Wiener Institut für Internationale Wirtschaftsvergleiche
The Vienna Institute forInternational EconomicStudies
www.wiiw.ac.at
wiiw Spring Seminar, 7 April 2016
Gábor Hunya
Economic Prospects for CESEE
2wiiw Spring Seminar, 7 April 2016Europe’s Integration Challenged
� 2015 GDP growth - higher than expected in the EU-CEE and WB – reached peak
- lower in the CIS-3 and UA – bottoming out in late 2016
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
3wiiw Spring Seminar, 7 April 2016Europe’s Integration Challenged
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
0
2
4
6
8
BG CZ HU
PL RO SK
2468
10EE HR LT LV SI
Source: National and Eurostat statistics.
-6
-4
-2
0
1Q 10 1Q 11 1Q 12 1Q 13 1Q 14 1Q 15 4Q 15-6-4-20
1Q 10 1Q 11 1Q 12 1Q 13 1Q 14 1Q 15 4Q 15
-10
-5
0
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
0
5
10
15
1Q 10 1Q 11 1Q 12 1Q 13 1Q 14 1Q 15 4Q 15
BY KZ RU UA TR
5wiiw Spring Seminar, 7 April 2016Europe’s Integration Challenged
2015 2016 2017 2018BG 3.0 2.5 2.5 2.7HR 1.6 1.4 1.8 2.0CZ 4.3 2.4 2.3 2.4EE 1.1 2.2 2.4 2.6HU 2.9 2.2 2.3 2.9LV 2.7 3.0 3.2 3.5LT 1.6 3.0 3.4 3.5PL 3.6 3.4 3.2 3.4RO 3.7 4.0 3.0 3.5
Forecast, %
EU-CEE
Greens and reds: real GDP growth forecast and revisions
RO 3.7 4.0 3.0 3.5SK 3.6 3.0 3.2 3.3SI 2.9 2.0 2.3 2.8AL 2.6 3.2 3.5 3.6BA 2.3 2.9 2.9 3.1XK 3.7 3.9 4.3 4.0MK 3.7 3.4 3.1 3.1ME 3.2 2.8 2.8 3.1RS 0.7 1.6 1.7 2.0
Turkey TR 3.3 3.2 3.1 3.0BY -3.9 -2.6 0.5 1.5KZ 1.2 1.0 2.5 3.5RU -3.7 -0.8 0.8 1.8UA -9.9 0.0 1.9 2.5
Western Balkans
CIS-3 +UA
Colour scale reflects variation from the minimum (red) to the maximum (green) values.Source: wiiw Annual Database incorporating national and Eurostat statistics; wiiw forecast.
6wiiw Spring Seminar, 7 April 2016Europe’s Integration Challenged
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
6
8
Household final consumption Government final consumption Gross fixed capital formation
Change in inventories Net exports GDP total
Source: wiiw Annual Database incorporating national and Eurostat statistics; own calculations. Forecasts by wiiw.
'15 '16 '17 '18
EU-CEE
-4
-2
0
2
4
6
BG CZ EE HR HU LT LV PL RO SI SK
7wiiw Spring Seminar, 7 April 2016Europe’s Integration Challenged
Household final consumption Government final consumption Gross fixed capital formation
Change in inventories Net exports GDP total
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
4
6
8
-4
-2
0
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
-16
-14
-12
-10
-8
-6
-4
-2
0
2
4
BY KZ RU UA
10wiiw Spring Seminar, 7 April 2016Europe’s Integration Challenged
Gross fixed capital formation in % of GDP
Investment revival after temporary decline
25
30
BG CZ HU
PL RO SK
25
30EE HR LT LV SI
Source: wiiw Annual Database incorporating national and Eurostat statistics; wiiw forecasts.
15
20
2012 2013 2014 2015 2016 2017 201815
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
11wiiw Spring Seminar, 7 April 2016Europe’s Integration Challenged
Stock of private bank loans, % GDP, 2010-2015
Conditions for private investment start improving: bank loans from deleveraging to recovery; less non-performing loans; slightly more greenfield FDI; higher profits
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.
0
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
12wiiw Spring Seminar, 7 April 2016Europe’s Integration Challenged
Fiscal stance of the CESEE countries, 2015
Conditions for public investment: fiscal space dependent on debt level …
AL
HR
HURS
SI UA
70
80
90
100
Gen
eral
gov
ernm
ent g
ross
deb
t,
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
BYCZ
EE
KZ
LT
LV
ME
MKPL
RO
RU
SK
TR
XK
0
10
20
30
40
50
60
70
-8.0 -6.0 -4.0 -2.0 0.0 2.0
Gen
eral
gov
ernm
ent g
ross
deb
t,in
% o
f GD
P
General government balance in % of GDP
13wiiw Spring Seminar, 7 April 2016Europe’s Integration Challenged
HungaryLithuania
LatviaPoland
RomaniaSloveniaSlovakiaAlbania
MacedoniaMontenegro
SerbiaInterest Primary balance
General government net lending (+) or net borrowing (-), in % of GDP, 2013 and 2015
… but not all make use of it
2013
-15 -12 -9 -6 -3 0 3 6
BulgariaCzech Republic
EstoniaCroatia
Hungary
-15 -12 -9 -6 -3 0 3 6
BulgariaCzech Republic
EstoniaCroatia
HungaryLithuania
LatviaPoland
RomaniaSloveniaSlovakiaAlbania
MacedoniaMontenegro
Serbia
Source: AMECO.
