overview what we have seen : achievements crisis less bad than feared what we can expect :...
TRANSCRIPT
Overview
• What we have seen: achievements
Crisis less bad than feared
• What we can expect: challenges
Fragile, slow and varied recovery
• What should be done: policies for sustained recovery
Exit strategies and structural reforms
Downturn moderatedForecasted versus actual GDP growth in 2009 in EU10, EU15 and Poland, percent
Source: European Commission, Eurostat, Central Statistical Offices, World Bank staff calculations
-4.2 -4.1
1.2
-3.6-4.3
1.7
-5
-4
-3
-2
-1
0
1
2
EU10 EU15 PL
EC Forecast Autumn 2009 Actual 2009
Poland: leading the recovery
GDP growth in EU10 countries, year-on-year, percent
Source: European Commission, Eurostat, Central Statistical Offices, World Bank staff calculations
-25
-20
-15
-10
-5
0
5
10
15
1Q 0
7
2Q 0
7
3Q 0
7
4Q 0
7
1Q 0
8
2Q 0
8
3Q 0
8
4Q 0
8
1Q 0
9
2Q 0
9
3Q 0
9
4Q 0
9
BG
CZ
EE
LV
LT
HU
PL
RO
SI
SK
Poland: sentiment back to long-term averageEconomic sentiment indicator for EU10 countries (long term average = 100)
Source: European Commission, World Bank staff calculations
50
60
70
80
90
100
110
120
Jan-
07
Apr
-07
Jul-0
7
Oct
-07
Jan-
08
Apr
-08
Jul-0
8
Oct
-08
Jan-
09
Apr
-09
Jul-0
9
Oct
-09
Jan-
10
BG
CZ
EE
LV
LT
HU
PL
RO
SI
SK
External imbalances declined
-25
-20
-15
-10
-5
0
5
10
EU10 LV LT BG EE HU RO SI PL SK CZ
2008
2009
Current account balance as percent of GDP in 2008 and 2009
Source: Central Banks, Convergence and Stability Program Updates from January/February 2010, World Bank staff calculations
Risk appetite returned
Asset class performance, percent change
Source: Reuters, Bloomberg, World Bank staff calculationsNotes: *CDS spreads are reversed; ** for real effective exchange rates minus denotes depreciation
-150 -100 -50 0 50 100
CDS spreads*
Stocks
Credit to private sector
Exchange rates**
Pre-crisis to Trough
Trough to current
-400
Poland: risk appetite returned
Asset class performance, percent change
Source: Reuters, Bloomberg, World Bank staff calculationsNotes: *CDS spreads are reversed; ** for real effective exchange rates minus denotes depreciation
-150 -100 -50 0 50 100
CDS spreads*
Stocks
Credit to private sector
Exchange rates**
Pre-crisis to Trough
Trough to current
-520
Capital inflows rebounded
0
5
10
15
20
25
1Q 0
7
2Q 0
7
3Q 0
7
4Q 0
7
1Q 0
8
2Q 0
8
3Q 0
8
4Q 0
8
1Q 0
9
2Q 0
9
3Q 0
9
4Q 0
9
1Q 1
0
Banks
Equity
Bond
Capital inflows to EU10, USD billions
Source: World Bank staff calculations
Poland: capital inflows reboundedCapital inflows to Poland, USD billions
Source: World Bank staff calculations
0
1
2
3
4
5
6
7
8
1Q 0
7
2Q 0
7
3Q 0
7
4Q 0
7
1Q 0
8
2Q 0
8
3Q 0
8
4Q 0
8
1Q 0
9
2Q 0
9
3Q 0
9
4Q 0
9
1Q 1
0
Banks
Equity
Bond
Poland: yield curve normalizedChange in yield curve over time, percent
Source: Bloomberg, World Bank staff calculations
0
1
2
3
4
5
6
7
1M 2M 3M 6M 1Y 2Y 3Y 4Y 5Y 8Y 10Y
20Y
30Y
15.10.08
1.03.09
1.03.10
Rise in unemployment moderatedForecasted versus actual unemployment rates in 2009 in EU10, EU15, and Poland, percent
Source: European Commission, Eurostat, Central Statistical Offices, World Bank staff calculations
9.1 9.08.48.8
