Transcript presentation made by Peter Havlik

Wiener Institut für
Internationale
Wirtschaftsvergleiche
The Vienna Institute for
International Economic
Studies
3rd Craft, Trade and SME Summit
Luxembourg, 23-24th April 2004
Accession Countries on the Eve of EU Enlargement
Peter Havlik (wiiw)
Current economic situation and outlook for the region
Income and productivity catching-up in the ACs
Challenges of EU accession for the new member states
www.wiiw.ac.at
Gross Domestic Product (GDP)
annual changes in % against previous year
2002
2003
2004
2005
Forecast
3.0
3.5
3.5
3.9
4
4
4.5
5
3.4
3.5
3.7
3.9
Czech Republic
Hungary
Poland
Slovak Republic
Slovenia
CEEC-5
2.0
3.5
1.4
4.4
2.9
2.2
2.9
2.9
3.7
4.0
2.2
3.4
Estonia
Latvia
Lithuania
CEEC-8
6.0
6.1
6.8
2.5
4.8
7.4
8.9
3.7
5.4
6.2
6.9
4.0
5.9
6.2
6.6
4.2
Bulgaria
Romania
CEEC-10
4.8
4.9
3.0
4.5
4.9
3.9
4.5
4.5
4.2
4
4.5
4.1
Croatia
Macedonia
Serbia and Montenegro
5.2
0.3
4.0
4.3
2.8
1.0
3.2
4
2
3.5
4
3
Russia
Ukraine
4.7
5.2
7.3
9.3
5.0
7
4.6
6.5
EU(15)
Austria
1.1
1.4
0.8
0.8
2.0
1.6
2.4
2.2
‹#›
Real per capita GDP in ACs
EU(25) average = 100
CZ
HU
PL
SK
SI
EE
LV
LT
100
90
80
70
60
50
40
30
20
10
0
1995
2000
2003
2004
2005
2010
Note: Projection assuming a 2 percentage points growth differential
with respect to the EU(15) after 2003.
2015
‹#›
Productivity in ACs and EU(15)
Index 1995=100
GDP(ACs)
Employment(ACs)
Productivity(ACs)
Productivity EU(15)
135
Productivity growth in EU(25)
will accelerate:
+23
120
105
90
1990
1992
1994
1996
1998
2000
2002
‹#›
Productivity in ACs and EU(15)
GDP per employed persons, EU(15) = 100, year 2003
AC(8)
USA
EU(25)
125
121
100
93
75
Productivity level in EU(25)
will drop by 7% after
50
accession compared to EU(15)
53
25
0
at PPPs
‹#›
Consequences of EU accession for ACs:
GDP growth
 No immediate direct growth effects
(year 2004) expected
Facit:
 The recent catching-up processes
will continue
 Genuine growth forecasts
now hardly possible
 European economy slowly recovers
from stagnation
 Higher GDP growth
expected in the medium and
long run
 highly integrated ACs profit from the
EU recovery as well
 Accelerated GDP growth after 2005
possible
‹#›
Inflation (consumer prices)
annual changes in % against previous year
2002
2003
2004
2005
Forecast
3.5
2
6.9
5
2
3
8
5
4
3.5
Czech Republic
Hungary
Poland
Slovak Republic
Slovenia
1.8
5.3
1.9
3.3
7.5
0.1
4.7
0.8
8.5
5.6
Estonia
Latvia
Lithuania
3.6
1.9
0.3
1.4
2.9
-1.2
2.8
4
1
2.9
3.5
2.2
Bulgaria
Romania
5.8
22.5
2.4
15.3
5
11
3
8
Croatia
Macedonia
Serbia and Montenegro
Russia
Ukraine
2.2
1.4
16.5
16.0
0.8
1.5
2.4
9.4
13.6
5.2
2
3
8
10
7
1.5
2
8
8
5
‹#›
Consequences of EU accession for ACs:
Inflation
 Price levels temporarily increase
(except Slovenia)
Facit:
 Higher interest rates as a
reaction to inflationary
pressures may pose a break
on the future GDP growth
 As a consequence of the
harmonisation of Taxes and
Tariffs with the EU
 The requirement to meet
Maastricht criteria will exert a
downward pressure on inflation
 Adjustments to EU price levels in
the Single Market expected in
the medium and long run
‹#›
Government deficit (= „-“)
in % of GDP
2000
2001
2002
2003
2004
2005
2
0
-2
-4
-6
-8
-10
Maastricht (3% des BIP)
-12
-14
CZ
EE
HU
LV
LT
PL
SK
SI
‹#›
Government debt
in % of GDP
2000
2001
2002
2003
2004
2005
60
Maastricht (60% des BIP)
50
40
30
20
10
0
CZ
EE
HU
LV
LT
PL
SK
SI
‹#›
Consequences of EU accession for ACs:
State budgets
 Revenues from trade tariffs drop
 Costs due to the implementation of
‚acquis‘-regulations increase
 Contributions to EU budget from 1 May
Facit:
