Transcript TIGHTENING LABOUR MARKETS

Wiener Institut für
Internationale
Wirtschaftsvergleiche
The Vienna Institute for
International Economic
Studies
www.wiiw.ac.at
Financial Crisis and Consequences
Vladimir Gligorov
wiiw Spring Seminar 2009
27 March 2009, Vienna
Wiener Institut für
Internationale
Wirtschaftsvergleiche
The Vienna Institute for
International Economic
Studies
www.wiiw.ac.at
Causes of Current Crisis
 Lax monetary policy: low interest rates and strong



credit expansion
Global imbalances
Deficit countries in Central, Eastern and South-eastern
European Countries
In the Balkans: low export capacity
Wiener Institut für
Internationale
Wirtschaftsvergleiche
Monetary policy
The Vienna Institute for
International Economic
Studies
www.wiiw.ac.at
Wiener Institut für
Internationale
Wirtschaftsvergleiche
The Vienna Institute for
International Economic
Studies
www.wiiw.ac.at
Boom-bust in housing starts compared with
the counterfactual
Wiener Institut für
Internationale
Wirtschaftsvergleiche
The Vienna Institute for
International Economic
Studies
www.wiiw.ac.at
wiiw Spring Seminar, 27 March 2009
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Why contagion?
 A more cautious banking sector puts the brakes on
funding of
- Private consumption, private investment,
exports and imports
- Real estate transactions
 Investors in financial markets have become more riskaware; the destination and composition of flows have
changed to the disadvantage of emerging markets
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
1. Evidence from most recent developments
Decline in industrial output
Decline in foreign trade
Decline GDP
Decelerated inflation
Real depreciation (not everywhere)
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Industrial output decline
Rates of change in %, monthly, year-on-year
Candidate countries
TR
MK
HR
Potential candidates
BA
20
15
RS
Source: wiiw Monthly Database incorporating national statistics.
Feb-09
Jan-09
Nov-08
Dec-08
Oct-08
Aug-08
Sep-08
Jun-08
Jul-08
May-08
Mar-08
Apr-08
Feb-08
Feb-09
Jan-09
Nov-08
Dec-08
Oct-08
Aug-08
Sep-08
Jun-08
Jul-08
May-08
Mar-08
Apr-08
Feb-08
Jan-08
-5
-10
-15
20
15
10
5
0
-5
-10
-15
-20
-25
Jan-08
40.9
10
5
0
-20
-25
ME
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Exports of goods: decline after mid-2008
EU candidate countries, euro-based, January 2006 = 100
260
240
MK
220
200
180
160
TR
140
120
Jan-09
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Source: wiiw Monthly Database incorporating national statistics.
R
Jul-08
HR
100
80
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Exports of goods: decline after mid-2008
Potential candidate countries, euro-based, January 2006 = 100
260
240
RS
220
200
BA
180
160
140
120
Jan-09
Jul-08
Jul-07
Jan-07
Jul-06
Jan-06
Source: wiiw Monthly Database incorporating national statistics.
Jan-08
AL
100
80
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
GDP - shift from expansion to contraction
Candidate countries, change in %, annual, year-on-year*
8
6
4
Macedonia
2
0
Turkey
-2
Croatia
-4
2006
2007
* 2008 wiiw estimate, 2009 wiiw forecast
Source: wiiw Annual Database incorporating national statistics.
2008
2009
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
GDP - shift from expansion to contraction
Potential candidate countries, change in %, annual, year-on-year*
11
10
9
Montenegro
Serbia
8
7
6
5
Albania
BA
4
3
2
1
0
-1
-2
-3
2006
2007
* 2008 wiiw estimate, 2009 wiiw forecast
Source: wiiw Annual Database incorporating national statistics.
2008
2009
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Decelerating inflation
CPI, monthly, change year-on-year in %
16
HR
MK
TR
AL
BA
ME
RS
12
11
10
9
8
7
6
5
4
3
2
1
0
Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09
* wiiw forecast
Source: wiiw Monthly Database incorporating national statistics.
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Currency Board or euro as legal tender:
Producer prices vis-à-vis EU: mainly up
EUR per unit of national currency, Jan 2007 = 100
Exchange rate nominal
Exchange rate real
Bosnia and Herzegovina
90
85
85
Source: wiiw Monthly Database incorporating national statistics.
