Peter Havlik The Vienna Institute for International Economic Studies (wiiw) September 2010
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Transcript of Peter Havlik The Vienna Institute for International Economic Studies (wiiw) September 2010
Wiener Institut für Internationale Wirtschaftsvergleiche
The Vienna Institute for International Economic Studies
www.wiiw.ac.at
Impacts of the global crisis and future growth challenges
Strategie Evropa 2020 jako reakce na krizi: cesty k posílení
ekonomického rustu a konkurenceschopnosti
Peter Havlik
The Vienna Institute for International Economic Studies (wiiw)
September 2010
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Growth model, global crisis and the Strategy Europe 2020
Key points:
Growth model: liberalization and integration
Global crisis: transmitted via the growth model
Strategy Europe 2020: a revival of Lisbon ?
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Key features of the (old) growth model:
significant internal and external liberalization (trade flows, capital transactions, financial market integration)
targeted at integration with the EU area
benefits: capital inflows (FDI), trade integration, ‘technology’ transfer; institutional convergence
the model worked - ‘convergence process’ – but structural (and sometimes unsustainable) imbalances emerged
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Trade balance of goods and services, in % of GDP
-24-18-12
-606
-24-18-12
-606
-24-18-12
-606
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
NMS-5 (CZ)
Baltics
SEE
NMS-5: CZ, HU, PL, SK, SI. Baltics: EE, LV, LT. SEE: BG, RO, HR, MK, BA (from 1998), RS (from 1999), ME (from 2001).Source: wiiw Annual Database incorporating national statistics, Eurostat.Source: wiiw Annual Database incorporating national statistics, Eurostat.
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Income catching-up: per capita GDP at PPPProjection assuming a 50% growth differential with respect to EU-27 after 2013 (compared to
the average growth differential in the period 2000-2008)
EU-27 average = 100
0
10
20
30
40
50
60
70
80
90
100
1995 2000 2005 2008 2009 2010 2015 2020
BG CZ HU PL RO SK
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Three transmission channels of the crisis:
I. Collapse of demand for imports from the region
- => collapse of exports
- => collapse of industrial production
- => collapse of oil and metals prices (RU, UA, KZ)
II. More difficult credit financing for households, companies and government after September 2008 (Lehman Brothers exit)
III. Hardly any counter-cyclical economic policy measures of the state (except Russia, Kazakhstan and Poland)
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5060708090
100110120130140150160170
Ja
n-0
4
Ma
y-0
4
Se
p-0
4
Ja
n-0
5
Ma
y-0
5
Se
p-0
5
Ja
n-0
6
Ma
y-0
6
Se
p-0
6
Ja
n-0
7
Ma
y-0
7
Se
p-0
7
Ja
n-0
8
Ma
y-0
8
Se
p-0
8
Ja
n-0
9
Ma
y-0
9
Se
p-0
9
Ja
n-1
0
Ma
y-1
0
CZ HU SK
Collapse of exports after Sept. 2008
in EUR, January 2007 = 100
Quelle: wiiw-Monatsdatenbank.
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Source: wiiw Database based on Eurostat.
0
20
40
60
80
100
120
140
-15 -12 -9 -6 -3 0 3 6 9
BG
HU DE
GR
IE
PT
EU-27
FR
ES
UK
DKSE
NLAT
IT
SK
CZ
LV SIRO
EE
Unsustainable High public debt
High fiscal deficit Maastricht compliant
Budget deficit and public debt, 2008
in % of GDP (Maastricht criteria)NMS OMS EU-27
Fiscal deficit (< 3%)
Pu
blic
deb
t (<
60%
)
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Unsustainable High public debt
High fiscal deficit Maastricht compliant
NMS OMS EU-27
Fiscal deficit (< 3%)
Pu
blic
deb
t (<
60%
)
Source: European Commission forecast.
0
20
40
60
80
100
120
140
-15 -12 -9 -6 -3 0 3 6 9
PL
DE
PT FR
ES
SE
DK
AT NL
UK IE
IT
SI SK LT
RO
EE
BG
HU
LV CZ
EU-27
GR
Budget deficit and public debt, 2010
in % of GDP (Maastricht criteria)
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Strategy Europe 2020
Raising the employment rate of the population aged 20-64 from
the current 69% to 75%
Raising the investment in R&D to 3% of the EU's GDP
Meeting the EU's '20/20/20' objectives on greenhouse gas
emission reduction and renewable energies
Reducing the share of early school leavers from the current 15%
to under 10% and making sure that at least 40% of youngsters
have a degree or diploma
Reducing the number of Europeans living below the poverty line
by 25%, lifting 20 million out of poverty from the current 80
million.