 Co-financing of EU projects and
 Expected anti-inflationary
agricultural subsidies
measures and government
 Revenues from project-related transfers
deficit reduction programs may
uncertain (mainly 2004)
well result in lower GDP growth
 The already high government deficits
in the short- and medium run
may well grow
 Consolidation requirements may result
in more restrictive fiscal politicies
‹#›
FDI stocks in ACs, Ukraine and Russia, 2003
per capita (EUR)
in % of GDP
EU FDI share
4000
90
3500
80
3000
70
72.3
60
2500
2000
50
55.8
40
1500
38.8
30
31.8
1000
26.2
500
30.2
25.2
16.5
20
20.1
19
14
13.5
10
0
0
CZ
HU
EE
SI
LV
PO
SK
LT
BU
RO
UKR RUS
‹#›
Consequences of EU accession for ACs:
Foreign trade
Facit:
 Deterioration of trade and
current account balances
possible
 Exports and Imports grow as last
trade barriers disappear
(especially in agriculture and
services trade)
 Growing trade also among ACs
themselves
 Extra-EU Imports increase due to
market growth effects
 Market services in the ‚old‘ EU
remain competitive; outsourcing to
ACs only in selected areas
‹#›
Nominal exchange rates, Jan. 2000=100
(national currency vis-à-vis EUR)
CZ
HU
PL
SK
SI
120
115
110
105
100
95
90
85
80
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
‹#›
Consequences of EU accession for ACs:
Participation in ERM II and EMU accession
 After initial enthusiasm most ACs are
nowadays rather cautious
Facit:
 Euro accession 2007 at the
earliest (EE, LT, LV, SI)
 Resp. only after 2008 (CZ,
HU, PO, SK)
 Only Estonia, Latvia, Lithuania and
Slovenia intend to join ERM II
immediately after EU accession
(2 years ER stability, +/-15%
fluctuations permitted)
 Poland, Hungary, Slovakia and the
Czech Republic will and can join
EMU only some time afterwards
‹#›
Unemplyoment rates (LFS)
annual averages in %
2002
2003
Czech Republic
Hungary
Poland
Slovak Republic
Slovenia
CEEC-5
7.3
5.8
19.9
18.5
6.4
15.3
7.8
5.9
19.5
17.4
6.7
15.0
2004
2005
Prognose
8.2
8.2
6
6
20
19
16
15
6.3
6
15.2
14.6
Estonia
Latvia
Lithuania
CEEC-8
10.3
12.0
13.8
15.0
10.0
10.8
12.7
14.6
10
10
12
14.7
10
10
11
14.2
Bulgaria
Romania
CEEC-10
17.8
8.4
13.8
14.5
7.0
13.0
14
8
13.4
13
7
12.6
Croatia
Macedonia
Serbia and Montenegro
14.8
31.9
13.8
14
36.7
14
14
36
15
13.5
35
15
Russia
Ukraine
8.0
10.1
8.5
9.5
8
9
9
8.5
‹#›
Unemployment rates by region (%), 2002
0.00 to 5.00
5.00 to 10.00
10.00 to 15.00
15.00 to 30.00
No data
‹#›
Consequences of EU accession for ACs:
Labour market and migration
 Lasting high unemployment in most
ACs (‚jobless growth‘)
Facit:
 Labour market will remain
the major challenge for the
EU in future as well
 East-west migration waves
are not expected
 Nevertheless, additional migration
flows hardly expected due to existing
restrictions and low labour mobility in
the ACs
 In the medium- and long run, the
ACs will face labour market
shortages due to low birth rates and
aging populations
‹#›
Summary conclusions
> GDP growth: no immediate direct effects of EU accession, more
growth in the medium and long run (assuming ‚good‘ policies), yet
exact forecasts are hardly possible
> Inflation: temporary price increases, higher interest rates likely
> State budget: higher deficits, restrictive fiscal and monetary
policies could pose a break on future GDP growth
> Foreign trade: exports and imports will grow; trade and current
account balances may deteriorate
> FDI flows: no boom; privatisation completed, few additional big
projects, only greenfield and SME investments will expand
> EMU (Euro) accession: 2007 at the earliest (EE, LT, LV, SI) resp.
only after 2008 (CZ, HU, PO, SK)