Disscussion on Structural transformation and growth ...eef9694e-6c4d-49b2-a8... · Labour market...

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Disscussion on Structural transformation and growth perspectives in

CESEE

Tomas Slacik

84th East Jour FixeOesterreichische Nationalbank in cooperation with OMFIFJune 3, 2019

Session 1: Long-run growth and resilience

www.oenb.at


Some key hypotheses by Erik Berglöf

Convergence• „Convergence miracle“ in CESEE (in terms of GDP per capita) yet…• Economic growth has been relatively “innovation-light”• (Social, environmental and institutional) Convergence beyond rising incomes has stalled• Hence, further convergence will entail a shift from investment-led to innovation-led growth • …will require fundamental structural transformation (structures and institutions)

Integration into Global Value Chains (GVC)• CESEE benefited greatly from integration into GVC


Outline

1. Closer look at structural gaps and convergence in CESEE

2. Integration into GVC: double-edged sword – example car industry

3. Structural cha(lle)nges in the car industry

[email protected] [email protected] 6


Set of structural and competitiveness indicators across 5 thematic areas:

• Human capital• R&D and innovation • Environmental protection• Transport and energy infrastructure • ICT

…from various sources (Eurostat, OECD, WEF, IMF, World Bank)

…between 2007–2016


Many shades of red: structural investment gaps in CESEE in 2007

7

Note: Shades of red/green indicate distance in standard deviations below/above the EU average.Source: Eurostat, OECD, World Bank, own calculations.


Structural gap changes in CESEE over the 2007-2013 programming period (convergence perspective)

Human capitalR&D and innovation

Environmental protection

Transport and energy infrastructure

ICT Average

BG -0.09 0.08 -0.03 -0.03 0.36 0.06CZ -0.30 0.10 0.02 0.04 -0.08 -0.04EE 0.26 0.41 -0.22 0.17 -0.04 0.12HU -0.48 -0.29 0.09 -0.24 -0.27 -0.24LV 0.13 0.06 0.28 0.06 0.31 0.17LT 0.07 0.02 -0.59 0.14 0.02 -0.07PL 0.23 0.05 -0.04 0.00 0.35 0.12RO -0.28 0.05 0.31 0.11 0.09 0.06SI 0.18 0.09 -0.07 0.02 0.18 0.08SK -0.44 -0.06 0.31 0.06 0.09 -0.01CESEE average -0.07 0.05 0.01 0.03 0.10 0.02Source: Eurostat, OECD, World Bank, WEF, authors' calculations

Standard deviations from the EU average

Note: Shades of red/green indicate a widening/narrowing of the gap vis-a-vis the EU average.

On average convergence toward the EU average was limited

10


EIB Investment Survey:EIB Investment Survey: availability of skilled human capital the biggest challenge in CESEE

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Uncertainty about the future

Availability of finance

Availability of adequate transport infrastructure

Business regulations and taxation

Labour market regulations

Access to digital infrastructure

Energy costs

Availability of staff with the right skills

Demand for products and services

CESEE EU

% of firms

Obstacles to investment - CESEE vs. EU

Source: EIB Investment Survey 2017.


Outline





Automotive industry dominant manufacturing sector in some CESEE

Wood, paper, printing and reproduction

Bas ic metals and fabricated metal products, except machinery and equipment

Food products; beverages and tobacco products

13th

11th

12th

11th

11th

5th

6th

4th

2nd

1st

1st

1st

1st

0 5 10 15 20 25 30

HR*

LT*

LV*

EE

BG

SI

PL*

EU

RO

SK

DE*

HU

CZ

% of GVA, current prices, 2017

Share and rank of "Motor vehicles, trailers and semi-trailers" in manufacturing

Source: Eurostat.* 2016

Motor vehicles, trailers and semi-trailers


Significance of the car industry in CESEE

FDI

2018 % change 18/17 per capita - rank in the world

Ths. persons (2016)

% of total employment

% of total-FDI (2016)

