labour market in central and eastern europe in context of economic crisis jiří rusnok, chief...
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Labour Market in Labour Market in Central Central and and Eastern Eastern Europe in Context of Europe in Context of EconEconoomic Crismic Crisiiss
Jiří Rusnok, Jiří Rusnok, Chief Economist, Pension Director, ING Czech Chief Economist, Pension Director, ING Czech RepublicRepublic
ILO, Geneve, June 4, 2009ILO, Geneve, June 4, 2009
ILO, Geneve, June 4, 2009ILO, Geneve, June 4, 200922
Content:Content:
DDiversified situation in the CEE iversified situation in the CEE region.region.
SStructure of anti-crisis packagetructure of anti-crisis packages.s. RRisk of excessive government isk of excessive government
borrowing in CEE region.borrowing in CEE region.
ILO, Geneve, June 4, 2009ILO, Geneve, June 4, 200933
Diversified Diversified SSituation in the ituation in the CEE CEE RRegionegion
Very different macroeconomic situation at the Very different macroeconomic situation at the beginning of the crisis – also very different impact beginning of the crisis – also very different impact across the regionacross the region
Most of the economies (except HU) in CEE grew in Most of the economies (except HU) in CEE grew in recent years by more than 5% of real GDPrecent years by more than 5% of real GDP per per year, in 2009 almost all of them will face negative year, in 2009 almost all of them will face negative growthgrowth
Countries with currency board arrangement Countries with currency board arrangement (pegged FX rate) are in much (pegged FX rate) are in much more more fragile fragile ssiittuuation – labour market and CA deficit more ation – labour market and CA deficit more affectedaffected,,
Mostly smallMostly small,, very open economies – very open economies – hugehuge impact impact of dropping international trade of dropping international trade
In general, countries with fewer macroIn general, countries with fewer macro--imbalances imbalances are much more robust in times of crisesare much more robust in times of crises..
ILO, Geneve, June 4, 2009ILO, Geneve, June 4, 200944
Unemployment Rates in Unemployment Rates in
CEECCEEC (according ILO definition)
Source:Eurostat
Country May 08 January 09 February 09 March 09 April09
EU (27) 6,8 7,9 8,1 8,4 8,6
EU (15) 6,9 8,1 8,3 8,5 8,7
Bulgaria 6,6 5,3 5,6 5,9 6,2
Estonia 3,9 9,8 11,1 12,4 13,9
Czech R. 4,3 4,9 5,2 5,5 5,7
Hungary 7,7 8,5 8,8 9,3 9,6
Latvia 6,2 13,2 14,6 16,1 17,4
Lithuania 4,6 11,5 13,5 15,2 16,8
Poland 7,2 7,2 7,5 7,7 7,8
Slovakia 9,7 9,7 10,2 10,6 11,1
ILO, Geneve, June 4, 2009ILO, Geneve, June 4, 200955
Job Creation in Context of Job Creation in Context of GDP Growth in CEEC, 1999 -GDP Growth in CEEC, 1999 -20082008
Poland
-3,0
-2,0
-1,0
0,0
1,0
2,0
3,0
0,0 1,0 2,0 3,0 4,0 5,0 6,0 7,0
changes in real GDP
chan
ges
in
ER
Hungary
-1,0
-0,5
0,0
0,5
1,0
1,5
2,0
2,5
0,0 1,0 2,0 3,0 4,0 5,0 6,0
changes in real GDP
ch
an
ges i
n E
R
Czech R.
-2,0
-1,5
-1,0
-0,5
0,0
0,5
1,0
0,0 1,0 2,0 3,0 4,0 5,0 6,0 7,0 8,0
changes in real GDP
chan
ges
in
ER
Slovakia
-3,0
-2,0
-1,0
0,0
1,0
2,0
3,0
0,0 2,0 4,0 6,0 8,0 10,0 12,0
changes in real GDP
chan
ges
in
ER
Source:Eurostat
ILO, Geneve, June 4, 2009ILO, Geneve, June 4, 200966
Macroeconic Prediction for Macroeconic Prediction for CEEC RegionCEEC Region
Real Real GDP GDP change change
Gen.Gov.BaGen.Gov.Balance % lance % GDPGDP
Public Public Debt % Debt % GDPGDP
CA % GDPCA % GDP InflatioInflation CPIn CPI
UnemploymeUnemployment %nt %
CZCZ -3,5-3,5 -3,0-3,0 29,429,4 -2,7-2,7 1,01,0 8,28,2
PLPL -0,7-0,7 -4,1-4,1 47,747,7 -4,5-4,5 1,81,8 11,011,0
SKSK -2,1-2,1 -2,8-2,8 30,030,0 -5,7-5,7 2,02,0 11,511,5
SISI -2,7-2,7 -3,2-3,2 24,824,8 -4,0-4,0 0,50,5 6,26,2
HH -3,3-3,3 -2,9-2,9 73,873,8 -4,0-4,0 4,24,2 9,19,1
RORO -4,1-4,1 -7,5-7,5 21,121,1 -9,0-9,0 4,54,5 6,16,1
BGBG -2,0-2,0 -0,5-0,5 12,212,2 -14,1-14,1 2,02,0 7,47,4
EEEE -10,0-10,0 -3,2-3,2 6,16,1 -5,7-5,7 -0,5-0,5 11,811,8
LVLV -12,0-12,0 -6,3-6,3 30,430,4 -6,5-6,5 -1,0-1,0 10,310,3
LTLT -10,0-10,0 3,03,0 20,020,0 -7,0-7,0 1,51,5 15,715,7
IMF, Economic outlook, May 2009
ILO, Geneve, June 4, 2009ILO, Geneve, June 4, 200977
Fiscal Stimulus Packages in Fiscal Stimulus Packages in CEECCEEC SSignificantly smaller in size compared to the ignificantly smaller in size compared to the
western Europe and USAwestern Europe and USA, around 1 – 2 % of , around 1 – 2 % of GDP.GDP.