9.3
8.2
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
EU10 EU15 PL
EC Forecast Autumn 2009 Actual 2009
Lower drop in employment than in outputOutput vs. employment decline, percent
Source: Eurostat, Central Statistical Offices, World Bank staff calculations
-18-16-14-12-10
-8-6-4-2024
EU10 LV EE LT SI HU RO SK CZ BG PL
Change in output 3Q 09 - 3Q 08 (cummulated)Change in employment 3Q 09 - 3Q 08
Slow recoveryGDP growth in EU10 and EU15 countries pre- and post crisis
Source: Eurostat, Convergence and Stability Program Updates from January/February 2010, IMF WEO April 2010, World Bank staff calculations
1.9 1.9
5.3 5.3 5.1 5.1
-4.0 -4.2-3.6 -3.6
1.7 1.71.2 1.0 1.6 1.5
3.0 2.72.3
1.7
3.6 3.3
4.5
3.2
-6
-4
-2
0
2
4
6
CP EU15 WEO EU15 CP EU10 WEO EU10 CP PL WEO PL
Average 2003-2008 2009 2010 2011
Varied recoveryForecasted GDP growth in EU10 countries
Source: Convergence and Stability Program Updates from January/February 2010, IMF WEO April 2010
-20
-15
-10
-5
0
5
10
WEO CP
WEO CP
WEO CP
WEO CP
WEO CP
WEO CP
WEO CP
WEO CP
WEO CP
WEO CP
LV LT EE SI RO HU SK BG CZ PL
2009 2010 2011
Domestic-based recoveryContribution to GDP growth in EU10 in 2009 and 2010
Source: Convergence and Stability Program Updates from January/February 2010
-8
-6
-4
-2
0
2
4
2009 2010 2009 2010
EU10 PL
Other
Net exports
GDP growth
Poland: public investment driven recovery…Gross fixed capital formation, percent change, year-on-year
Source: Convergence and Stability Program Updates from January/February 2010
-15
-10
-5
0
5
10
15
2008 2009 2010 2011 2012
CZ
HU
PL
SK
…supported by EU funds…
Source: European Commission, OECD Economic Survey for Poland 2010, World Bank staff
Distribution of EU funds across the EU10 countries, 2007-13
0
10
20
30
40
50
60
70
80
0
5
10
15
20
25
30
SI RO SK CZ BG LV LT EE PL HU EU10
Allocations, as a share of 2008 GDP (left axis)Allocations, absolute values, bln EUR (right axis)
…although absorption challenges remain
Source: European Commission, World Bank staff
Absorption rates of EU structural and cohesion funds across the EU10 countries, 2007-13
0
5
10
15
20
25
30
2007
-09
2010
2007
-09
2010
2007
-09
2010
2007
-09
2010
2007
-09
2010
2007
-09
2010
2007
-09
2010
2007
-09
2010
2007
-09
2010
2007
-09
2010
BG RO CZ SK HU PL SI LV EE LT
Credit-less recovery
-20
-10
0
10
20
30
40
50
60
70
80
Jan-
07
Apr
-07
Jul-0
7
Oct
-07
Jan-
08
Apr
-08
Jul-0
8
Oct
-08
Jan-
09
Apr
-09
Jul-0
9
Oct
-09
Jan-
10
BG
CZ
EE
LV
LT
HU
PL
RO
SI
SK
Credit growth to non-financial corporations, percent, year-on-year
Source: ECB, World Bank staff calculations
Jobless recoveryForecasted harmonized unemployment rates in EU10 countries
Source: Convergence and Stability Program Updates from January/February 2010, World Bank staff calculations
0
5
10
15
20
25
LV EE LT SK HU RO PL BG CZ SI
2009
2010
2011
Jobless recovery – especially for the young…Change in unemployment rate from June 2008 to January 2010 by age (%)
Source: Eurostat, World Bank staff calculations
EU15
EU10BG
CZ
EE
LV
LT
HU
PL
ROSI
SK
0
5
10
15
20
25
30
35
0 5 10 15 20 25 30 35
Chan
ge in
une
mpl
oym
ent
rate
am
ong
youn
g (p
.p)
Change in overall unemployment rate (p.p.)