CZ 1,345,041 -5.3 2nd 192.31 3.7% 7.6HU 430,998 -14.7 9th 94.80 2.1% --SK 1,090,000 8.8 1st 73.28 3.2% 7.0RO 476,769 32.7 20th 190.30 2.3% 6.0PL 659,646 -4.4 21st 292.80 1.8% --SI 209378 10.3 3rd 12.01 1.3% 2.9CESEE-6 4,211,832 855.50DE 5,120,409 -9.3 6th 880.00 2.0% --EU28* 16,146,681 -2.1 2,478.47 1.1% 0.7Source: Eurostat, WIIW, ACEA, OICA* EU28 employment in 2015, production passenger cars only

EmploymentVehicle production


Cars a major export good…

0

5

10

15

20

25

30

2004

2017

2004

2017

2004

2017

2004

2017

2004

2017

2004

2017

2004

2017

CZ HU SK RO PL SI EU28To Germany To other EU countries To non-EU countries

Exports: Share of products related to the production of motor vehiclesin % of total exports

Source: Eurostat.

Note: Product groups according to SITC Rev. 4: 722, 781, 782, 783 (tractors, motor cars and motor vehicles), 784 (parts and accessories), 786 (trailers and semi-trailers, containers), 7132 (piston engines) and 7783 (various electrical equipment for motor vehicles).


Exports of cars increasingly importantRisk profile of the automotive sector (dependence on EU28), 2004 (small icons) & 2017 (large icons)

Source: Eurostat.

BG

CZ

EE

HR

HU

LTLV

PL

RO

SI

SK

EU28

BG

CZ

EEHR

HU

LTLV

PL

RO

SI

SK

EU28

0

5

10

15

20

25

0 1 2 3 4 5 6

Shar

e of

exp

orts

to E

U28

rela

ted

to m

otor

veh

icle

s in

% o

f to

tal e

xpor

ts

Share of motor vehicles, trailers and semi trailers in total GVA


Rising integration of CESEE automotive industry in the GVC…

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

CZ HU SK RO PL AT2000 2014

indexGVC integration index (NACE Rev. 2 C29)

Source: WIIW.


Flipside: higher vulnerability to cyclical shocks

Slowdown of the German automotive industry (-7.1% in H2 vs. H1 2018,

manufacturing without cars -0.9%)

• Ban for diesel engines in some cities

• New emission standards (WLTP) – slow certification

• Economic slowdown in China, car sales down by -4% 2018 yoy


Outline





Structural outlook and risks for the automotive industry• Brexit

• Trade wars (USA – China – EU)

• New emission limits – far reaching implications

0

20

40

60

80

100

120

140

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

g CO2/km

Fleet average CO2 emmission limits for the car industry

Source: EC.


Thank you for your attention!

Tomas [email protected]

References

Bubbico, R., M. Kollar and T. Slacik. 2018. Structural investment needs in CESEE and the use of EU funds.In: Focus on European Economic Integration, Q3/2018,87-101, Oesterreichische Nationalbank.


Brain and skills drain: main culprit for Hungary’s diverging quality of human capital?...

0.00%

0.05%

0.10%

0.15%

0.20%

0.25%

0.30%

0.35%

0.40%

0.45%

0.50%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Hungary

Share of total population

Emmigration from Hungary

Source: Eurostat.


…everything is relative: rather heterogeneous emmigration patterns in CESEE

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Bulgaria Czechia Estonia Croatia Latvia LithuaniaHungary Poland Romania Slovenia Slovakia

Share of total population

Emmigration from CESEE

Source: Eurostat.


Hungary: many factors contributed to the deteriorated quality of human capital

-0.25

-0.20

-0.15

-0.10

-0.05

0.00

0.05

Quality ofeducation

Availabilityof scientists

Earlyleavers

PISA On the jobtraining

Tertiaryeducation

Lifeexpectancy

Healthexpenditure

Secondaryeducation

HU

Contribution to change vis-a-vis the EU average 2007-2013 in standard deviations

Human capital divergence breakdown - Hungary

Source: Author's calculations.


