Animal Spirits and Slow Recovery VG

7/27/2019 Animal Spirits and Slow Recovery VG

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Animal Spirits and Slow Recovery

Vladimir Gligorov


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Contents

Recession and recovery

Issues

Growth models


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Recession and Recovery

Business cycle synchronisation

The better performers

The Balkans

The big neighbours

Return of domestic demand


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GPS: Greece, Portugal, Spain. ASEAN-5: Indonesia, Malaysia, Philippines, Thailand and Vietnam. NMS-11 incl. Croatia.

Source: wiiw Database incorporating national and Eurostat statistics. IMF,

World Economic Outlook, April 2013. European Commission, Spring Report, April 2013. wiiw forecast.

External environment: growth and growth forecastsDevelopment of GDP change in % against preceding year

-4

-2

0

2

4

6

8

10

12

2010 2011 2012 2013 2014 2010 2011 2012 2013 2014

USA NMS-11

EURO Area GPS

Germany SEE

Japan Russia

ASEAN-5* Ukraine

Latin America&Carrib. Turkey

China


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Source: World Economic and Financial Surveys, April 2013, Table 1. *The US figures for 2013 and 2014 are updated from IMF(2013b), June 2013.

Fiscal balances, 2010-2014

ProjectionsAdvanced economies 2010 2011 2012 2013 2014United States

-11.1

-10.0

-8.5

-5.9*

-4.8*

Euro area -6.2 -4.1 -3.6 -2.9 -2.6Germany -4.1 -0.8 0.2 -0.3 -0.1Japan -9.3 -9.9 -10.2 -9.8 -7.0United Kingdom -10.1 -7.9 -8.3 -7.0 -6.4


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Source: wiiw Monthly Database incorporating national and Eurostat statistics.

Exports of goods (nominal, euro-based)change in % against preceding year, 3-month moving average

-40

-20

0

20

40

60

Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

CZ HU PL

SI SK

-40

-20

0

20

40

60


BG EE HR

LT LV RO

-40

-20

0

20

40

60


ES GR IE

IT PT

-50

0

50

100


AL BA

-50

0

50

100


ME MK RS TR

-50

0

50

100


KZ RU UA

Druck!


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Exports of goods (nominal, euro-based)change in % against preceding year, 3-month moving average

-20

0

20

40

60

Jan-11 Jul-11 Jan-12 Jul-12 Jan-13

CZ HU PL

SI SK

-20

0

20

40

60


BG EE HR

LT LV RO

-20

0

20

40

60


ES GR IE

IT PT

-20

0

20

40

60


AL BA

-20

0

20

40

60


ME MK RS TR

-20

0

20

40

60


KZ RU UA

show


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Remark: Data refer to NACE Rev. 2. BA, ME, RU and UA until 2011 refer to NACE Rev.1. IE: Seasonally adjusted data. Source:wiiw Monthly Database incorporating national and Eurostat statistics.

Gross industrial productionchange in % against preceding year, 3-month moving average

-30

-20

-100

10

20

30


CZ HU PL

SI SK

-30

-20

-10

0

10

20

30


BG EE HR

LT LV RO

-30

-20

-10

0

10

20

30


ES GR IE

IT PT

-50

-25

0

25

50


ME MK RS TR

-30

-20

-10

0

10

20

30


BA

-30

-20

-10

0

10

20

30


KZ RU UA

Druck!


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Remark: Data refer to NACE Rev. 2. BA, ME, RU and UA until 2011 refer to NACE Rev.1. IE: Seasonally adjusted data.


Gross industrial productionchange in % against preceding year, 3-month moving average

-20

-10

0

10

20


CZ HU PL

SI SK

-20

-10

0

10

20


BG EE HR

LT LV RO

-20

-10

0

10

20


ES GR IE

IT PT

-20

-10

0

10

20


ME MK RS TR

-20

-10

0

10

20


BA

-20

-10

0

10

20


KZ RU UA

show!


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Source: Eurostat and national statistics.

Development of quarterly GDPreal change in % against preceding year

-20

-10

0

10

20

1Q'08 1Q'09 1Q'10 1Q'11 1Q'12 1Q'13

CZ HU PL SI SK

-20

-10

0

10

20

1Q'08 1Q'09 1Q'10 1Q'11 1Q'12 1Q'13

BG EE HR LT LV RO

-20

-10

0

10

20

1Q'08 4Q'08 3Q'09 2Q'10 1Q'11 4Q'11 3Q'12

MK RS TR AL ME

-20

-10

0

10

20

1Q'08 1Q'09 1Q'10 1Q'11 1Q'12 1Q'13

KZ RU UA

Druck!