Jan-09
90
Sep-08
95
May-08
95
Jan-08
100
Sep-07
100
May-07
105
Jan-09
105
Sep-08
110
May-08
110
Jan-08
115
Sep-07
115
May-07
120
Jan-07
120
Jan-07
Montenegro
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Countries with de-facto EUR peg
Producer prices vis-à-vis EU: various patterns
EUR per unit of national currency, Jan 2007 = 100
Exchange rate nominal
100
100
95
95
95
90
90
90
85
85
85
Jan-09
Sep-08
May-08
Jan-08
Sep-07
May-07
Jan-07
Source: wiiw Monthly Database incorporating national statistics.
Jan-09
100
Sep-08
105
May-08
105
May-07
105
Jan-09
110
Sep-08
110
May-08
110
Jan-08
115
Sep-07
115
115
May-07
120
Jan-07
120
Jan-07
120
Jan-08
Macedonia
Croatia
Sep-07
Albania
Exchange rate real
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Countries with flexible exchange rate:
Producer prices vis-à-vis EU: strong reversal
EUR per unit of national currency, Jan 2007 = 100
Exchange rate nominal
Exchange rate real
90
85
85
80
80
Source: wiiw Monthly Database incorporating national statistics.
Jan-09
90
Sep-08
95
May-08
95
Sep-07
100
May-07
100
Jan-07
105
Jan-09
105
Sep-08
110
May-08
110
Jan-08
115
Sep-07
115
May-07
120
Jan-07
120
Jan-08
Turkey
Serbia
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
2. Imbalances
Imbalances:
Fiscal imbalances less alarming – so far
Alarming external deficits
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Relatively low government deficits,
government debt and overall external debt
in % of GDP, 2008
Gov. budget Gov. debt External debt
Croatia
-2.3
54.5
96
Macedonia*
-1.0
.
49
Turkey
-1.3
35.1
47
Albania
-4.0
53.5
20
BiH
2
20.0
16
Montenegro
2
.
14
-2.5
.
71
Serbia
* External debt at end of 2007
Source: wiiw Database incorporating national statistics.
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Imports of goods:
intensity and coverage by exports
in % of GDP, 2008
70
Exports
60
Deficit
50
40
30
20
10
0
BA
MK
ME
HR
RS
AL
TR
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Source: wiiw Annual Database incorporating national statistics.
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Deficit in trade with goods: coverage, 1-9 2008
Services
Inco me
Current transfers
Capital transfers
FDI
P o rtfo lio investment
Other investment
Errors and o m.
140
120
100
80
60
40
20
0
Croatia Macedonia Turkey
Albania
BiH
Montenegro Serbia
0
-20
-40
Increase in currency reserves in % of trade deficit
5
11
2
4
6
Source: wiiw Database incorporating national statistics.
8
-1
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
3. Potential trouble
 Lack of external means for the financing of external
deficits and debt refinancing
 More balanced current account becoming a must
 Either more exports or less imports (goods and
services)
 Allowing for nominal depreciation as one alternative
(additional burden to households and companies with
foreign currency debt)
 Wage deflation in the context of strong GDP decline as
a second alternative
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
4. Southeastern Europe’s prospects
 2009 GDP decline
 2010 GDP stagnation
 2011 some GDP growth again, provided the
international business climate improves
 2012 ff. growing GDP, but at rates lower than in
2003-07
 Gradual return of FDI inflow
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
5. Financial risks
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
What do we see in the financial
indicators?
 High current account deficits
 In most cases – worsening
 So, financing them is the key issue
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Current account balance
in % of GDP
AL
BA
HR
RS
TR
ME
MK
30
20
10
0
-10
-20
-30
-40
-50
-60
q1'07
q2'07
q3'07
Source: National bank of the respective country.
q4'07
q1'08
q2'08
q3'08
q4'08
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Governments’ foreign debt
 Mostly not very high
 And the share in total foreign debt - declining
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
General government
share in gross external debt in %
BA
HR
RS
TR
MK
q2'08
q3'08
q4'08
40
35
30
25
20
15
10
5
0
q1'07
q2'07
q3'07
Source: National bank of the respective country.
q4'07
q1'08
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Short-term debt
 In a couple of cases too high
 In a number of cases increasing
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Short-term foreign debt
in % of foreign exchange reserves (excluding gold)
AL
BA
HR
RS
TR
ME
MK
180
160
140
120
100
80
60
40
20
0
q1'07
q2'07
q3'07
Source: National bank of the respective country.
q4'07
q1'08
q2'08
q3'08
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Banks and risks
 Credit expansion decelerating
 Leverage ratios relatively low
 Risks, however, increasing by most measures
 Some countries facing bigger problems than others
 Banks rely significantly on foreign liabilities
 Foreign currency loans important
 Not enough data to say something on non-performing loans
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Bank loans to non-financial private sector
growth in %, eop month (year-on-year)
BA
HR
RS
TR
ME
MK
250
200
150
100
50
0
q1'07
q2'07
q3'07
Source: National bank of the respective country.
