Transcript STRATEGIC MANAGEMENT

STRATEGIC MANAGEMENT
8. National economic policy
Situation of the Hungarian economy
Trust in forecasts
It is impossible to manage an enterprise
without understanding the national
economic policy.
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Introduction
In accordance with the classic theories the five
main spheres which can influence the firms’
competitiveness are: rivalry amongst
established firms, change of strategies of
suppliers and buyers, threats of new entrants
and substitute products (M. Porter). All these are
actors (elements) of the micro economy.
Micro economic actors can be influenced however
by the economic policy as well (figure).
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Economic system
feedback
state
wages,
products
families
manpower,
money
firms
Source: own figure based on many publications
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Main goals of an economic policy
Theories often stated that the main goal of an
economic policy is the welfare of the nation.
According to the new views the welfare of a
nation is determined by its competitiveness.
This can be measured by the GDP per capita (M.
Porter).
GDP: national income, sum of firms’ value added. Its main
elements are the income of families (wages), firms (profit)
and state (taxes).
Some researches stated however that often the
main goal of politicians is to create good
circumstances to their re-election.
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Porter analysed 120 successful industries in 10
countries. He stated that the determinants of
the countries’ success are on one hand the
micro economic base (effectiveness of firm’s
functioning, e.g. the productivity), but, on the
other, it influenced also /3/ by the macro
economic environment, and /4/ the micro
economic business environment as well.
The traditional factors (sources) of GDP growth are /1/ the level
of employment and /2/ firm’s productivity.
An economic policy have to influence the
environmental determinants first of all.
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Tools of an economic policy
It is difficult to clarify, what are the elements of an
economic environment. Nobody discuss
however that some important elements of it are
the four classic tools of the regulation (and an
economic policy), so,
• the monetary,
• fiscal,
• foreign trade and
• social policies (see P. A. Samuelson).
The utilisation of the above tools has manifold
effects to the economy.
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Monetary and fiscal policies regulate the volume of
money. Main tools of the first are the influencing the
obligatory reserves’ rate, open market operations, and
the influencing of discount rates. A fiscal policy fixes
the budget (taxes and state expenses). Foreign trade
policy fixes customs duties and influence the exchange
rate. Main task of a social policy is the decrease of
social inequalities (e.g. with creation of a good systems
of pensions and public health).
Sometimes the utilisation of the above tools needs
great prudence (e.g. the Laffer curve, see the
next slide).
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The Laffer curve
Revenue
from
taxation
Maximum
Rate of tax, %
100
Own figure based on many publications
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With the help of the monetary and fiscal policies
the central bank can influence the business
cycles.
There are three type of important economic cycles.
Period of the long-range, or Kondrateff cycles can
be 40-50 years, the business cycles are 6-10 years
long, and length of some cycles is only 1-2 days.
The causes of different cycles are much debated
topics. But all experts are agree that the cycle
regulation is very important.
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The renewed views stated, that in the modern
economy some new elements of an economic
policy are important as well. Notably:
• Some global tools, e.g. the improvement of the
institutional framework (business environment)
of firms’ functioning can be very effective.
The institutional framework is effective, if
„transaction” costs of production is minimal (see
Coase).
• But politicians often use some selective tools
(e.g. subventions of the SMEs, branches) too.
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Main elements of an institutional (business)
environment are /1/ property and
contractual rights, /2/ traditional behaviour
of economic actors, /3/ economic policy, /4/
and the educational system. Economic policy
can (globally) influence these elements.
• Property and contractual rights – and the real
possibilities of law enforcement – determine
key elements of firms’ functioning. In case of
their mistakes the bureaucracy (so, the
transaction costs) can be too high or the
business risks are not acceptable for a fair
firm.
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• Firms’ behaviour – if it is fair - can compensate
the lack, or mistakes of some laws. In a reversed
case, e.g. in case of illegal competition the real
value of the correct laws is nothing.
• The businesslike and predictable cycle regulation
and the strict control of enterprise behaviour –
or, their reverse, the high bureaucracy and
corruption - have great influence to the
economic environment too.
Corruption is the misuse of public power for private
benefit (if in the abuse there are minimum two
stakeholders).
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Because of the great losses caused by corruption
all over the world, a main goal of many
international organisations (e.g. UN, World Bank,
EU) is to fight against it.
Corruption is frequent in construction; sometimes collapsing
buildings kill people. Under its influence costs of an investment
can double, entrepreneurial risks increase, FDI decrease etc.
Transparency International (TI) has pioneered the
measurement of the level of corruption all over
the world. Since 1995 it has published many
Reports on the results. They stated the strict
relations between the level of corruption and
GDP too (figure).
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ALevels
korrupció
és a GD Pand
sz intje
of corruption
GDP
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CPI, p o n t
C
P
I,
p
o
i
n
t
LU
9
8
DE
US
7
6
HU
5
4
3
2
1
RU
0
0
10000
20000
30000
40000
50000
60000
70000
GDPGDP/
per capita,
fő, USDUSD
Forrás:
GDP: IMD,
2007.
