Transcript 18-5-2012_Ana_Mitreska

Macedonia and the Euro-zone Debt Crisis
(Small and Open – Hostages of Uncertain
prospects?)
Ana Mitreska
National bank of the Republic of Macedonia
Athens May, 2012
Small and Open and Highly Exposed
(hostages of uncertain prospects?)
The resumption of the European debt crisis brought us to the
starting point once again!

The intensity of the spill over effects lower, but the “agony” prolonged

Transmission channels well known

Sound initial conditions prior to the global crisis still in place...

...but strong external and internal impulses needed to built growth model
In the midstream of the crisis


Scrutinizing the impact through main transmission channels
Real channels of transmission – weaker impulses through foreign
demand...
Foreign effective demand
(y-o-y changes)
3.00
Croatia
2.00
Bulgaria
1.00
Serbia
0.00
Netherlands
-1.00
Italy
-2.00
Spain
-3.00
-4.00
Greece
-5.00
Germany
-6.00
Belgium
-7.00
2009
2010
2011
2012
2013
In the midstream of the crisis


Scrutinizing the impact through main transmission channels
...impacting domestic and export demand and bringing to a standstill the
growth...

...not allowing the economy to hit the potential ...

...implying sluggish recovery of the labour market
In the midstream of the crisis
GDP components
Output gap decomposition
(y-o-y changes, in %)
25.0
2
foreign demand
1
residual
20.0
15.0
10.0
0
lending interest
rate
-1
5.0
deposit interest
rate
world export
prices
-2
relative prices
-3
0.0
-5.0
-10.0
-15.0
output gap
-4
2009
2010
2011
2012
8
2009
2013
Persons employed
(y-o-y changes, in %)
export
import
domestic demand
-20.0
2010
2011
2012
Real wages
(y-o-y changes, in %)
12
10
6
8
4
6
2
4
2
0
0
-2
-2
-4
-4
2009
2010
2011
2012
2013
2009
2010
2011
Real wages
2012
2013
Inflation
2013
In the midstream of the crisis
The outcome already anticipated, with high exposure of the trade to Euro
zone countries
Export by country groups
(EUR million)
3500
Developing
co untries
Wes tern Balkans
3000
2500
Other d eveloped
co untries
Other EU
co untries
Italy
2000
1500
Greece
1000
Germany
500
EXPORT to tal
2011
2010
2009
2008
0
2007

Scrutinizing the impact through main transmission channels
2006

In the midstream of the crisis

Scrutinizing the impact through main transmission channels
Financial channels of transmission – multidimensional


The banking sector – low financial integration, stable and well capitalised...
...but confidence factor brought the “lacklustre”
market
feature of the credit
In the midstream of the crisis
Credit to GDP, marginal change, in %
Credit demand - Enterprises
(net-percent)
(net-percent)
80
80.0
60
60.0
40
40.0
20
20.0
0.0
0
-20.0
-20
-40.0
-40
Source: NBRM's Lending Surveys.
Source: NBRM's Lending Surveys.
Credit to depost ratio, in %
Real interest rates
105.0
(gaps, in %)
5
100.0
4
3
95.0
2
90.0
1
0
85.0
-1
80.0
-2
-3
75.0
-4
70.0
2006
Source: NBRM.
2007
2008
2009
2010
2011
2012
2009
2010
2011
deposits
2012
loans
2013
Q4
Q1.2012
Q3
Q2
Q4
Q1.2011
Q3
Q2
Q4
Q1.2011
Q3
Q2
Q1.2008
Q4
Q1.2012
Q3
Q2
Q4
Q1.2011
Q3
Q2
Q4
Q3
Q2
Q4
Q1.2011
Source: NBRM and SSO.
Q1.2009
-100.0
Q3
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
-80.0
-80
Q2
0.0
-60.0
-60
Q1.2008
2.5
Q4
5.0
Q1.2009
7.5
Credit demand - Households
Q3
10.0
Q2
12.5
In the midstream of the crisis


The banking sector, assessed to be resilient to shocks arising out of the ongoing
crisis...
despite the large share of EU capital within the total banking capital
5.17%
10.60%
27.02%
8.56%
Greece
Bulgaria
Turkey
Slovenia
7.02%
Switzerland
15.29%
8.18%
Austria
France
Other
18.17%
In the midstream of the crisis






Scrutinizing the impact through main
transmission channels
Financial channels of transmission –
multidimensional
Capital inflows – “Flight to Quality” and
“Home Bias” yielded into a sharp slowdown
in capital inflows at the onset of the global
crisis
Yet, capital flows resumed,
impetus to economy ...
providing
...and despite the ongoing debt crisis in the
Euro zone, they continued to penetrate into
the economy...
...although at a more moderate pace
compared to prior to the crisis
Foreign direct investment
(% of GDP)
9
8
7
6
5
4
3
2
1
0
2005 2006 2007 2008 2009 2010 2011 2012 2013
In the midstream of the crisis
Scrutinizing the impact through main transmission channels

