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The Economies in Transition Project LINK Conference
New York, NY October 2012
Robert C. ShelburneUN Economic Commission for Europe
United NationsEconomic Commission
For Europe
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LINK Contributers
• Russia‐E. Abramova, Alexander Apokin, D. Belousov, Kirill Mikhaylenko‐Center for
Macroeconomic Analysis and Short‐term Forecasting
• Ukraine‐Valerity Heyets, Maria Skrypnychenko‐ Ukrainian Academy of Sciences
• Croatia‐The Institute of Economics
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ECE Regions
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EiT & NMS in the global economy
EiT
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Over the long‐term there has been no convergence in the per capita income of FSU (USSR) with the USA or Western Europe
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Per capita income of EECCA and SEE relative to the world and eurozone
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Convergence of per capita incomes over the last decade
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The EiT medium‐run growth has slowed more than in either the advanced or emerging economies
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Real GDP growth in the ECE sub‐ regions
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Growth in the EiT, 2011‐13
Note: Kyrgyzstan 2012 GDP stagnation due to strike at Kumtor, the world’s largest gold
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Real growth forecast for Russia2012 2013
LINK, Oct 3.7 3.6IMF,Oct 3.7 3.8EIU, Oct 3.8 3.9UNCTAD, Sept 4.7Consensus Econ, August 3.7 3.7UBS, July 3.8 3.7WESP, July 4.4 4.4EBRD, July 3.1 3.3Global Insight, July 3.6 3.5Rosbank, July 4.0 3.6OECD, June 4.5 4.1
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Leading indicators have recently turned down for Eurozone and especially Russia
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NMS leading indicators down slightly
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Unemployment in SEE; largely structural
ECE estimates, cross‐country comparisons should not be made as no common methodology
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Unemployment in EECCA (CIS)
ECE estimates, cross‐country comparisons should not be made as no common methodology
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Russian unemployment: small increase during crisis and now full employment
Source: Data from Russian Central Bank
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Medium‐term inflation trends
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Inflation in SEE
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Inflation in EECCA (CIS)
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Poor wheat harvest in the CIS for 2012‐13 (Rainy spring and summer drought)
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Corn production was hit hard by the summer drought
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Currency situation in Europe CIS mostly managed floaters
Eurozone members
EU members thatmust ultimately join the euro
EU members thatdo not have to join the euro
Non EU members that use the euro
Fixed exchange rate to
euro
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Exchange rates versus the US$ Declines since 2008 but general stability since 2009
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Russian ruble has been appreciating in real terms
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Exports from CIS still below peak in 2008Q3
Source: Data from WTO
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Export indexes, in about half EiT exports still below 2008Q3
Source: Data from WTO
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SEE & NMS are the most exposed regions in the world to a deteriorating eurozone through
several transmission mechanisms
Most of CIS
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Reduced exports to the EU would be a major transmission mechanism
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A 3% decline in EU exports would create a 1% decline in SEE growth by this channel alone
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Remittances remain significant for many EiT; SEE about 5‐10%, CIS varies considerably
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Bank‐assets owned by eurozone banks (mainly Italy & Austria)
Note: Baltic banks largely owned by Sweden & Norway
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Russia’s vulnerability to a eurozone banking crisis has been reduced from 2008 as it’s banking sector is now a net creditor
Source: Chart from Russian LINK Report, Abramova, Apokin, Belousov, Mikhaylenko
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Russian remittance outflows closely correlated with the price of oil
Source: World Bank, Migration and Development Brief 13, November
8, 2010
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Economic downturn in Russia reduced remittance outflows to CIS‐11 significantly
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Current accounts remain somewhat problematic in SEE
IMF projections for 2013
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2012 Current accounts in global perspective
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FDI inflows are still depressed in SEE and Russia, but not EECCA‐11 (CIS‐11), longer‐term
FDI is significant Eit receive about 6% of world FDI
Will WTO accession boost FDI to Russia?
2000 2011
Per Cent Increase
2000 to 2011 2008 2009 2010 2011
Per Cent Change 2008
to 2011 SEE-6 5.7 75.7 1,232 12.7 8.3 4.0 6.7 -47 Russia 32.2 457.5 1,321 75.0 36.5 43.3 52.9 -29 EECCA-11 23.0 224.1 876 33.4 27.6 26.5 32.6 -2EiT 60.8 757.3 1,145 121.0 72.4 73.8 92.2 -24 NMS 103.1 634.4 515 63.0 27.5 25.4 36.0 -43 Turkey 19.2 140.3 630 19.5 8.4 9.0 15.9 -19ECA 183.2 1,532.0 736 203.5 108.3 108.2 144.0 -29
FDI Inward Stock FDI Inflows
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Public debt in the EiT is generally lowPu
blic
deb
t to
GD
P
Source: UNCTAD TDR, 2012
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Government gross debt to GDP Note: for most net debt=gross debt or net is not provided; a * gives the
amount net is less than gross as % of GDP
Alb, Cro,
Kyr, Mon,
Ser
Arm, Bel,
B&H,Geo,
Mac,Taj,Ukr
Aze, Kaz,
Rus, Tur,
Uzb
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Sovereign yields, some uptick over the last year
Source: IMF Global Financial Stability Reports
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Saving gap in Central & Southeast Europe
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Excessive savings in the CIS
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Counter‐cyclicality of monetary and fiscal policy in ECE, 2000‐2011
Macro‐policy in Russia like most emerging economies is weakly countercyclical
Source: Derived from data in Elod Takats, BIS Quarterly Review, June 2012
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Russia’s counter‐cyclical government finances
Source: Chart from Russian LINK Report, Abramova, Apokin, Belousov, Mikhaylenko
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Russia’s pro‐cyclical monetary policy
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Dollarization of Russian Banking Deposits
%
Data from Russian Central Bank
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There is no population growth in all three regions; within ECCAA growth in central Asia is negated by losses in Europe
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Russia’s coming pension crisis
IMF staff projections
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Cumulative percent of workforce retired by a given age
Source: UNECE 2012 MDG Report
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Housing Price Trends in EiT & NMS
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Housing construction in Russia
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Trade policy in SEE increasingly structured under the CEFTA
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PTAs in the CIS Note: 9 EiT are not WTO members