IIn majority countries almost no banking crises n majority countries almost no banking crises (except Ukraine, Baltic(except Ukraine, Balticss, partially Hungary), partially Hungary)..
Significantly lower affordability of public financeSignificantly lower affordability of public finance – t– thus, fiscal policy is both pro-cyclical and hardly sustainable; the latter because it is and will be difficult to finance higher fiscal deficits – need for a coordinated international support.
Mostly small and very open economies – Mostly small and very open economies – effectivnes of domestic fiscal stimuluseffectivnes of domestic fiscal stimulus thus thus limitedlimited..
More focus on supply side in order to boost More focus on supply side in order to boost competetivness of national economycompetetivness of national economy
Specific Labour Market Measures Active and passive labour market measures are
part of regular employment policies in the region.
Automatic (embedded) stabilizers are important part of anti-crises strategies
The level and effectiveness of these systems is obviously different from one country to another
Specific (temporary) new measures:– Social contributions discount (degressive) for
employers, applicable to below average wages (CZ)– Training programs for employees in case of partial
unemployment subsidized heavily from the European Social Fund (CZ. SK)
– Temporary subsidizing of mandatory social contributions in case of shorter working hours due to lack of orders („kurzarbeit“) (SK, PL)
– Flexible working time arrangements (SK, PL)
ILO, Geneve, June 4, 2009ILO, Geneve, June 4, 200999
RRisk of isk of EExcessive xcessive GGovernment overnment BBorrowing in orrowing in CEE CEE RRegionegion Despite that in general the indebtedness of Despite that in general the indebtedness of
CEEC is not (maybe except HU) as high as CEEC is not (maybe except HU) as high as average of the EU(15), the perception of the average of the EU(15), the perception of the market is much worse – the assistance market is much worse – the assistance packages for: Latvia, Hungary, Ukraine, packages for: Latvia, Hungary, Ukraine, Romania, Serbia, Belarus, Romania, Serbia, Belarus,
Sharp increase in cost of financing of state Sharp increase in cost of financing of state debts – CDS increased sharplydebts – CDS increased sharply
Longer term fiscal sustainability could be a Longer term fiscal sustainability could be a huge issue. huge issue.
Enormous rise of debt service cost within state Enormous rise of debt service cost within state budgets of CEEC in near future – crowding out budgets of CEEC in near future – crowding out effect towards social expenditureseffect towards social expenditures
ILO, Geneve, June 4, 2009ILO, Geneve, June 4, 20091010
State Debt, % GDP,State Debt, % GDP, forecast forecast
20092009
0
20
40
60
80
100
120
IMF, Economic outlook, May 2009
ILO, Geneve, June 4, 2009ILO, Geneve, June 4, 20091111
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Closing remarkClosing remarkss As far as longer-term prospects for CEEC are concerned, As far as longer-term prospects for CEEC are concerned,
I'm optimistic. Nevertheless, situation will be very I'm optimistic. Nevertheless, situation will be very different within the region with regards to the overall different within the region with regards to the overall macroeconomic stability.macroeconomic stability.
CEEC which are EU members will have better CEEC which are EU members will have better environment to survive the troubled period and will be environment to survive the troubled period and will be less affected than some of other countries.less affected than some of other countries.
These countries have mostly successfully reformed their These countries have mostly successfully reformed their institutions in recent 10-15 years, and most have built institutions in recent 10-15 years, and most have built economies that are diversified and resilient. economies that are diversified and resilient.
Labour market tensions will grow, double digit Labour market tensions will grow, double digit unemployment rates will be back in some countries and unemployment rates will be back in some countries and could stay for a longer time. could stay for a longer time.
The crisis puts them at risk, but even if the slowdown in The crisis puts them at risk, but even if the slowdown in many of these economies will be deep, change comes many of these economies will be deep, change comes naturally to this part of Europe. So they will adjust, naturally to this part of Europe. So they will adjust, possibly better and faster than many of Europe's possibly better and faster than many of Europe's established market economies. established market economies.