2015
16wiiw Spring Seminar, 7 April 2016Europe’s Integration Challenged
Period per cent of GDP
General government investments and capital transfers received in % of GDP, change 2016/2015
Public investments temporarily curtailed due to decline in EU transfers in 2016; recovery expected
EEHRPL0.0
0.5
Ge
ner
al g
over
nmen
t gro
ss fi
xed
cap
ital f
orm
atio
n
Average net financial position of the EU-CEE-10 in 2007-2014 and wiiwforecast, in % of GDP
2007-2008 1.3
2009-2011 2.5
2012-2014
2015 estimated
3.2
up to 6
2016-2017 forecast 1.0 – 2.5
EFSI loans forecast 2016-2017 0.5 – 1.5
Source: AMECO.
BG
CZ
HR
LVLT
HU
PL
RO
SI
SK
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
-2.0 -1.5 -1.0 -0.5 0.0 0.5Ge
ner
al g
over
nmen
t gro
ss fi
xed
cap
ital f
orm
atio
n in
% o
f GD
P
General government: capital transfers received, in % of GDP
17wiiw Spring Seminar, 7 April 2016Europe’s Integration Challenged
Current account balance versus external debt, 2010-2015
Current account deficit shrank / surplus increased in high-debt EU-CEE;deficits shrank but debt increased in WB
HR
HU
LV
SI
100
120
140
160
Gro
ss e
xter
nal d
ebt,
% o
f GD
P
HRHU
LV
SI
UA
100
120
140
160
Gro
ss e
xter
nal d
ebt,
% o
f GD
P
HRHU
Note: Orange dots: 2015. Grey dots: average 2010-2014.Source: wiiw Annual Database incorporating national and Eurostat statistics.
ALBA
BG
BY CZ
EEHR
KZLT
ME
MKPLRO
RS
RU
SK
TR
UA
XK
0
20
40
60
80
100
-20 -15 -10 -5 0 5 10
Gro
ss e
xter
nal d
ebt,
% o
f GD
P
Current account balance, % GDP
AL
BA
BGBY
CZ
EEKZ
LT
ME
MKPL
RO
RS
RU
SK
TR
XK
0
20
40
60
80
100
-20 -15 -10 -5 0 5 10
Gro
ss e
xter
nal d
ebt,
% o
f GD
P
Current account balance, % GDP
HRHR
18wiiw Spring Seminar, 7 April 2016Europe’s Integration Challenged
BOP components in % of GDP, 2015
Mainly positive current and capital accounts in EU-CEE; negative current accounts in WB
10.0
15.0
Net errors and omissions Financial account, net Capital account balance Current account balance
Source: wiiw Annual Database incorporating national and Eurostat statistics.
-15.0
-10.0
-5.0
0.0
5.0
10.0
BG CZ EE HR HU LT LV PL RO SI SK AL BA ME MK RS TR XK BY KZ RU UA
19wiiw Spring Seminar, 7 April 2016Europe’s Integration Challenged
Primary income, compensation of employees, credit in % of GDP and secondary income, remittances, credit, in % of GDP, 2010 and 2014
Increasing private transfers in the wake of emigration
6
7
8Remittances Compensation
Remark: No data for 2010 compensation in SK and ME, for 2010 remittances in RO, SK, ME, RS. Source: Eurostat.
0
1
2
3
4
5
6
10 14 10 14 10 14 10 14 10 14 10 14 10 14 10 14 10 14 10 14 10 14 10 14 10 14 10 14
BG CZ EE HR HU LT LV PL RO SI SK ME MK RS
20wiiw Spring Seminar, 7 April 2016Europe’s Integration Challenged
Unemployment rates decline in response to economic recovery
Demography and emigration lead to labour shortages in EU-CEE
1
Natural change Migration
Cumulative net migration and natural population change, 2011-2014, in % of 2010 population
20
BG CZ EE HR HU LT
LV PL RO SI SK
Source: wiiw Annual Database incorporating national and Eurostat statistics.
-5
-4
-3
-2
-1
0
BG CZ EE HR HU LT LV PL RO SI SK
0
2
4
6
8
10
12
14
16
18
20
2013m03 2013m09 2014m03 2014m09 2015m03 2015m092015m12
21wiiw Spring Seminar, 7 April 2016Europe’s Integration Challenged
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
1002010 2015 2018
Source: wiiw Annual Database incorporating national and Eurostat statistics.
0
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
22wiiw Spring Seminar, 7 April 2016Europe’s Integration Challenged
� 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 in 2017
- 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
� Conditions of private investments improve in EU-CEE
� Temporary decline in EU transfers in 2016; Juncker Plan no substitute
� Demography and emigration lead to labour shortages in EU-CEE
� More risks ahead if global economic growth falters; China, EU stumble; commodity prices fluctuate
Wiener Institut für Internationale Wirtschaftsvergleiche
The Vienna Institute forInternational EconomicStudies
www.wiiw.ac.at
wiiw Spring Seminar, 7 April 2016
Gábor [email protected]
Thank you for your attention
24wiiw Spring Seminar, 7 April 2016Europe’s Integration Challenged
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
Top Related