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Development of quarterly GDPreal change in % against preceding year

-6

-4

-20

2

4

6

8

10

1Q'11 1Q'12 1Q'13

CZ HU PL SI SK

-6

-4

-20

2

4

6

8

10

1Q'11 1Q'12 1Q'13

BG EE HR LT LV RO

-6

-4

-2

0

2

46

8

10

1Q'11 3Q'11 1Q'12 3Q'12 1Q'13

MK RS TR AL ME

-6

-4

-2

0

2

4

68

10

1Q'11 1Q'12 1Q'13

KZ RU UA

show!


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GDP during the crisis2008=100

70

80

90

100

110

120

130

BG CZ EE HR HU LT LV PL RO SI SK ES GR IT PT*

1Q 12 1Q 13

* PT data 2013 refer to 4Q12.Source: Eurostat, national Statistics.

3Q 2008

70

80

90

100

110

120

130

ME MK RS TR AL BA RU UA KZ

1Q 12 1Q 13

1Q 2008


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Development of gross industrial production (real),September 2008 = 100

60

70

80

90

100

110

120

130

CZ HU PL SI SK BG EE HR LT LV RO ES EL IE IT PT BA*MEMK RS TR KZRU*UA

Mar-12 Mar-13

* NACE Rev. 1.Source: wiiw Monthly Database incorporating national and Eurostat statistics.


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GDO growth, 2013Revisions (November 2012, March 2013 and June 2013)

0

1

2

3

4

5

6

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

MK ME RS TR AL BA XK KZ RU UA

-4

-3-2-101234

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Eurozone BG HR CZ EE HU LV LT PL RO SK SI

2013

*Kosovo.Quelle: wiiw-Prognosen, Europische Kommission fr Eurozone.


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GDP growth, 2014Revisions (November 2012, March 2013 and June 2013)

-1

0123456

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Eurozone BG HR CZ EE HU LV LT PL RO SK SI

2014

*Kosovo.Quelle: wiiw-Prognosen, Europische Kommission fr Eurozone.

-1

0

1

23

4

5

6

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

Nov-12

Feb-13

Jun-13

MK ME RS TR AL BA XK* KZ RU UA


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Source: wiiw (June 2013).

GDP growth, wiiw forecast 2013-2015

2013 2014 2015 2013 2014 2015

Kazakhstan 5.0 6.0 6.5 Macedonia 1.2 2.2 2.6

Lithuania 3.5 3.8 4.2 Slovakia 1.0 2.4 3.0

Albania 3.5 2.5 3.0 Serbia 1.0 2.0 3.0

Turkey 3.4 4.5 5.0 Bulgaria 0.9 2.0 3.0

Kosovo 3.0 5.0 4.0 Bosnia and Herzegovina 0.8 2.0 3.0

Latvia 2.8 3.1 3.5 Ukraine 0.5 2.5 3.5

Russia 2.4 3.1 3.2 Hungary 0.0 1.2 2.3

Estonia 2.0 3.2 3.5 Czech Republic -0.8 1.4 2.4

Romania 1.9 2.0 2.1 Croatia -1.0 1.0 2.0

Montenegro 1.3 2.0 3.0 Slovenia -3.3 -0.4 1.0

Poland 1.2 2.7 3.5


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Divergent performances

Better performers: PL, SK, Baltics, RO, AL

Worse performers: HU, CZ, Sl, Balkans (BU, HR, RS)

Big neighbours: RU, UA, KZ, TR

Overall: dimmed prospects in most parts

Recession and recovery


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Issues

Interest rates and animal spirits

Growing out of debt

Liquidity trapped or not

The curious case of euro attraction

Dealing with imbalances

Searching for jobs

Social and political risks


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1.2 1.3 1.0

3.4 3.5

0.8

5.0

2.4

0.5

-6

-4

-2

0

2

4

6

MK ME RS TR AL BA KZ RU UA

Source:wiiw forecast (July 2013). European Commission, Spring Report 2013.

