Economic Policy Statement of Eesti Pank 12 December 2012

Transcription

1 Economic Policy Statement of Eesti Pank 12 December 2012

2 Key points of the presentation The external environment The Estonian economy until now and in the next few years Economic policy implications 12 December 2012 Economic Policy Statement of Eesti Pank 2

3 The euro area debt crisis is hanging around stubbornly The economy of the euro area has not recovered at the expected rate Confidence and economic activity have fallen of late in most of Estonia s main partners Eesti Pank s baseline forecast works on the assumption that the measures taken to solve the debt crisis will slowly lead to a resolution of it 12 December 2012 Eesti Pank Economic Comment 3

4 Inflation has slowed in the euro area but remains above its target of slightly below 2% Growth in the euro area has turned negative euroa area GDP growth, y-o-y euroa area inflation, y-o-y 4% 3% 2% 1% 0% -1% -2% -3% -4% -5% -6% Sources: Eurostat 12 December 2012 Economic Policy Statement of Eesti Pank 4

5 Markets expect interest rates to remain very low and to fall further in % december 2012 forecast 3-month EURIBOR june 2012 forecast 4% 3% 2% 1% 0% Source: ECB 12 December 2012 Economic Policy Statement of Eesti Pank 5

6 The economic forecast drawn up jointly by the central banks of the euro area is significantly more pessimistic than earlier forecasts Uncertainty about future developments in the euro area is still high The euro area economy will start to recover in the middle of 2013 Inflation will slow as prices for energy and food rise less rapidly Euro area real economic growth Euro area inflation growth, y-o-y forecast range, December 2012 forecast range, September 2012 Sources: Eurostat, ECB 12 December 2012 Economic Policy Statement of Eesti Pank 6

7 Market expectations for oil prices have declined Naftahind, USA dollarit barreli kohta 120 detsembriprognoos 2012 juuniprognoos Source: ECB 12 December 2012 Eesti Pank Economic Comment 7

8 The outlook for external demand has worsened for Estonia The fall in external demand will hit particularly hard in 2013 External demand growth 15% december 2012 forecast june 2012 forecast Sari3 10% 5% 0% -5% -10% -15% -20% Source: ECB 12 December 2012 Economic Policy Statement of Eesti Pank 8

9 If growth in Estonia is to accelerate, it is important that external demand recover The development of exporting industries is directly linked to the economic situation in destination countries real GDP growth real domestic demand growth real growth in goods and services exports 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% Sources: Statistics Estonia, Eesti Pank 12 December 2012 Eesti Pank Economic Comment 9

10 Estonia s economy will grow more slowly in 2012 than it did in 2011 Growth in 2012 will be higher than was forecast in June From 2013 growth will accelerate slowly Real economic growth in Estonia 12% june 2012 forecast december 2012 forecast 8% 4% 0% -4% -8% -12% -16% Sources: Statistics Estonia, Eesti Pank 12 December 2012 Eesti Pank Economic Comment 10

11 Wage growth will remain high, growth in employment will slow down Growing labour productivity will provide a base for economic growth Increased productivity will support wage growth 25% 20% 15% 10% 5% 0% -5% growth in average nominal gross wages employment growth -10% Sources: Statistics Estonia, Eesti Pank 12 December 2012 Economic Policy Statement of Eesti Pank 11

12 Long-term unemployment has fallen as a share of unemployment, even as general unemployment is declining Unemployment has fallen to its equilibrium level 20% less than 6 months 6-11 months months 24 months or more non-accelerating wage rate of unemployment total unemployment rate 15% 10% 5% 0% Sources: Statistics Estonia, Eesti Pank 12 December 2012 Eesti Pank Economic Comment 12

13 Inflation continues to fall Core inflation driven by domestic factors has remained low The rise in electricity prices will have an impact on inflation in 2013 Inflation will be eased by falls in global prices for oil and food commodities 12% core inflation food energy harmonised consumer price inflation 10% 8% 6% 4% 2% 0% Sources: Statistics Estonia, Eesti Pank 12 December 2012 Eesti Pank Economic Comment 13

14 The general government budget will be close to balance by % general government budget balance 2% 1% 0% -1% -2% -3% Sources: Statistics Estonia, Eesti Pank 12 December 2012 Eesti Pank Economic Comment 14

15 Conclusions of the Economic Forecast 12 December 2012 Economic Policy Statement of Eesti Pank 15

16 Estonia s economy is close to balance Core inflation remains low and stable Unemployment is at a level which does not accelerate wage growth The general government budget deficit is small and will contract further Gross domestic production is close to its long-term trend The current account deficit is historically low The net external debt position is close to balance 12 December 2012 Eesti Pank Economic Comment 16

17 but balance is fragile New imbalances can easily arise low interest rates could cause excessively fast credit growth high structural unemployment and labour shortages could cause upward wage pressures and encourage inflation global oil prices might run higher than expected and drive up inflation 12 December 2012 Economic Policy Statement of Eesti Pank 17

18 Future growth will depend on the external environment If the external environment becomes more unfavourable than forecast, this could have an immediate impact on economic activity in Estonia For growth to accelerate and for sustainable growth to be achieved, it is important that the debt crisis in the euro area be resolved Continuation of the debt crisis will threaten Estonia s main trading partners, who have so far escaped the worst of the crisis, and this could then threaten export demand and growth for Estonia Following from the measures taken in the euro area, it is vital that states with high levels of debt comply with the agreed budget programmes 12 December 2012 Eesti Pank Economic Comment 18

19 The public sector has an important role to play in maintaining confidence Strict budget discipline and rational public sector financing are key sources of confidence in uncertain times The public sector must not abandon its target of reaching a budget surplus in 2014 Active labour market policies need to be applied to bring down structural unemployment and ensure long-term economic growth 12 December 2012 Economic Policy Statement of Eesti Pank 19

20 Key figures for Eesti Pank s economic forecast GDP (billion euros) GDP change in real terms (%) Inflation (%) Unemployment (%) Change in average gross wages (%) Budget balance (% of GDP) Sources: Statistics Estonia, Eesti Pank 12 December 2012 Economic Policy Statement of Eesti Pank 20