CPI:(2007),
TI, 2007 CPI: TI (2007)
Source:
GDP:
IMD
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• Often the development of the system of
education is an effective global tool of the
economic policy too. It forms competitive
labour for the national economy. But it can
help the resolution of other problems, like the
fighting against the corruption as well.
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Some selective tools also can help the realisation
of the economic policy. E.g.:
• SME sphere can support by the control of
monopolies. If it is impossible to liquidate a
monopole position (e.g. in case of electricity
services), the EU offer the creation of an
contestable (attackable) market (the entry of
new firms in the given market).
• Sometimes the economic policy has to support
innovations, e.g. the formation of new branches
(the distribution of the IT application etc.) as
well.
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Situation of the Hungarian economy
Hungary is a catching-up economy (as it was
mentioned, its GDP/capita is low).
Today it is the entry from a crisis (in 2009 the „growth”
was minus 7%, in 2010 and 2011 it was 1%).
The main problem is, that in spite of the high taxes ant
the everyday stability programs, the deficit of the
government balance is high (forecasting of which is
difficult as well). It increases the indebtedness of
the country (which is high).
The foreign indebtedness is also high, aldough
nowadays the current account balance is positive.
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Some great problems of the Hungarian economy
are „structural” ones. I can mention the low
activity rate, the small number of graduates
and innovative firms.
The problems of business environment, the lack
of the good development plans, the costly
bureaucracy, the high taxes, the corruption
etc. are very hard too.
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Trust in forecasts
GKI Economic Research Co. has prepared economic
forecasts since 1968. Their main goal is the forecasting
of the business cycles.
Today our forecasts are as follows:
• brief monthly forecasts (see: www.gki.hu) on the
expected processes of the given year, 12 in a year,
• Detailed forecasts on the processes of the given year,
four times a year,
• in June and December, forecasts about the expected
processes of the next 3 years.
The most important sources for the forecasts of GKI Co.
are
(1) global and national statistical trends,
(2) the information of business cycle reports,
(3) the half yearly surveys on the expectations and
economic prospects of enterprises and
(4) the information considering the aims of the
government.
The monthly forecasts of GKI Co. are based on the short
term corporate expectations about economic
processes measured with the help of EUharmonised enterprise surveys. The survey results
constitute coinciding information (next slide).
On the reliability of monthly surveys
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v o lu m e in d e x o f p ro d u c tio n (3 m o n th m o v in g a v e ra g e )
Source: K. Németné Pál
GKI forecasts the most important economic
indicators of a particular year six times:
• in October and December of the preceding
year; and
• in March, May, October and December of the
given year.
The forecasts examine (1) the possible trends of
GDP growth, (2) expected demand (domestic
consumption and export), (3) the expected
supply (value added in the major branches
and import), (4) the perspectives of the
internal and external financial equilibriums.
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The forcasts’ control should evaluate the
following two different coherencies:
• the size (mean and dispersion) of estimats’
errors
• the concordance (correlations) between the
trends of the forecasts and the facts (statistics).
Annual forecasts for the GDP (the pace of
expected economic growth) published from
1994 to 2011 turned out to be quite reliable
(see the next slide), aldough in 2007-2008 GKI
do not forecasts the crisis.
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Forecasted dynamic of GDP and the statistics
Percent, previous year = 100 %
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A relatively favourable (but not as favourable as
previously) picture can be given about the
reliability of forecasts between 1995 and 2011
on the market conditions of economic growth
(first of all on the future consumption; the
forcasts of investments are not so good).
At the same time, GKI’s estimations are quite
moderately reliable for the production of the
most important branches (see data of the
industrial forecasting on the next slide).
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Forecasted dynamics of industrial value added and
the statistics, percent, previous year = 100 %
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Inflation forecasts are very accurate (see the
next slide).
It must be mentioned however that GKI Co.’s
forecasts concerning the internal and external
financial equilibrium of the Hungarian
economy were often not accurate enough in
the examined period (see the slide).
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Inflation’s forecasts and the statistics,
percent, previous year = 100 %
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Balance of current accout’s forecasts and statistics
Billion euros
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GKI Co.’s longer term forecasts are based partly
on the examined statistical trends, partly on
information about the expected changes of
corporate strategies and economic policy
aims.
It seems however, that our forecasting
capabilities today are not enough to give
reliable enough long-term forecasts (see the
next slide).
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GDP statistics and medium-term GDP forecasts
(1993 = 100%)
1,5
%
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1,3
1,2
1,1
1
0,9
1993
1994
1995
1996
1997
1998
1999
2000
actual
1 year forecast
1,5 years forecast
2,5 years forecast
3 years forecast
3,5 years forecast
2001
2002
2003
2 years forecast
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Thank you for your attention!
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