GDP growth in 2013 (in %)and contribution of individual demand components in percentage points

0.9

-1.0 -0.8

2.0

0.0

2.83.5

1.2 1.5

1.0

-3.3

-6

-4

-2

0

2

4

6

BG HR CZ EE HU LV LT PL RO SK SI

Consumption Investment Trade balance GDP growth (%)


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Source:wiiw forecast (July 2013). European Commission, Spring Report 2013.

GDP growth in 2014 (in %)and contribution of individual demand components in percentage points

2.0

1.0

1.4

3.2

1.2

3.23.8

2.71.8

2.4

-0.3

-6

-4

-2

0

2

4

6


Consumption Investment Trade balance GDP growth (%)

2.2 2.02.1

4.5

2.5 2.0

6.0

3.1 2.5

-6

-4

-2

0

2

4

6



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Issues


Growing out of debt


The curious case of euro attraction


Searching for jobs

Social and political risks


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Decompression and compression (sovereign)

Given the growth expectations, interest rates too high

even though they are mostly where they were before

the crisis (private)


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Source: ECB, National Banks; wiiw calculations.

Spreads of 10-year sovereign debt yields to the German

equivalent, %

0

5

10

15

20

25

30

CZ LV BG IE PL SK LT HR IT ES SI MK KZ RO PT HU TR RU CY AL UA GR RS

2012M6 2013M3


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equivalent, %

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

2007M1 2008M1 2009M1 2010M1 2011M1 2012M1 2013M1

BG CZ HU LV LT PL RO IIPS


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equivalent, %

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

2007M1 2008M1 2009M1 2010M1 2011M1 2012M1 2013M1

IIPS HR MK TR AL RS



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Interest rates on loans to non-financial corporations, value

below 1 EUR million, maturity between 1 and 5 years, %

2.5

3.5

4.5

5.5

6.5

7.5

8.5

2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1

DE IE ES IT NL AT SI SK


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big-loan small-loan gfcf gfcfspread_lag 0.060***

(0.018) 0.140***(0.036)big-loan_lag -1.460***

(0.405)small-loan_lag -1.713***

(0.939)crisis -1.298***

(0.250) -1.046***(0.183) -10.455***(2.278) -10.320***(2.125)ecb -0.693**

(0.324) -0.342**(0.134) -0.793(2.253) -0.889(2.180)const 5.281***

(0.153) 5.498***(0.171) 10.366***(1.681) 12.682**(5.200)Number of observations 253 309 409 491R2 0.203 0.313 0.290 0.321Standard errors are in parentheses;

*** denotes 1% significance, ** 5% significance, * 10% significance

Impact of sovereign yield spread on interest rates(big loans and small loans); impact of interest rates on gross investment


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Remark: Croatia: Long-term. Montenegro: Over one year. Serbia: Refers to all currencies.

Source: Eurostat, National bank statistics.

Interest rates - loans to non-financial corporationsdomestic currency, amount outstanding, maturity >5 years, % p.a.

0

5

10

15

20


CZ HU PL SI SK

0

5

10

15

20


ES GR IE IT PT

0

5

10

15

20


BG EE HR

LT LV RO

0

5

10

15

20


MK ME RS KZ


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Remark: Kazakhstan: Loans to individuals.

Source: Eurostat, National bank statistics.

Interest rates - loans to households for housingin domestic currency, amount outstanding, maturity >5 years, % p.a.

0

5

10

15

20


CZ HU PL SI SK

0

5

10

15

20


BG EE LT LV RO

0

5

10

15

20


ES GR IE IT PT

0

5

10

15

20


KZ


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Source: Eurostat, National Bank statistics.

Interest rates on loans outstandingdomestic currency, maturity > 5 years, % p.a.

0

5

10

15

20


CZ HU PL SI SK

0

5

10

15

20


BG EE HR LT LV RO

loans to non-financial corporations

0

5

10

15

20


CZ HU PL SI SK

0

5

10

15

20


BG EE LT LV RO

loans to households for housing


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Source: National banks statistics, wiiw calculations.

Non-performing loans

% total loans

0

510

15

20

25

30

35


2009 2010 2011 2012 Mar-13

0

5

10

15

20

25

30

35



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-60.0

-40.0

-20.0

0.0

20.0

40.0

60.0

1Q'08 1Q'09 1Q'10 1Q'11 1Q'12 1Q'13

KZ RU UA


Gross fixed capital formationreal change in % against preceding year

-60

-40

-20

0

20

40

60

1Q'08 1Q'09 1Q'10 1Q'11 1Q'12 1Q'13

CZ HU PL SI SK

-60

-40

-20

0

20

40

60

1Q'08 1Q'09 1Q'10 1Q'11 1Q'12 1Q'13

BG EE HR LT LV RO

-60.0

-40.0

-20.0

0.0

20.0

40.0

60.0

1Q'08 1Q'09 1Q'10 1Q'11 1Q'12 1Q'13

MK* RS TR

KZ 71.5

* Macedonia: Gross Capital Formation


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Estonia 2012: 39.7%

Source: National and Eurostat statistics, wiiw own calculations.