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Employment by skill groups
average changes 2000-2007, 2008 and 2009, in %
-15
-10
-5
0
5
10
00
-07
08
09
00
-07
08
09
00
-07
08
09
00
-07
08
09
00
-07
08
09
00
-07
08
09
Total High-skill Medium-skill Low-skill
Source: Eurostat, wiiw calculations.
EU-27 CZ HU PL SK RO
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ULC growth and contributions of main components,
average annual changes in %, 2005-2010
‘Fixers’
12.8
-8.1
-15.3
10.9
4.5
-9.9
9.8
-3.6
1.8
10.5
0.22.5
5.6
-0.2
16.2
15.011.9
2.2
0.0-5.0
9.0
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
av.05-08
20092010 av.05-08
2009 2010 av.05-08
20092010 av.05-08
20092010 av.05-08
2009 2010 av.05-08
20092010 av.05-08
2009 2010-20
-15
-10
-5
0
5
10
15
20
Average gross wages GDP Employed persons Exchange rate ULC (rhs)
BG EE LV LT SK SI AT
Source: wiiw Annual database incorporating national statistics and Eurostat.
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ULC growth and contributions of main components
average annual changes in %, 2005-2010
‘Floaters’
9.5
4.26.6
17.2
-1.1
4.0
19.3 20.622.2
-15.1
18.611.5
-3.0
5.6
-15.5-6.3
0.5
-4.6
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
av.05-08
2009 2010 av.05-08
2009 2010 av.05-08
2009 2010 av.05-08
2009 2010 av.05-08
2009 2010 av.05-08
2009 2010-25
-20
-15
-10
-5
0
5
10
15
20
25
Average gross wages GDP Employed persons Exchange rate ULC (rhs)
CZ HU PL RO RU UA
Source: wiiw Annual database incorporating national statistics and Eurostat.
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Exchange rates Flexible exchange rates have supported sustainable current
account deficits
‘Floater’ countries had a less costly adjustment to the crisis (lower
employment losses)
Nominal depreciations improve competitiveness and support growth
once external demand recovers
Fixed exchange rates tend to mandate procyclical fiscal policies
during the crisis and in the medium run
EMU membership may not protect against real exchange rate
misalignments
Flexibility helps – especially in times of crisis
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Constraints following the crisis:
External factors:
higher risk assessment of the region;
more difficult external (and internal) financing;
reduced growth expectations in the most important export markets;
tougher to join the eurozone (new OCA debate)
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Constraints following the crisis:
Internal factors:
‘Deleveraging’ of private sector, increased propensity to save;
more limited room to manoeuvre for fiscal policy;
weaker and more cautious banking sector;
very differentiated processes of real exchange rate adjustments
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Some tentative conclusions
EU and national policies should be reformed in order to improve
“economic governance”
in order to benefit from trade and financial integration regulation is
needed
to deal with external and domestic imbalances measures to improve
competitiveness needed (Strategy Europe 2020)
depending on the types and severity of imbalances, the speed to full
integration should be calibrated (“flexibility” helps)
depending upon country-specific circumstances, the ‘integration
model of growth’ must be adjusted but not abandoned
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Selected references: ‘Will Exports Prevail over Austerity?’ wiiw Current Analysis and
Forecasts, No. 6, July 2010, Vienna
‘Whither Growth in Central and Eastern Europe? Policy lessons for an integrated Europe’ Policy Report written by the Bruegel-wiiw Expert Group, Vienna and Brussels, June 2010
Atoyan, R., (2010), ‘Beyond the Crisis: Revisiting Emerging Europe’s Growth Model’, IMF Working Paper 10/92
Havlik, P., (2010), ‘Unit Labour Costs, Exchange Rates and Responses to the Crisis’, wiiw Monthly Report No. 7/10, July
Haddad, M., Harrison, A., Hausman, C., (2010), ‘Decomposing the Great Trade Collapse: Products, Prices, and Quantities in the 2008-2009 Crisis’. NBER Working Paper No. 16253, August
IMF-ILO, (2010), ‘The Challenges of Growth, Employment and Social Cohesion’. Discussion document prepared for joint IMF-ILO conference, September