-0.25

-0.20

-0.15

-0.10

-0.05

0.00

0.05

Quality ofeducation


Earlyleavers


Tertiaryeducation

Lifeexpectancy

Healthexpenditure

Secondaryeducation

HU SK


Human capital divergence breakdown - Hungary vs. Slovakia

Source: Author's calculations.26

Slovakia: waning quality of education overshadowed by lack of researchers

-0.25

-0.20

-0.15

-0.10

-0.05

0.00

0.05

Quality ofeducation


Earlyleavers


Tertiaryeducation

Lifeexpectancy

Healthexpenditure

Secondaryeducation

HU SK


Human capital divergence breakdown - Hungary vs. Slovakia


SK:• worst quality of research

institutions in CESEE

• second largest deterioration ofuniversity-industry collaboration(after HR, before HU)


Estonia: high-tech and innovation leader in CESEE

-0.05

0.00

0.05

0.10

0.15

0.20

0.25

0.30

High-techemployment

High-tech exports Quality ofresearch

institutions

R&D expenditure High-tech patents University -Industry

collaboration

Contribution to change vis-a-vis the EU average 2007-2013 in standard deviationsBreakdown of innovation and R&D conergence in Estonia

Source: Author's calcuations.

http://fortune.com/2017/04/27/estonia-digital-life-tech-startups/


Lithuania: mainly power losses driving environmental protection divergence

-0.50

-0.40

-0.30

-0.20

-0.10

0.00

0.10

Electricpower

transmissionand

distributionlosses

Environmentprotection

expenditure

Air pollution GHGemissions

fromtransport

CO2emissions

Wasterecycling

GHGemissions

compared to1990

Renewableenergy

consumption

Breakdown of environmental protection divergence in Lithuania




Slovakia: broad-based environmental protection convergence

-0.04

-0.02

0.00

0.02

0.04

0.06

0.08

0.10

Renewableenergy

consumption

GHGemissions

compared to1990

GHGemissions

fromtransport

CO2emissions

Environmentprotection

expenditure

Electricpower

transmissionand

distributionlosses

Air pollution Wasterecycling

Breakdown of environmental protection convergence in Slovakia




Similar picture in Romania: several factors contributed to environmental protection convergence

-0.02

0.00

0.02

0.04

0.06

0.08

0.10

0.12

Renewableenergy

consumption

GHGemissions

fromtransport

Electricpower

transmissionand

distributionlosses

GHGemissions

compared to1990

Wasterecycling

CO2emissions

Air pollution Environmentprotection

expenditure

Breakdown of environmental protection convergence in Romania




Structural outlook and risks for the automotive industry• Brexit

• Trade wars (USA – China – EU)

• New emission standards• Falling demand for diesel engines and rising for SUVs increases average CO2

emmission• Massive investment in e-cars necessary• Irreversible structural change (e.g. risky bet of Volkswagen: 70 e-cars in the next 10

years)• Smaller margins and profits due to high prodution costs (and possible fines)• Smaller cars no longer economical


Structural investment gaps in CESEE in 2016

Structural gap vis-a-vis the EU at the end of the programming period 2007-2013

Human capital

R&D and innovation

Environmental protection

Transport and energy infrastructure

ICT Average

BG -1.2 -0.9 -0.5 -1.1 -0.8 -0.9CZ 0.0 0.0 0.1 0.9 -0.3 0.2EE 0.2 0.2 -0.2 0.0 0.4 0.1HU -0.9 -0.1 0.0 -0.2 -0.7 -0.4LV -0.6 -0.8 0.5 -0.6 -0.4 -0.4LT -0.2 -0.7 0.0 -0.6 0.2 -0.3PL -0.1 -0.8 -0.5 -0.1 -0.6 -0.4RO -1.3 -1.1 0.0 -0.4 -1.2 -0.8SI 0.2 -0.1 -0.1 0.1 -0.3 0.0SK -0.6 -0.7 0.4 -0.1 -0.4 -0.3CESEE avg. -0.4 -0.5 0.0 -0.2 -0.4 -0.3Source: Bubbico, Kollar, Slacik , Focus on European Economic Integration, Q3/2018, Oesterreichische Nationalbank

Average standard deviations from the EU average

Note: Shades of red/green indicate distance below/above the EU average.

Disscussion on Structural transformation and growth ...eef9694e-6c4d-49b2-a8... · Labour market...

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