Post on 27-Mar-2015
The Baltic States: Recovery, Outlook, and
Challenges“Economic Crossroads: From Recovery to
Sustainable Development in the Baltic States and the EU”
Riga, November 24, 2011
Mark AllenSenior IMF Resident Representative for
Central and Eastern Europe
The views expressed in this Presentation are those of the author and do not necessarily represent those of the IMF or IMF policy.
2
Scope of the presentation
Recovery in the Baltic States
Outlook beyond the Baltic States
Vulnerabilities to tackle
3
Scope of the presentation
Recovery in the Baltic States
4
GDP has recovered to 2005/6 levels …
GDP level(2004 = 100)
Source: WEO database.
5
…but domestic demand is lagging…
Domestic demand level(2004 = 100)
Source: WEO database.
6Source: WEO database
Contributions to Growth (percent points)
… although now contributing to growth.
7
Exports are gaining market shares.
Source: IMF, Direction of Trade; World Economic Outlook; Eurostat
Export markets growth(Weighted by 2007 export patterns)
Estonia Latvia Lithuania
8
There has been some correction in wages...
Source: Haver; IMF Country Reports
Average Gross Earnings(Mar-04=100)
9
…and unemployment is falling from the peak.
Source: IMF, IFS
Unemployment rate (percent)
10
Market perceptions have improved remarkably.
Source: Bloomberg
CDS spreads(basis points)
11
Scope of the presentation
Recovery in the Baltic States
Outlook beyond the Baltic States
12
The world economic recovery is sluggish…
Source: WEO database.
GDP Growth (percent)
13
…and world trade is not looking healthy.
Source: WEO database.
Growth of Trade(percent)
*Trade volume is calculated from the trade value deflated by CPB
estimated price series
14
Advanced economy prospects have worsened sharply.
Source: ConsensusForecasts.
Consensus GDP Growth Forecasts for 2012(percent)
WEO Forecasts
15
A third wave of fear has hit the markets…
Source: Yahoo Finance.
Market Volatility Index(VIX S&P 500)
Lehman
Greece Eurozone
16
…and European banks are under pressure.
Source: Bloomberg.
Banks’ 5yr CDS Spreads(basis points)
17
Scope of the presentation
Recovery in the Baltic States
Outlook beyond the Baltic States
Vulnerabilities to tackle
18
Current accounts are no longer a risk factor.
Source: IMF, World Economic Outlook
Current Account Balance(percent of GDP)
19
But total external debt, while coming down, remains high…
Source: IMF, World Economic Outlook
Gross External Debt(percent of exports)
20
…especially private sector debt.
Source: IMF, World Economic Outlook
Private Sector External Debt(percent of GDP)
21
This is reflected in lower foreign bank exposure
Source: BIS
Foreign Bank Exposure(USD millions)
Decline from the peak (Jun-08)
-36%-30%-30%
-31%-31%
22
Fiscal positions are returning to “Maastricht”
Source: WEO database.
2000
2000
2000
2012
2012
Fis
cal
Bala
nce
(p
erc
en
t of
GD
P)
Public Debt (percent of GDP)
„Maastricht zone”
2012
20072000200120022003200420052006 20082009201020112012
Slide by
slide
23
Credit growth has stalled and NPLs peaked.Non-performing Loans to Total Loans (percent )and Credit Growth (year-on-year percent change)
Source: Haver, National banks, Latvian Financial and Capital Market Commission
24
Capital adequacy ratios have been strengthened
Source: IMF staff
Capital Adequacy Ratio
25
And the banking sectors are becoming more profitable
Source: IMF staff
Return on Assets
26
But loan-to-deposit ratio remain very elevated.
Source: Haver
Loan-to-Deposit Ratio
27
Thank you
28
Backup slides
29
Fiscal positions are returning to “Maastricht”
Source: WEO database.
2000
2000
2000
Fis
cal
Bala
nce
(p
erc
en
t of
GD
P)
Public Debt (percent of GDP)
„Maastricht zone”
20072000200120022003200420052006 20082009201020112012
30
Fiscal positions are returning to “Maastricht”
Source: WEO database.
2000
2000
2000
Fis
cal
Bala
nce
(p
erc
en
t of
GD
P)
Public Debt (percent of GDP)
„Maastricht zone”
20072000200120022003200420052006 20082009201020112012
31
Fiscal positions are returning to “Maastricht”
Source: WEO database.
2000
2000
2000
Fis
cal
Bala
nce
(p
erc
en
t of
GD
P)
Public Debt (percent of GDP)
„Maastricht zone”
20072000200120022003200420052006 20082009201020112012
32
Fiscal positions are returning to “Maastricht”
Source: WEO database.
2000
2000
2000
Fis
cal
Bala
nce
(p
erc
en
t of
GD
P)
Public Debt (percent of GDP)
„Maastricht zone”
20072000200120022003200420052006 20082009201020112012
33
Fiscal positions are returning to “Maastricht”
Source: WEO database.
2000
2000
2000
Fis
cal
Bala
nce
(p
erc
en
t of
GD
P)
Public Debt (percent of GDP)
„Maastricht zone”
20072000200120022003200420052006 20082009201020112012
34
Fiscal positions are returning to “Maastricht”
Source: WEO database.
2000
2000
2000
Fis
cal
Bala
nce
(p
erc
en
t of
GD
P)
Public Debt (percent of GDP)
„Maastricht zone”
20072000200120022003200420052006 20082009201020112012
35
Fiscal positions are returning to “Maastricht”
Source: WEO database.
2000
2000
2000
Fis
cal
Bala
nce
(p
erc
en
t of
GD
P)
Public Debt (percent of GDP)
„Maastricht zone”
20072000200120022003200420052006 20082009201020112012
36
Fiscal positions are returning to “Maastricht”
Source: WEO database.
2000
2000
2000
Fis
cal
Bala
nce
(p
erc
en
t of
GD
P)
Public Debt (percent of GDP)
„Maastricht zone”
20072000200120022003200420052006 20082009201020112012
37
Fiscal positions are returning to “Maastricht”
Source: WEO database.
2000
2000
2000
2012
2012
Fis
cal
Bala
nce
(p
erc
en
t of
GD
P)
Public Debt (percent of GDP)
„Maastricht zone”
2012
20072000200120022003200420052006 20082009201020112012
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