q4'07
q1'08
q2'08
q3'08
q4'08
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
3m...BOR-3mEURIBOR
spread in percentage points, eop month
AL
HR
RS
MK
20
15
10
5
0
-5
q1'07
q2'07
q3'07
Source: National bank of the respective country.
q4'07
q1'08
q2'08
q3'08
q4'08
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
TED spread (3m...BOR-3mT-Bill)
spread in percentage points, eop month
AL
HR
RS
MK
14
12
10
8
6
4
2
0
-2
-4
q1'07
q2'07
q3'07
Source: National bank of the respective country.
q4'07
q1'08
q2'08
q3'08
q4'08
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Leverage, banking sector assets
to capital ratio, eop month
BA
HR
q4'07
q1'08
RS
ME
MK
14
12
10
8
6
4
2
0
q1'07
q2'07
q3'07
Source: National bank of the respective country.
q2'08
q3'08
q4'08
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Share of banks’ external debt
in assets in %, eop month
BA
HR
q4'07
q1'08
RS
TR
MK
30
25
20
15
10
5
0
q1'07
q2'07
q3'07
Source: National bank of the respective country.
q2'08
q3'08
q4'08
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Share of loans in foreign currency
in % of total loans, eop month
AL
BA
HR
MK
80
70
60
50
40
30
20
10
0
q1'07
q2'07
q3'07
Source: National bank of the respective country.
q4'07
q1'08
q2'08
q3'08
q4'08
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Share of non-performing loans
in % of total loans, eop month
AL
HR
MK
12
10
8
6
4
2
0
q1'07
q2'07
q3'07
Source: National bank of the respective country.
q4'07
q1'08
q2'08
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Real estate bubble?
 Construction slowing down
 Prices for apartments declining
 However, not enough data to say more on that
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Growth in apartment prices
in %, CPI deflated (year-on-year)
HR*
RS*
30
25
20
15
10
5
0
-5
-10
q1'07
q2'07
q3'07
* Data refer to half year.
Source: National bank of the respective country.
q4'07
q1'08
q2'08
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Construction sector growth less GDP growth
in % (year-on-year)
HR
RS
TR
MK
12
10
8
6
4
2
0
-2
-4
-6
-8
-10
q1'07
q2'07
q3'07
* Data refer to half year.
Source: National bank of the respective country.
q4'07
q1'08
q2'08
q3'08
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Development of income inequality
in Central Europe, Baltic States, SEE and CIS, 1989-2006
unweighted averages of Gini coefficients (income based)
Central Europe
SEE
Transition
countries
(polynomial
trend)
Polynomisch
(Transition
countries)
CIS
Baltics
45
Gini coefficient
40
35
30
25
20
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: UNU-WIDER: World Inequality Database Version 2.0c, w iiw calculations.
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Income inequality in world regions
unweighted averages of Gini coefficients (income based), 2003
55
Sub-Saharan Africa
Latin America
50
China
45
Gini coefficient
South Asia
East Asia
Russia
40
CIS
USA
Middle East
& North Africa
35
SEE
30
Central Europe
& Baltics
Western Europe
25
Source: UNU-WIDER: World Inequality Database Version 2.0b , own calculations.
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Distribution of income & source of income
Correlation of functional distribution and inequality in transition countries
CE & Baltics, SEE and CIS
50
2002
Gini coefficient
45
y = -0.40x + 48.75
2
R = 0.27
40
35
30
25
20
15
15
20
25
30
35
40
45
50
55
Compensation of employees, in % of GDP
Sources: AMECO database, CIS STAT database, UNU-WIDER: World Inequality Database Version 2.0c .
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Role of labour market institutions
Correlation of coverage rate of collective agreements
in transition countries, 2001
45
40
Central Europe,
2001 &
Baltics
BGR, ROU, HRV
Gini coefficient
35
y = -0.15x + 36.80
2
R = 0.44
30
25
20
15
10
0
20
40
60
80
100
coverage rate of collective agreements
Sources: Schroeder (2004), UNU-WIDER: World Inequality Database Version 2.0a.