Jobless recovery – … and less educatedChange in unemployment rate from 2Q 2008 to 3Q 2009 by education (%)
Source: Eurostat, World Bank staff calculations
EU15
BG
CZ
EE
LVLT
HU
PLRO
SI
SK
-5
0
5
10
15
20
25
-5 0 5 10 15 20 25
Chan
ge in
une
mpl
oym
ent
rate
am
ong
less
ed
ucat
ed w
orke
rs
Change in overall unemployment rate (p.p.)
Financial policy: stabilizing banking system in Western Europe and maintaining exposure to EU10 region
European Banks’ 5-year CDS (bps)
Source: Bloomberg, Datastream, World Bank staff calculations
0
100
200
300
400
500
600
Jan-
08
Mar
-08
May
-08
Jul-0
8
Sep-
08
Nov
-08
Jan-
09
Mar
-09
May
-09
Jul-0
9
Sep-
09
Nov
-09
Jan-
10
Mar
-10
Raiffeisen
Deutsche Bank
Soc Generale
Unicredit
Intesa
ERSTE
SEB Bank
Monetary policy: supportive of recovery…Policy interest rates (percent)
Source: Central Banks, World Bank staff calculations
0
2
4
6
8
10
12
14
Jan-
08Fe
b-08
Mar
-08
Apr
-08
May
-08
Jun-
08Ju
l-08
Aug
-08
Sep-
08O
ct-0
8N
ov-0
8D
ec-0
8Ja
n-09
Feb-
09M
ar-0
9A
pr-0
9M
ay-0
9Ju
n-09
Jul-0
9A
ug-0
9Se
p-09
Oct
-09
Nov
-09
Dec
-09
Jan-
10Fe
b-10
Mar
-10
CZ HU PLRO EURO
Monetary policy: … also to reduce appreciation pressures …Nominal exchange rates to EUR (Aug 2008=100)
Source: Reuters, World Bank staff calculations
80
90
100
110
120
130
140
150
160
Aug
-08
Sep-
08O
ct-0
8N
ov-0
8D
ec-0
8Ja
n-09
Feb-
09M
ar-0
9A
pr-0
9M
ay-0
9Ju
n-09
Jul-0
9A
ug-0
9Se
p-09
Oct
-09
Nov
-09
Dec
-09
Jan-
10Fe
b-10
Mar
-10
CZ
HU
RO
PL
Monetary policy: … as long as inflation remains low
Overall HICP (percent)
Source: Eurostat, World Bank staff calculations
-5
0
5
10
15
20
Jan-
07
Apr
-07
Jul-0
7
Oct
-07
Jan-
08
Apr
-08
Jul-0
8
Oct
-08
Jan-
09
Apr
-09
Jul-0
9
Oct
-09
Jan-
10
BG
CZ
EE
LV
LT
HU
PL
RO
SI
SK
Fiscal policy: gradual unwinding …
Forecasted general government deficit in EU10 countries and EU15*
Source: Convergence and Stability Program Updates from January/February 2010, World Bank staff calculations
-7.1-6.5
-7.2-7.5
-5.8
-6.9
-5.8
-4.7
-5.9
-8
-7
-6
-5
-4
-3
-2
-1
0
EU15 EU10 PL
2009
2010
2011
Fiscal policy: … to keep public debt sustainable …
Forecasted general government debt in EU10 countries and EU15*
Source: Convergence and Stability Program Updates from January/February 2010, World Bank staff calculations
76.4
44.150.7
82.1
47.553.1
85.2
49.356.3
0
10
20
30
40
50
60
70
80
90
EU15 EU10 PL
2009
2010
2011
Fiscal policy: … through both expenditure and revenue-based consolidation …Composition of fiscal deficit reduction from 2009 to 2012, percent of GDP
Source: Convergence and Stability Program Updates from January/February 2010, World Bank staff calculations
-4
-2
0
2
4
6
8
EU15 EU10 LV LT RO PL SK SI CZ BG EE HU
Expenditures Revenues Fiscal deficit
Fiscal policy: … and structural adjustment …
-2
0
2
4
6
8
10
EU10 LV LT RO PL SI SK CZ BG EE HU
Cyclical component Structural primary balance Primary balance
Composition of primary deficit reduction from 2009 to 2012, percent of GDP