Gross fixed capital formation, public sectorreal change in % against preceding year

-30

-20

-10

0

10

20

30

BG CZ EE HU LV LT PL RO SK SI MK TR KZ UA

2011 2012


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Private and public investments,average growth p.a., 2006-2012

Source: Eurostat, wiiw own calculations.

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

-15.0 -10.0 -5.0 0.0 5.0 10.0 15.0

private

public


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Fiscal policy, public debt, public and private investment

Fiscal policy largely restrictive

Public debt situation depends on growth: 5 percent

nominal growth would largely resolve the sovereign debtissue

Mostly negative developments in public investments

Private investment gets no/little stimulus from public

investment


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ESA'95 definition for all EU countries, national definition for the rest of the countries.

Sources: Eurostat, Government Finance Statistics (IMF), National Ministries of Finance, National Banks.

Total fiscal revenues,in % of GDP

20

30

40

50

60

2007 2008 2009 2010 2011 2012

CZ HU PL

SI SK

20

30

40

50

60

2007 2008 2009 2010 2011 2012

BG EE HR

LT LV RO

20

30

40

50

60

2007 2008 2009 2010 2011 2012

AT DE ES GR

IE IT PT

20

25

30

3540

45

50

55

2007 2008 2009 2010 2011 2012

AL BA ME MK RS


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Remark: Ireland: 2010 66.1%. ESA'95 definition for all EU countries, national definition for the rest of the countries.Sources: Eurostat, Government Finance Statistics (IMF), National Ministries of Finance, National Banks.

Total fiscal expenditures,in % of GDP

20

30

40

50

60

2007 2008 2009 2010 2011 2012

CZ HU PL

SI SK

20

30

40

50

60

2007 2008 2009 2010 2011 2012

BG EE HR

LT LV RO

20

30

40

50

60

2007 2008 2009 2010 2011 2012

AT DE ES GR

IE IT PT

20

30

40

50

60

2007 2008 2009 2010 2011 2012

AL BA ME

MK RS


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Source: Eurostat, IMF, wiiw own calculations.

Public debt in % of GDP, 2002, 2008 and 2012

0

2040

60

80

100


2008 2012

0

20

40

60

80


2008 2012


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Implicit interest rates on public debt compared with GDP

growth

Source: Eurostat, AMCEO.

-10

-5

05

10

15

20

25

30

2000 2002 2004 2006 2008 2010 2012 2014

Greece

-10

-5

0

5

10

15

20

25

30

2000 2002 2004 2006 2008 2010 2012 2014

Germany

-10

-5

0

5

10

15

20

25

30

2000 2002 2004 2006 2008 2010 2012 2014

Serbia

-10

-5

0

5

10

15

20

25

30

2000 2002 2004 2006 2008 2010 2012 2014

Croatia

-10

-5

0

5

10

15

20

25

30

2000 2002 2004 2006 2008 2010 2012 2014

Czech Republic

-10

-5

0

5

10

15

20

25

30

2000 2002 2004 2006 2008 2010 2012 2014

Hungary

IIR GDP


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M1 rising but not M2 and M3 in reserve currencies

(liquidity trap)

But not in non-reserve currency countries



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Source: wiiw Monthly Database incorporating National bank statistics.

Money M1

change in % against preceding year

-40

-20

0

20

40

60


CZ HU PL SI SK

-40

-20

0

20

40

60


BG EE HR LT LV RO

-40

-20

0

20

40

60


AL BA ME MK RS

-40

-20

0

20

40

60


KZ RU UA


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44


Money M2


-40

-20

0

20

40

60


CZ HU PL SI SK

-40

-20

0

20

40

60


BG EE HR LT LV RO

-50

0

50

100


AL BA ME MK RS

-40

-20

0

20

40

60


KZ RU UA


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45


Money M3


-40

-20

0

20

40

60


CZ HU PL SI SK

-40

-20

0

20

40

60


BG EE HR LT LV RO

-10

0

10

20

30

40


MK

-40

-20

0

20

40

60


KZ UA


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Reserves mostly in euro very high: on average 35

percent of GDP

Less in Russia, Turkey, other big neighbours

Euro and nominal vs. real stability

Exchange rate regime and trade

Euro attraction


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* positive values indicates real appreciation


