. Source: wiiw Database incorporating national and Eurostat statistics.

Exports CESEE Imports CESEE FDI stock CESEE ISO2 AT CN AT CN AT CN EU-CEE-11 BG 1.8 2.4 2.4 3.7

  • 9.7
  • 0.3

CZ 4.4

  • 1.3

3.9

  • 7.3
  • 11.0
  • 0.5

EE 0.3 1.7 1.0 4.7

  • 1.6

0.1 HR 6.2

  • 0.9

7.5

  • 3.2
  • 20.0
  • 0.0

HU 5.0

  • 1.6

6.3

  • 5.9
  • 10.2
  • 0.3

LT 0.5 0.7 1.1 2.9 1.1 0.0 LV 0.4 1.1 1.0 3.0

  • 1.4

0.5 PL 1.9 1.0 2.1 8.0

  • 4.0
  • 0.1

RO 2.3 1.2 3.3

  • 5.0
  • 11.9
  • 0.1

SI 7.4

  • 1.7

9.3

  • 4.5
  • 24.7
  • 0.1

SK 6.0

  • 1.6

10.2

  • 4.2
  • 16.0
  • 0.1

WB-6 AL 0.7 3.1

  • 1.2

7.9

  • 6.4
  • 0.1

BA 8.1

  • 0.3

3.4

  • 6.5
  • 19.2
  • 0.0

MK 1.2 1.1 1.7 5.8

  • 12.2
  • 0.8

ME 0.5 1.7 1.9 9.6

  • 3.4
  • .

RS 2.7 0.4 3.1

  • 8.1
  • 11.6
  • .

XK 2.8

  • 1.5

1.7 9.0

  • 6.0
  • .
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Migration from CESEE: From guest worker to brain drain

Note: Top 10 according to 2017 ranking, shares in %, data based on BPM6 methodology. Source: Oesterreichische Nationalbank (OeNB).

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% HU DE SK SI RO CZ PL IT BA HR

  • Restl. MOSOEL

Rest der Welt

Compensations of employees transferred from Austria Workers‘ remittances transferred from Austria

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% HU RS PL TR DE BA SK RO HR CZ

  • Restl. MOSOEL

Rest der Welt Other CESEE Rest of the World Other CESEE Rest of the World

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

wiiw.ac.at

Thank you for your attention!

Follow us: www.wiiw.ac.at » Open Data Appendix of data to the Report, Excel file, free download » Data Visualisation to the Report, tool to create customised graphs

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Country codes

AL Albania ME Montenegro BY Belarus MK Macedonia BA Bosnia and Herzegovina PL Poland BG Bulgaria 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 CESEE Central, East and Southeast Europe CIS Commonwealth of Independent States EU-CEE European Union – Central and Eastern Europe WB Western Balkans