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Main causes of inequality development
in transition
 Loss in output and increase of unemployment
 Rising wage inequalities due to liberalization of labour market
regulations
 Industrial employment and productivity growth reducing inequality
 Dampening effect of public expenditure
 While price and trade liberalization reduced inequality via job
creation, (public utilities infrastructure) privatization did opposite
 Economic integration via exports had positive effects on equality
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
The outcome
 Croatia: Under the assumption of a mild recession,
the Gini increases by 0.3pp to 31.2
 Hungary: Under the assumption of a strong recession,
the Gini increases by 0.9pp to 27.0
 Ukraine: Under the assumption of a heavy recession,
the Gini increases by 1.2pp to 31.1
 Doubling the drop in industrial & overall employment and
the increase in unemployment raises the Gini to:
HR 31.6; HU 27.3; UA 31.9
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Crisis impact on inequality
 Given the extent of the recession, the model suggest an
increase of inequality from 0.3pp to 1.2pp (0.7pp to 2pp)
 In general income inequality does not change rapidly
 Still absolute poverty will be on the rise with average income
levels falling
 Stronger fiscal expansion could reduce the increase of
inequality
 1pp more government expenditures reduces Gini by 0.1pp
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Conclusions
 Risks have increased
 Not primarily because of the health of the banks
(though Montenegro is different)
 But because of high demand for foreign financing that
has become scarce
 Which drives growth down
 Which in turn pushes the risks up
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
What is to be done?
 Stabilization is the key in the short run
 In the medium run, it is a question whether it might be
necessary to move from a neoclassical to a
mercantilistic growth strategy
 The choice may depend on the policy of the EU
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Rast na kratak rok
• Trenutna kretanja, ocenjena na osnovu dostupnih
•
•
•
•
podataka, su veoma negativna
Industrijska proizvodnja se smanjuje po visokoj stopi
gotovo svuda – takođe u Hrvatskoj
Spolja trgovina se takođe smanjuje gotovo svuda – isto i u
Hrvatskoj
Inflacija se usporava, a preti i deflacija, praktično svuda
Ova kretanja implicraju značajnan pad bruto domaćeg
proizvoda, praktično svuda, a u Hrvatskoj do 4 ili 5%
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Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Stabilnost na kratak rok
• S obzirom na pad proizvodnje, reč je o “igri sa negativnom sumom”, dakle o
•
•
•
•
•
•
raspodeli gubitaka
Ovo ide uz promene u relativnim cenama
Od kojih je ključan realni tečaj – dakle odnos između (uprošćeno govoreći)
izvoza i unutrašnje potrošnje
Budući da se smanjuje izvoz, finansiranje postojećih obaveza zavisi od
smanjenja potrošnje ili od mera za povećavanje izvoza
Ovo poslednje podrazumeva depresijaciju realnog kursa, bilo preko deflacije
ili preko nominalne depresijacije
Za razliku od okolnosti kada nominalna depresijacija podstiče inflaciju, u
deflatornom okruženju je moguća relaksacija monetarne politike čak i uz
depresijaciju tečaja
Osnovna pretnja stabilnosti jeste prinudna devalvacija usled suviše jakih
deflatornih pritisaka
wiiw
wiiw Spring Seminar, 27 March 2009
52
Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Zaključci G20 i MMF
• Ključan zaključak jeste da se održi kratkoročna stabilnost i da se
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podstakne globalna tražnja
Ključnu ulogu ima MMF – triplira se njegova kreditna sposobnost i
značajno povećava sposobnost da podrži likvidnost
MMF se reformiše, pri čemu su ključni sledeći elementi
Cilj je održanje rasta a ne samo stabilnosti
Monetarni i fiskalni uslovi se rukovode održivošću, dok su
kvantitativni kriteriji indikativni, a ne bezuslovni
Strukturni kriteriji su takođe indikativni, a ne obavezujući
MMF ima ključni zadatak da podrži globalnu tražnju i da obezbedi da
ne dođe do sloma sistema tečajeva što bi vodilo finansijskom haosu i
rastu protekcionizma
wiiw
wiiw Spring Seminar, 27 March 2009
53
Fragile Europe: the Path in and out of the Crisis – What Is to be Done?
Srednjoročne perspektive
• Najvažnije pitanje izbora metoda stabilizacije jeste šta to znači za razvoj na
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srednji rok?
Ovde je važno poći od pretpostavke da je malo verovatno da će rast na
srednji rok moći da se finansira na isti način kao i u prethodnom periodu
Kako će se onda hrvatska privreda vratiti na put visokih stopa rasta?
Ukoliko ne dođe do korekcije realnog tečaja, dakle ukoliko se samo
recesijom očuva nominalni tečaj, postoji opasnost da će to imati za posledicu
produženu stagnaciju ili preovladavanje niske stope rasta
Ovo zato što će rast morati mnogo više da se finansira povećanjem
unutrašnje štednje, a mnogo manje kreditima i ulaganjima iz inostranstva
To znači da je potrebno značajno povećati konkurentnost hrvatske privrede
To je problem i većine drugih zemalja u tranziciji
wiiw