New wiiw forecast for Central, East and Southeast Europe, Riding the global growth wave

Transcription

1 Wiener Institut für Internationale Wirtschaftsvergleiche The Vienna Institute for International Economic Studies wiiw.ac.at wiiw Spring Seminar, 12 April 218 New wiiw forecast for Central, East and Southeast Europe, Riding the global growth wave Richard Grieveson

2 Overview 1. Global backdrop, new forecasts for CESEE. 2. Drivers of growth, Is the region overheating? 4. What are the risks to growth? 2

3 1. Global backdrop, new forecasts 3

4 Global conditions: best coordinated upswing for almost a decade German Ifo business climate index, 25= Source: Ifo. 4

5 CESEE: 217 the best year since 211, first time all 22 economies grew since 27 CESEE-22 real GDP growth, % Countries recording negative growth Source: wiiw Annual Database incorporating national and Eurostat statistics. 5

6 CESEE growth: Clear upturn in most of region since 216 Quarterly real GDP growth, change in % against preceding year EU-CEE WB-6 CIS+Ukraine Turkey (rhs) Q 11 1Q 12 1Q 13 1Q 14 1Q 15 1Q 16 1Q 17 4Q 17 Source: wiiw Annual Database incorporating national and Eurostat statistics, own calculation. 6

7 Forecast revisions: Mostly positive upgrades in 218, mixed for 219 Real GDP growth revisions, regional and by country Remark: Current forecast and revisions relative to the wiiw Autumn Forecast 217. Colour scale reflects variation from the minimum (red) to the maximum (green) values. Source: wiiw forecast. 7

8 Growth forecasts: Convergence will continue in next three years Real GDP growth forecast, regional and by country Forecast, % EU-CEE WB Turkey CIS + Ukraine CESEE Remark: Current forecast and revisions relative to the wiiw Autumn Forecast 217. Colour scale reflects variation from the minimum (red) to the maximum (green) values. Source: wiiw forecast. 8

9 2. Drivers of growth 9

10 Drivers of growth (I): Positive outlook for consumption Unemployment rate, % Real wage growth, % EU-CEE CIS + Ukraine Turkey Western Balkans EU-CEE CIS + Ukraine Western Balkans Source: wiiw Annual Database incorporating national and Eurostat statistics, own calculation. Forecasts by wiiw. 1

11 Drivers of growth (II): Investment will grow faster than GDP in most places during the forecast period Capacity utilisation, %, seasonally adjusted data 9 1Q 218 4Q DE CZ SI HU EA-19 SK PL TR LT RO BG LV EE HR MK RS ME Source: Eurostat. 11

12 Drivers of growth (III): Higher export share and sound external competitiveness Exports of goods and services, % of GDP Westerns Balkans HR, SI, BG, RO Baltics Visegrad Source: wiiw Annual Database incorporating national and Eurostat statistics, own calculation. 12

13 Banking sector mostly well placed to support growth Bank non-performing loans in % of total loans end of period 6 3Q 17 3Q BG CZ EE HR HU LT LV PL RO SI SK AL BA ME MK RS XK BY KZ RU TR UA Source: wiiw Monthly Database incorporating national statistics. 13

14 3. Is CESEE overheating? 14

15 Source: Wall Street Journal, Bloomberg, Reuters, IMF, Financial Times. 15

16 CESEE is not overheating, but pockets of risk exist wiiw Overheating index, standard deviations from historical average 1.6 4q 217 4q TR HU BA RS MK AL SK HR RU EE ME RO CZ LV UA PL BG SI LT KZ Note: Values represent average of 11 indicators. Historical average for Q4 27 value = 2-27, for Q4 217 value = Source: wiiw Annual Database incorporating national and Eurostat statistics, own calculations. 16

17 Overheating clearest in labour markets and external debt wiiw Overheating index, standard deviations from historical average EU-CEE CIS + Ukraine Non-EU WB Turkey Source: wiiw Annual Database incorporating national and Eurostat statistics, own calculations. 17

18 Monetary policy loose, except in Russia Real interest rate, CPI adjusted, % Russia Turkey Czech Republic Hungary Poland Romania 1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17 1Q 18* Source: National statistics offices and central banks, wiiw Monthly Database. * 1Q 18 data as of February. 18

19 Core inflation is (slowly) picking up in most places Consumer price inflation excluding energy, % change year on year Q17 av BA BG PL SI HR MK RO LV SK CZ ME LT AL EE HU RS RU KZ TR UA Source: Eurostat and national statistics. 19

20 Inflation will remain at historically low levels ( goldilocks conditions) Consumer price inflation, % per year average average average average XK BA CZ MK HR LT AL PL SI SK EE LV BG HU ME KZ RO RU UA TR RS BY Source: wiiw Annual Database incorporating national and Eurostat statistics, wiiw forecasts. 2

21 4. What are the risks to growth? 21

22 As growth has risen, so have the risks Higher risk Lower risk Higher/near-term impact Global trade war End ultra-loose global monetary policy Bursting of financial bubbles Ukraine crisis Lower/longer-term impact East-West EU splits Threats to rule of law Brexit Eurozone break-up Demographic decline brings growth constraints 22

23 The region would be badly affected by a global trade war Exports to US as share of total, % Exports, % of GDP, EU-15 EU-CEE Non-EU CESEE Vehicles Iron & Steel Aluminium FR IT EZ avg. DE AT CESEE avg. Baltics Baltics avg. V-3 avg. V-3 Source: wiiw Annual Database, Eurostat. Note: V-3 = Czech Republic, Hungary, Slovakia. 23

24 Demographic decline brings long-term challenges % change in working-age population compared to EU-CEE BG CZ EE HR HU LT LV PL RO SI SK EU-28 Note: Figures based on Eurostat baseline scenario. Source: Eurostat; own calculations. 24

25 Conclusions Growth at highest level for six years. Outlook positive. In general region not overheating. Risks to growth have risen. Convergence will continue, with long-term challenges. 25

26 Thank you for your attention! Follow us: 26

27 Country codes AL Albania ME Montenegro BY Belarus MK Macedonia BA Bosnia and Herzegovina PL Poland BG Bulgaria 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 CESEE CIS EU-CEE WB Central, East and Southeast Europe Commonwealth of Independent States European Union Central and Eastern Europe Western Balkans 27