Exchange rates, consumer prices and wages 2005-2013


Real exchange rates, EUR per NCU, CPI-deflated* Consumer price inflation Real gross monthly wages

-30

-20-10

0

10

20

30

Jan-05 Jan-07 Jan-09 Jan-11 Jan-13

Czech Republic

-30

-20-10

0

10

20

30


Hungary

-30

-20

-10

010

20

30


Slovakia

-30

-20

-10

010

20

30


Bulgaria


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* positive values indicates real appreciation


Exchange rates, consumer prices and wages 2005-2013

change in % against preceding year (ctd.)

Real exchange rates, EUR per NCU, CPI-deflated* Consumer price inflation Real gross monthly wages

-30

-20-10

0

10

20

30


Croatia

-30

-20-10

0

10

20

30


Latvia

-30

-20

-10

010

20

30


Romania

-20

-10

0

10

20

30


Serbia


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Exchange regime, trade and GDP growth,

average p.a., 2009-2012

Note: Currency boards (BG, LT, LV, BA); Fixed (HR, MK); Float (CZ, PL, HU, RU, RS, AL);

Euro (EE, SI, SK); Other (KZ, UA; RU, TR).

Source: wiiw Annual Database incorporating national and Eurostat statistics, wiiw own calculations.

-2

0

2

4

6

8

10

12

-1.5 -1 -0.5 0 0.5 1 1.5 2 2.5

exportsandimpo

rts

GDP

exports imports

Fixed

Other

Euro

Float

Currency

boards


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Non-optimal currency area policies

Contain imbalances

External, fiscal, financial, labour market


The Macroeconomic Imbalance Procedure (MIP)


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1) Year 2011. - 2) Real exchange rate with CPI deflators. - 3) Gross wages per employee relative to labour productivity (real GDP per employed person, LFS). - 4) We do not have

data, but it is likely that house prices have fallen. - 5) We don't have the data, but it is highly likely that private credit flows are well below the threshold.

Sources: Eurostat, National Statistics, wiiw calculations.

Year 2012 3 year

average of

Current

Account

Balance

as % of GDP

Net

International

Investment

Position

as % of GDP

% Change

(3 years) of

Real Effective

Exchange Rate

with HICP

deflators

% Change

(5 years) in

Export Market

Shares

% Change

(3 years) in

Nominal unit

labour cost

% y-o-y change

in deflated

House Prices

Private Sector

Credit Flow

as % of GDP

Private Sector

Debt

as % of GDP

General

Government

Debt

as % of GDP

Unemployment

rate

3-year average

y-o-y % change

in Total

Financial

Sector

Liabilities, non-

consolidated

data

Thresholds -4%/+6% -35% 5% & 11% -5% +9% & +12% +6% +15% 160% 60% 10% 16.5%

Bulgaria -0.9 -80.8 3.1 1) 5.0 9.0 -5.3 -6.7 1) 146.0 1) 18.5 11.3 5.6 1)

Croatia -0.6 -88.1 -3.3 2) -24.1 -3.9 3) . 4) . 5) 144.2 53.0 13.7 2.9 1)

Czech Republic -3.0 -49.7 0.3 1) -3.8 3.3 -3.6 2.8 1) 78.6 1) 45.8 7.0 4.4 1)

Estonia 1.3 -53.0 0.8 1) 6.8 -2.3 3.7 6.8 1) 132.9 1) 10.1 13.1 -4.4 1)

Hungary 1.2 -103.3 -3.3 1) -16.6 5.7 -8.5 -7.8 150.1 79.2 11.0 -7.5

Latvia -0.3 -65.1 -0.6 1) 12.0 -5.9 0.7 -2.5 1) 125.1 1) 40.7 16.7 -4.5 1)

Lithuania -1.4 -52.2 3.6 1) 30.0 -5.2 -3.4 -0.8 1) 70.1 1) 40.7 15.5 8.9 1)

Poland -4.5 -65.7 -10.9 1) 0.6 3.3 -5.8 1) 7.1 1) 79.5 1) 55.6 9.8 4.4 1)