Financial channels of transmission – multidimensional

The Euro crisis shivered financial markets again

Macedonia – with low integration on the international capital markets...
...yet, increased risk aversion, lead to higher risk premium and possible limited future access to
external funding of the private and public sector
7
6
MACEDO 4.625 12/08/2015
- GDBR10 Index
5
MACEDO 9.875 01/08/2013
- GDBR10 Index
4
3
2
1
0
XII.2005
II.2006
IV.2006
VI.2006
VIII.2006
X.2006
XII.2006
II.2007
IV.2007
VI.2007
VIII.2007
X.2007
XII.2007
II.2008
IV.2008
VI.2008
VIII.2008
X.2008
XII.2008
II.2009
IV.2009
VI.2009
VIII.2009
X.2009
XII.2009
II.2010
IV.2010
VI.2010
VIII.2010
X.2010
XII.2010
II.2011
IV.2011
VI.2011
VIII.2011
X.2011
XII.2012
II.2012
IV.2012

Policy Setup

Looser Monetary policy, amidst

negative output gap

contained inflationary pressures

no large external disequilibria

Fiscal policy prudent

with low deficit and public debt


ability to attain external financing at concessional terms in 2011, despite
rising turbulences on international market...
...but prospects might be worrisome, as economy recovers slowly and access
to financing becomes more difficult
Policy Setup
Current account balance
Key policy rate - interest rate on CB bills
(in %, on annual basis)
10.0
9.0
9.0
8.0
7.0
-5
7.0
7.0
6.0
5.0
(% of GDP)
0
-10
4.9
4.0
4.0
3.75
-15
3.0
2008
2009
2010
2011
Source: NBRM.
Gross foreign reserves
350
300
2005 2006 2007 2008 2009 2010 2011 2012 2013
2012
4.6
4.2
250
4.4
4.7
5.0
4.5
4.0
3.5
3.7
3.0
200
2.5
150
2.0
1.5
100
1.0
50
0.5
0
0.0
2009
2010
2011
2012
2013
Change of gross foreign reserves (in EUR million)
Monthly coverage of next year's import of goods and services (right scale)
Policy Setup
Central Government debt (in% of GDP)
1.0
Budget balance financing
(net-basis, in Denar million)
2007
0.5
16,000
0.0
20
25
30
35
-0.5
-1.0
2006
2008
Source: MoF.
11,000
Domestic
Financing, net
6,000
-4,000
External
Financing, net
-9,000
-2.0
-3.0
40
1,000
-1.5
-2.5
Privatization
Receipts
21,000
2005
-14,000
2010
2011
2009
-19,000
Deposits Change
-24,000
2005
Source: MoF.
2006
2007
2008
2009
2010
2011
The old Conclusion
•
Recent crisis – “testing ground” for the resilience of the economy
•
The crisis has been weathered well, as no excessive imbalances existed prior to it
•
Macro-policies remained focused during the crisis, providing stable and benign environment
•
Main challenges ahead, same as before the crisis

Augmenting stability with structural reforms

Diversifying the export structure

Attracting new foreign investments

Moving towards sustainable external position
New insights and Conclusion
•
•
•
•
o
o
o
The protracted Euro crisis labeled us as a “hostage’ of its uncertain recovery...
...again, it brought to a halt the recovery process and yielded into a very
“moderate” scenario for the economy as a whole in the next two years...
...posing future policy challenges in the fiscal area .
Yet, there are few sparks, making the initial conditions slightly to differ
compared to the very beginning of the crisis
the protracted Euro crisis, amidst uneven global recovery, pressed for new trade
directions
the economy started to feel positive spill over effects from FDI newcomers –
structural change of the trade structure
low imbalances preceding the crisis and prudent policy stances helped , capital
inflows to resume faster, with non-EU investments announced to enter the economy
New export destinations and more diversified export structure
(in % of total export)
70.0
60.0
50.0
2006
2007
40.0
2008
2009
30.0
2010
2011
20.0
10.0
0.0
EU
Bulgaria
Germany
Greece
Italy
Serbia
Kosovo
Others
New export destinations and more diversified export structure
Export by SITC
(EUR million)
3500
Miscellaneous manufactured articles
3000
Machinery and transport equipment
2500
Manufactured goods classified by
materials
2000
Chemical Products
1500
Mineral fuels, lubricants and related
materials
Crude materials, inedible, except fuels
1000
Beverages and tobacco
500
Food and live animals
2011
2010
2009
2008
2007
2006
2005
0
EXPORT total
New insights and Conclusion
•
•
•
•
The Euro zone is our natural anchor...hence, inevitably changes in its
economic cycle pose direct and indirect consequences
Yet the crisis in progress demonstrated the need not “to put all eggs in the
same basket “
It prompted the need to discover alternate export destinations and to make
efforts to diversify the FDI country of origin
It revalidate the need for sound fundamentals and policies, as a
prerequisite for stronger resilience to crisis and faster exit out of the
gloomy outlook
THANK YOU FOR YOUR ATTENTION
http://www.nbrm.gov.mk
[email protected]