Source: Convergence and Stability Program Updates from January/February 2010, World Bank staff calculations
Fiscal policy: …moving from relaxation to tightening in spite of actual output remaining below potential…
2008 2009 2010 2011 2012Counter-cyclical tightening 2 0 0 0 0
Pro-cyclical relaxation 8 0 0 0 0Counter-cyclical relaxation 0 9 1 0 1
Pro-cyclical tightening 0 1 9 10 9
Cyclicality of fiscal policy, number of EU10 countries, 2008-12
Source: World Bank staff based on CP updates
Fiscal policy: … to meet Maastricht 3% deficit target
Source: European Commission
No CountryDate of the
Commission reportCouncil Decision on existence
of excessive deficitCurrent deadline for
correction
1 Austria 7- Oct- 09 2- Dec- 09 2013
2 Belgium 7- Oct- 09 2- Dec- 09 2012
3 Czech Republic 7-Oct-09 2-Dec-09 2013
4 Germany 7- Oct- 09 2- Dec- 09 2013
5 Italy 7- Oct- 09 2- Dec- 09 2012
6 The Netherlands 7- Oct- 09 2- Dec- 09 2013
7 Portugal 7- Oct- 09 2- Dec- 09 2013
8 Slovenia 7-Oct-09 2-Dec-09 2013
9 Slovakia 7-Oct-09 2-Dec-09 2013
10 Poland 13-May-09 7-Jul-09 2012
11 Romania 13-May-09 7-Jul-09 2011
12 Lithuania 13-May-09 7-Jul-09 2011
13 Malta 13- May- 09 7- J ul- 09 2010
14 France 18- Feb- 09 27- Apr- 09 2013
15 Latvia 18-Feb-09 7-Jul-09 2012
16 Ireland 18- Feb- 09 27- Apr- 09 2014
17 Greece 18- Feb- 09 27- Apr- 09 2010
18 Spain 18- Feb- 09 27- Apr- 09 2013
19 UK 11- J un- 08 8- J ul- 08 financial year 2014/15
20 Hungary 12-May-04 5-Jul-04 2011
Fiscal policy: … and join the Euro Area
Source: World Bank staff
Target date for euro adoption prior to the crisis*
Current target date for euro adoption
Bulgaria 2010 2013Czech Republic no target date no target date
Estonia 2011 2011
Hungary 2012 no target date
Latvia no target date 2014
Lithuania 2012 2014
Poland 2012 no target date
Romania 2014 2015
* Target dates announced prior to October 2008
Structural policy: answering the 1.5% question …Potential growth in 2004-07 and 2012 by EU10 member country
Source: Convergence Program Updates January/February 2010, European Commission , World Bank staff calculations.
EU10 BGCZ
EE
LV
LT
HU
PL
RO
SI
SK
0
1
2
3
4
5
6
7
0 1 2 3 4 5 6 7
2012
2004-2007
Structural policy: … requires more people in productive work and working longer …Long-term unemployed (12 months of more) as percent of active population
Source: Eurostat, World Bank staff calculations.
0
1
2
3
4
5
6
7
EU15 EU10 SK LV HU EE LT BG PL RO CZ SI
3Q 08
3Q 09
Structural policy: … also to boost competitiveness… CAB in Poland and EU10, 2009-2012, percent of GDP
Source: Convergence Program Updates 2010, IMF WEO April 2010, staff calculations.
-4.0
-3.5
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
WEO EU10 CP EU10 WEO PL CP PL
2009
2010
2011
2012
Structural policy: … to close gap to EU average living standards
0
10
20
30
40
50
60
70
80
90
100
BG RO LV LT PL EE HU SK CZ SI
2000
2008
2011
GDP per capita in purchasing power standards, EU27=100
Source: Eurostat, World Bank staff calculations.
For more information visit:www.worldbank.org/eca/[email protected]