Romania -4.3 -64.5 -2.4 1) 4.9 4.8 -9.2 1.8 1) 71.8 1) 37.8 7.2 4.3 1)

Slovakia -1.2 -63.8 4.3 1) 4.7 -1.2 -5.7 3.3 1) 76.3 1) 52.1 14.0 1.2 1)

Slovenia 0.6 -44.6 -0.3 1) -19.5 0.5 -8.6 -4.1 125.2 54.1 8.1 -0.8

Austria 2.2 0.5 -1.0 1) -20.5 4.1 -7.9 1) 4.1 1) 160.7 1) 73.4 4.3 -0.3 1)

Belgium -0.2 66.8 -0.5 1) -15.7 6.2 -0.4 9.4 241.3 99.6 7.7 -4.2

Germany 6.5 40.5 -3.9 1) -12.7 3.2 1.4 1) 4.8 1) 127.8 1) 81.9 6.2 2.1 1)

Greece -7.7 -114.1 3.1 1) -27.0 -8.1 -5.1 1) -6.4 130.3 156.9 18.2 -3.9

Ireland 2.4 -95.8 -9.1 1) -15.7 -9.4 -12.8 4.0 1) 309.5 1) 117.6 14.4 -0.7 1)

Italy -2.4 -24.4 -2.1 1) -23.4 3.0 -5.3 2.6 1) 128.6 1) 127.0 9.2 3.8 1)

Portugal -6.4 -116.7 -1.9 1) -15.5 -5.7 -9.1 -6.1 255.6 123.6 13.3 -3.6

Spain -3.1 -93.0 -1.3 1) -14.2 -6.7 -15.8 -4.1 1) 218.1 1) 84.2 22.3 3.7 1)

Macedonia -3.0 -55.8 0.6 2) -7.3 0.4 3) . 4) . 5) 47.1 36.0 31.5 4.9

Montenegro -19.5 . -0.1 2) -12.8 0.2 3) . 4) . 5) 54.7 51.9 19.7 7.0

Serbia -9.0 -92.5 -1.6 2) -0.5 9.8 3) . . 5) 56.3 58.9 22.1 10.2

Turkey -7.3 -51.3 . 11.9 . . . 46.3 36.8 9.2 14.4

Albania -11.7 -41.4 1) -3.9 2) 4.5 3.7 3) . . 5) 41.3 58.6 14.2 5.1

Bosnia and Herzegovina -7.9 -59.3 1) 0.1 2) -29.6 0.5 3) . . 5) 58.1 43.1 27.6 4.2

Kazakhstan 3.8 -12.2 21.2 2) 44.4 33.8 3) . . 39.5 12.7 5.5 10.2

Russia 4.6 7.8 1) 24.7 2) 16.6 30.9 3) . . 49.9 9.6 6.4 21.5 1)

Ukraine -5.6 -32.9 16.4 2) 8.5 45.7 3) . . 56.0 36.6 7.8 13.1 1)

( )

Scoreboard with values for 2012


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Adjustment processes take place through declining employment

Employment rates in some instances at very low levels

High youth and long-term unemployment

Expected prolonged correction of real wages

Labour markets


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Employment rates either fall or stagnateEmployment rates total (15-64, LFS)

30

35

40

45

50

55

60

65

70

CZ HU PL SI SK BG EE HR* LT LV RO ME* MK TR

1Q 08 1Q 13

* Data 1Q 2013 refer to 4Q 2012.



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Two directions:

In less democratic polities, polarisation between autocratic

tendencies and popular/ist demands for democratisation

In more stable democracies either collapse of the existing party

systems or more intense ideological competition (emergence of

more radical parties)

Examples: Balkans (BU, Sl, RS, Bosnia); HU, CZ, TR, RU; EU-South: Greece, Italy

Social tensions and political adjustments


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voters

left right

EU and stability vs. polarisation or a shift in policy space

58


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Stress on imbalances

The implication is that there should be more reliance on domestic

savings and investments

Not much support for cross-border investments until bank union

and fiscal union issues are resolved

Significant national action on sustainability of balances needed to

switch to the new growth model

Whither convergence growth?

59


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This year and the next:

- some recovery with downside risks

Medium term:

- continued growth below potential

- restructuring to adapt to new growth model

Longer term:

- some succeed, others do not- most likely scenario: club convergence, inter-club divergence

Returning to forecasts

Animal Spirits and Slow Recovery VG

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