Emerging Europe s Outlook Rapid Recovery or Post-crisis Hangover? Presented by: Ralf Wiegert Senior Economist IHS Global Insight

Transcription

1 Emerging Europe s Outlook Rapid Recovery or Post-crisis Hangover? Presented by: Ralf Wiegert Senior Economist IHS Global Insight

2 Emerging Europe s recovery Exports rebounded quickly, domestic demand slowly joining the fray Inflation is increasingly becoming a problem Employment lagging Fiscal consolidation remains a major issue Manufacturing benefits from global recovery Construction still in the doldrums Banking crisis contained as property prices bottom out 2

3 The recovery is set to continue, unless global growth forces falter 1 Real GDP Change in % POL HUN CZE ROM BGR RUS UKR TUR CEB CIS

4 2/1/27 6/1/27 1/1/27 2/1/28 6/1/28 1/1/28 2/1/29 6/1/29 1/1/29 2/1/21 6/1/21 1/1/21 2/1/211 2/1/27 6/1/27 1/1/27 2/1/28 6/1/28 1/1/28 2/1/29 6/1/29 1/1/29 2/1/21 6/1/21 1/1/21 2/1/211 Central European growth is driven by exports, boom-bust in construction most significant Industry Sentiment Construction Sentiment Poland Czech Republic Hungary Slovakia Romania Bulgaria -6 Source: Eurostat 4

5 1/1/27 5/1/27 9/1/27 1/1/28 5/1/28 9/1/28 1/1/29 5/1/29 9/1/29 1/1/21 5/1/21 9/1/21 1/1/211 1/1/27 5/1/27 9/1/27 1/1/28 5/1/28 9/1/28 1/1/29 5/1/29 9/1/29 1/1/21 5/1/21 9/1/21 1/1/211 Turkish industry posted steep rebound, Russian manufacturing lagged 7 6 Manufacturing PMI Poland Czech Republic Turkey 7 6 Russian PMI Indicators PMI GDP PMI Manufacturing PMI Services Source: NTC 5

6 2/1/27 5/1/27 8/1/27 11/1/27 2/1/28 5/1/28 8/1/28 11/1/28 2/1/29 5/1/29 8/1/29 11/1/29 2/1/21 5/1/21 8/1/21 11/1/21 2/1/211 2/1/27 5/1/27 8/1/27 11/1/27 2/1/28 5/1/28 8/1/28 11/1/28 2/1/29 5/1/29 8/1/29 11/1/29 2/1/21 5/1/21 8/1/21 11/1/21 2/1/211 Domestic demand still bears scars of crisis, price concerns dampen confidence Services Sentiment Consumer Confidence Poland Czech Republic Hungary Slovakia Romania Bulgaria -8 Source: Eurostat 6

7 Inflation is currently driven by energy and food prices, upside risks prevail 12 Consumer price inflation in %, annual average POL HUN CZE ROM BGR RUS UKR TUR CEB CIS

8 Fiscal austerity dampens the recovery POL HUN CZE ROM BGR RUS UKR TUR CEB CIS Government Budget Deficit, % of GDP

9 THE RECOVERY HAS FIRMED WHAT NEXT? 9

10 Convergence race 2.? Probably not. The region is not ready yet. A fresh credit-fuelled boom is not in the offing: High foreign debt burden Weak property market Banking crisis still lingering Investment inflows clearly below pre-crisis levels Fiscal consolidation High unemployment Bad demographics, migration Dependency on Western European recovery 1

11 Key challenges for a higher growth path Corruption and political interference (getting worse in several places) Solving banking crisis, especially in Ukraine, Kazakhstan Making good use of European Union transfers Nurturing innovation-based growth Enhance labor force quality: raise share of tertiary education graduates, nurture life-long learning culture Enhance labor force quantity: raise life expectancy and retirement age 11

12 Bottom line The big recession is a thing of the past, but the hangover from the precrisis boom still burdens the recovery Emerging Europe will be less dynamic than other emerging markets CIS growth will remain tagged to natural resources and other commodities, corruption key obstacle for growth and investment Exports are the main force behind Central Europe/Balkans growth, domestic forces will gather traction slowly Most Emerging European currencies will hold firm against US-Dollar and Euro in nominal and real terms Euro adoption at least five years away for Central European EU members (except for Baltic countries and perhaps Bulgaria, which might join earlier) 12

13 Thank You for Your Participation! Presented by: Ralf Wiegert Senior Economist IHS Global Insight Download a copy of this presentation at: