Meeting of SEE TU Economic Experts
TU approaches to understanding link between informal
economy and corruption
30 – 31 October 2013, Sofia
Comparative analysis of macroeconomic conditions in SEE countries
Bruno S. Sergi
University of Messina & ETUI
Some key issues from our last meeting
Terrific expectations for all SEE about EU
membership in terms of social improvement
and economic growth
Economic crisis: towards the end of the crisis?
……. any good news from the Eurozone?
Latest data shows the Eurozone is still in recession,
contracting further by -1.1% in Q2 2013 compared to the
same period a year ago.
Leading indicators show an improving outlook.
Economic outlook indicators are registering strong increases
but still remain low
Consumer confidence remains low, except in Germany!
Relevant Challenges
SEE TU economic experts’ network has already identified several
relevant challenges and problems in this region:
• Unsustainable reduction in wages and pensions;
• Growing inequality and injustice in the distribution of wealth;
• A strict conditionality of the IMF and other international
institutions, while national governments often misuse
international support and thereby concealing bad national
strategies and policies;
• Labour market difficulties and uncertainty regarding who
should be in charge of job creation.
Europe and the World
Eurozone’s GDP
Employment Indexes
Eurostat: Economic Sentiment Indicator
The Economic Sentiment Indicator is made up of the 15
individual components of the Eurostat confidence indicators.
The largest components are Industry, Services, Consumers,
Construction and Retail trade.
•
Eurostat: Consumer Confidence Indicator
The consumer component of the Economic Sentiment Indicator measures the level
of optimism that consumers have about the performance of the economy.
Consumer Indexes
IPSOS Consumer Confidence
The IPSOS Global @dvisor: ‘On the Economic Pulse of the World’ uses a monthly sample of
over 18,000 adults worldwide (with a minimum of 1000 in each country) and a demographic
weighting system to produce an accurate perception of consumers’ perspectives.
The Conference Board Leading Economic Index
The 8 components of The Conference Board Leading Economic Index® for the Euro Area include: Economic
Sentiment Index, Index of Residential Building Permits Granted, Index of Capital Goods New Orders, EURO
STOXX® Index, Money Supply (M2), Interest Rate Spread, Eurozone Manufacturing Purchasing Managers’
Index, and Eurozone Service Sector Future Business Activity Expectations Index.
OECD Composite Leading Indicator
The OECD composite leading indicator® (CLI) is designed “to provide early signals of turning points between
expansions and slowdowns of economic activity”. Its components include Production Orders, Finished Goods
Stock, Order Books, Order Inflows, Industrial Confidence Indicator, Share Prices, Consumer Confidence
Indicator, Short & Long Term Interest Rate and Share Price Spread.
SEE Countries
Annual Growth Rates for Industry
Country
2008
2009
2010
2011
Albania
8.7%
10.6%
18.6%
10.0%
Bosnia and Herzegovina
7.3%
1.5%
3.7%
5.6%
Croatia
1.2%
-9.2%
-1.4%
-1.2%
FYR Macedonia
5.1%
-8.7%
-4.8%
3.3%
-2.0%
-32.2%
17.5%
-10.3%
1.4%
-12.6%
2.5%
2.1%
Germany (a)
-0.1%
-16.3%
10.9%
7.6%
Greece (a)
-4.2%
-9.2%
-6.6%
-8.1%
Poland (a)
2.4%
-3.7%
10.8%
7.2%
EU-27 (a)
-1.8%
-13.7%
6.8%
3.2%
Montenegro
Serbia
Inward FDI Stock, as a percentage of GDP
Country
2000
2005
2010
Albania
6.78
12.48
36.67
Bosnia and Herzegovina
19.66
27.54
42.50
Croatia
13.10
32.74
56.68
FYR Macedonia
15.05
35.88
47.98
Montenegro
–
–
138.18
Serbia
–
–
46.51
8.87
20.03
–
Montenegro + Serbia
Ranking on the Ease of Doing Business
Country
Doing Business 2013 Rank
Doing Business
2012 Rank
FYR Macedonia
23
22
Montenegro
51
57
Croatia
84
80
Albania
85
82
Serbia
86
95
Kosovo
98
126
Bosnia and Herzegovina
126
125
Germany
20
18
Greece
78
89
Poland
55
74
Global competitiveness index
Country
Rank 2012-2013
Switzerland
1
Singapore
2
Germany
6
USA
7
UK
8
Honk Kong
9
Japan
10
China
29
Poland
41
Russia
67
Croatia
81
Bosnia and Herzegovina
88
Albania
89
Serbia
95
Greece
96
Source: World Economic Forum, The Global
Competitiveness Report 2012-2013, available at
<http://reports.weforum.org/global-competitivenessreport-2012-2013/>.
EBRD Index for Banking Sector Reform and Interest Rate
Liberalisation
Albania
Bosnia and
Herzegovina
Croatia
FYR
Macedonia
Montenegro
Serbia
Slovenia
2000
2,33
2,33
3,33
2,67
n.a.
1
3,33
2001
2,33
2,33
3,33
2,67
n.a.
1
3,33
2002
2,33
2,33
3,67
2,67
n.a.
2,33
3,33
2003
2,33
2,33
3,67
2,67
n.a.
2,33
3,33
2004
2,67
2,67
4
2,67
2,3
2,33
3,33
2005
2,67
2,67
4
2,67
2,3
2,67
3,33
2006
2,67
2,67
4
2,67
2,7
2,67
3,33
2007
2,67
2,67
4
2,67
2,7
2,67
3,33
2008
3
3
4
3
3
3
3,33
2009
3
3
4
3
3
3
3,33
2010
3
3
4
3
3
3
3,33
Loans-to-GDP Ratio in %
(loans to nonfinancial private sector)
Albania
Bosnia and
Herzegovina
Croatia
Greece
FYR
Montenegro
Macedonia
Poland
Serbia
2004
9,6
32,3
51,8
n.a.
22,1
16,8
n.a.
24,8
2005
15,3
36,5
56,4
75,6
25,1
20,7
89,6
30,7
2006
22,2
39,5
64,0
79,5
30,2
39,4
93,1
30,8
2007
30,0
44,4
67,1
88,0
36,8
83,0
98,0
35,3
2008
35,2
50,9
68,1
92,2
43,9
90,7
101,8
41,4
2009
37,2
50,2
69,6
90,3
42,9
80,4
107,5
45,0
2010
38,2
51,9
70,2
92,1
44,9
81,4
109,6
47,5
Vulnerability Indicators
Banking system
Bank
dep.
(end of 2010)/4
Loans/
dep.
Country
risk
Private
sector, in %
12.10.11
(CDS
spread, bps)
latest
Total assets
as share of
Share in total assets:
GDP
State-owned
Foreign
banks
owned
banks
% of GDP
77,0
0,0
92,4
68,3
58,8 …
86,7
0,8
94,5
34,8
161,8 …
116,8
4,3
90,3
61,8
117,5
Macedonia
65,4
1,4
93,3
50,2
94,3 …
Montenegro
97,4
0,0
88,4
51,2
126,5 …
Poland
76,8
22,9
70,5
45,5
116,3
Serbia
65,3
16,0
75,3 …
Albania
Nonperforming loans
NPL in %
Dec 2010
NPL in %
latest
7,6
8,7
Bosnia and
Herzegovina
Croatia
...
...
492,5 ...
...
...
...
FYR
…
21,0 ...
268,6
…
8,8
8,4
16,9
17,1
Fiscal Balance and Public Debt, 2011
Country
Fiscal balance,
in % of GDP
Public debt,
in % of GDP
Albania
-3.6%
60.0%
Bosnia and Herzegovina
-1.3%
39.0%
Croatia
-5.0%
46.0
FYR Macedonia
-2.5%
27.7%
Montenegro
-4.1%
45.9%
Serbia
-5.0%
49.0%
Germany
-0.8%
80.5%
Greece
-9.4%
170.6%
Poland
-5.0%
56.4%
EU-27
-4.4%
82.5%
Balance on Current Account,
as percentage of GDP
Country
2004
2005
2007
2010
2011
Albania
-4.0
-6.1
-10.4
-11.4
-12.3
-16.2
-17.1
-10.7
-5.7
-8.8
Croatia
-4.1
-5.3
-7.3
-1.1
-1.0
Kosovo
-8.4
-7.4
-8.3
-17.4
-20.3
FYR Macedonia
-8.1
-2.5
-7.1
-2.1
-2.7
Montenegro
-7.2
-16.6
-39.5
-24.6
-19.5
-12.2
-8.8
-16.1
-7.4
-9.5
4.7
5.1
7.4
6.0
5.7
Greece
-5.8
-7.6
-14.6
-10.1
-9.8
Poland
-5.2
-2.4
-6.2
-4.7
-4.3
EU-27
0.5
0.1
-0.4
0
0.2
Bosnia and Herzegovina
Serbia
Germany
Unemployment Rate, LFS, in percentage
Country
Unemployment rate,
Unemployment rate,
Unemployment rate,
2008
2010
2011
Albania
13.0
13.7
14.0
Bosnia and Herzegovina
23.4
27.2
27.6
Croatia
8.4
11.8
13.5
Macedonia
33.8
32.0
31.4
Montenegro
17.2
19.6
19.7
Serbia
13.6
19.2
23.0
Germany
7.5
7.1
5.9
Greece
7.7
12.6
17.7
Poland
7.1
9.6
9.7
EU-27
7.1
9.7
9.7
Income Inequality, the Gini Index, 2008
More austerity?
 No! Jim O’Neill, president of Goldman Sachs asset management and father
of the acronym BRIC:
 introducing reforms does not imply austerity!
 reducing a government’s deficit without a clear strategy for economic growth is
not an intelligent policy.
 No! Deutsche Bank:
 it is important to let the ECB pump money into the system without having this
imply conditionality. That is, the ECB should use anti-spread shield to cut
interest rates on Italian and Spanish debt without having to ask additional
austerity measures to the two countries.
Twin peaks
Both unemployment and government debt are high in advanced
economies following the Great Recession
Advanced economies
unemployment rate
Source: Finance & Development September 2011
Advanced economies
general government gross debt
Cutbacks hit home
Fiscal consolidation reduces incomes and raises unemployment in the short run.
Impact of a 1 percent of GDP fiscal consolidation on GDP and
unemployment
Note: Chart reports point estimates and one-standard-error bands; income measured by real GDP. See IMF (2010) and Guajardo, Leigh, and Pescatori (2011) for estimation details.
No job soon
Fiscal contractions raise unemployment, particularly
long-term unemployment
Impact of a 1 percent of GDP
fiscal consolidation on
short-term unemployment
Source: Finance & Development September 2011
Impact of a 1 percent of GDP
fiscal consolidation on long-term
unemployment
Hitting paychecks
Spending cutbacks affect wage earners the most.
Impact of a 1 percent fiscal
consolidation on wage income
Impact of a 1 percent fiscal
consolidation on prot and rent
income
Relevant Changes
 Aligning Western Balkans’ legislation with the EU acquis
in the field of labour law
 Aligning the anti-discrimination laws with the EU acquis
 Implementation of relevant social legislation
 Free movement of labour with EU markets
Greece’s lesson and Germany
The Hellenic statistical institute photographs the results of five years of austerity as follows:
Households’ disposable income has fallen by 29.5% since 2008 (inflation by calculating the cumulative loss up to 40%).
Average salaries have fallen by 34%.
The salaries of Greeks have plummeted since 2009/Q2 by 34%; at the same time the government cut social services and
benefits by 26%. Greeks were forced to reduce expenditures - consumption fell by 7.6% even in the last 12 months.
The programmes of the Troika provide another 4bn in cuts next year. It is no coincidence that every case of this kind, for
reasons of political expediency, has been postponed until after the 2014 European elections, when the front populist anti-EU
already running at high speed could be another issue.
A study carried out under the auspices of the Commission (author Jan in t’ Veld) is the first ‘mea culpa’ of the EU about the
hardness of the measures imposed to Greece and all countries at risk of leaving the euro, including Italy. The working paper
was first published and then taken out of the web site. But it was already abundantly downloaded and then it has been put
back on line with the specification that the author's opinions doesn’t necessarily coincide with those of the Commission.
Meanwhile, Germans’ wealth grows continuously: it amounted to 2.018 trillion Euros twenty years ago; in 2003 reached
3.694 trillion Euros; at its historical record of 5.027 trillion Euros nowadays. And in the calculation leading to these
figures, the Bundesbank does not include that portion of assets such as real estate etc. It does not seem that various austerity
policies have been detrimental to the citizens of Germany!
Economic developments in the region
Over the last 20 years, the region dealt with the
economic regime change:
price liberalisation
opening up the economy
building market institutions
large scale migration
continuous attempts to macroeconomic stability policies
…… 2008
Financial crisis of 2008 exposed several
vulnerabilities of the growth model on which
economies of the region built their growth,
which demands a reassessment of domestic
and foreign balances.
This short-run adjustment materialised in the
deterioration of real and nominal economic
indicators ….. see next slide
Current Account deficits as % of GDP
SEE economic growth model
troublesome developments with regard to the future
sustainability of economic growth include:
 the relatively low and decreasing FDI flows;
the relatively weak competitiveness of regional
economies;
the lack of economic cohesiveness in terms of the
regional economies structures.
NB: See next slides: FDI and an account of the progress of intraregional trade as a share of the region’s total
trade
G.2 Total SEE and CEE FDI inflows per capita
The economic transition in SEE has been self-centered,
reflecting a national focus rather than a regional
perspective.
SEE countries consider bilateral relations with the EU as
more important than relations with the region taken as a
whole.
The types of policies that these countries designed in terms
of ‘regional cooperation’ led to a model of competition for
the same markets and investors, rather than a model of
cooperation.
Seen as a single market point of view (ca 26 million people), the
region offers opportunities and would attract more investors.
From a convergence point of view, regional cooperation would
ensure a cost-efficient learning process in the common path
towards the EU. Since SEE countries have different learning
curves resulting from different paces of transition, sharing
experiences would help to avoid errors.
At a macroeconomic policy level, some economic policy
coordination can benefit the allocation of resources. A race-tothe bottom philosophy does not benefit the region as a whole.
Enhancing regional cooperation
 To design and implement a Balkan
regional strategy for Europe
 EU integration commitment should be an
anchor for pursuing sound policies and
coordinated structural reforms
 There is an urgent need for coordinated
policies that would encourage stronger
inward FDI and other non-bank flows
Thank you!