Impact of economic crises on CEE economies
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Impact of economic crises on CEE economies Impact of economic crises on CEE economies ERES Industry Seminar UniCredit Bank Slovakia Jan Toth Chief Economist 26 March 2010
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Impact of economic crises on CEE economies. ERES Industry Seminar UniCredit Bank Slovakia Jan Toth Chief Economist 26 March 2010. Global pictures. Key Western European markets Price pressures vs. economic cycle Interest rates Soft indicators. - PowerPoint PPT Presentation
Transcript of Impact of economic crises on CEE economies
Impact of economic crises on CEE economiesImpact of economic crises on CEE economies
ERES Industry SeminarUniCredit Bank Slovakia
Jan TothChief Economist26 March 2010
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Key Western European markets
Price pressures vs. economic cycle
Interest rates
Soft indicators
Global pictures
3 Zdroj: Eurostat (2008)
% z
HD
P
Openness of the economy (export+import as % of GDP)
Slovakia is extremely small open economy, depended on foreign demand
31%
55% 58%
83%88%
113%
149%
161%168%
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
US FR IT PL DE AT CZ HU SK
4
Economic growth in European biggest economies
Germany in deepest recession (share of industry is the biggest)
-8
-6
-4
-2
0
2
4
6
Q1
06
Q2
06
Q3
06
Q4
06
Q1
07
Q2
07
Q3
07
Q4
07
Q1
08
Q2
08
Q3
08
Q4
08
Q1
09
Q2
09
Q3
09
Q4
09
Q1
10f
Q2
10f
Q3
10f
Q4
10f
Q1
11f
Q2
11f
Q3
11f
Q4
11f
DE FR IT
5
Cash for clunkers – mostly gone by 1H10
6
(Core) inflationary pressures should remain low
Eurozone Core CPI vs. Output Gap
Less important energy and food prices could increase. Source: Capital Economics
7
Broader Money does not grow despite printing press
Source: Capital Economics
8
Short-term interest rates, forecasts
ECB - Later to cut rates, later to increase rates
Source: UniCredit
0
1
2
3
4
5
I-9
9
VII-
99
I-0
0
VII-
00
I-0
1
VII-
01
I-0
2
VII-
02
I-0
3
VII-
03
I-0
4
VII-
04
I-0
5
VII-
05
I-0
6
VII-
06
I-0
7
VII-
07
I-0
8
VII-
08
I-0
9
VII-
09
I-1
0
VII-
10
I-1
1
VII-
11
I-1
2
1 Month
3 Month
6 Month
Key Rate
9
Long-term interest rates in eurozone
German 10-yr government bonds, yield curve should become less steep
Source: UniCredit
0,7
1,7
2,7
3,7
4,7
5,7
6,7
7,7
8,7
I-9
0
I-9
1
I-9
2
I-9
3
I-9
4
I-9
5
I-9
6
I-9
7
I-9
8
I-9
9
I-0
0
I-0
1
I-0
2
I-0
3
I-0
4
I-0
5
I-0
6
I-0
7
I-0
8
I-0
9
I-1
0
I-1
1
I-1
2
10Y BUnds
2Y Bunds
10
“Soft” indicators point to stronger 2Q10
Eurozone (esp. Germany) enjoys industrial production revival
Source: Capital Economics
11
Slovak example - zoomed on recent data
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%V
I.08
VII.
08
VIII
.08
IX.0
8X
.08
XI.0
8X
II.0
8I.0
9II.
09
III.0
9IV
.09
V.0
9V
I.09
VII.
09
VIII
.09
IX.0
9X
.09
XI.0
9X
II.0
9I.1
0II.
10
III.1
0IV
.10
V.1
0V
I.10
VII.
10
VIII
.10
IX.1
0
IFO Exp. (normalized)
ZEW (normalized)
Slovak Manufacturing (ex-auto)
12
“Soft” indicators point to still low levels of stocks compared to orders
The ratio signals that “recovery” is not over yet
Source: UniCredit
33
36
39
42
45
48
51
54
57
60
63
VI.97 XII.99 VI.02 XII.04 VI.07 XII.09
0,5
0,6
0,7
0,8
0,9
1,0
1,1
1,2
1,3
1,4
Mfg PMI - LS
New Orders-to-Stock Ratio - RS
13
Living standards
Growth forecasts and investments
Euro adoption had negative short-term impact
Polish and Hungarian labour force cheap vis-à-vis neighbours
Recession was the deepest in Slovakia, but recovery swift
Large fiscal deficits could push tax rates higher after elections
CEE economies
14
Living standards in historical perspective ( EU15=100% )
Living standards catch-up stalled during global crisis
20
30
40
50
60
70
80
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
e
20
10
F
20
11
F
Bulgaria Czech Republic Hungary Poland Romania Slovakia
Source: Eurostat. February 2010.
15
CEE growth
Poland was best off in 2009 due to smaller export share
4,8 5,0
6,7
8,5
10,6
6,2
-4,7
1,62,4
-0,3
2,72,3 2,73,8
3,1
-8-7-6-5-4-3-2-10123456789
1011
2003 2004 2005 2006 2007 2008 2009 2010f 2011f
Czech Republic Hungary Poland Slovak Republic
16
Czech Republic - Y-o-Y Czech Republic - 2008=1
Slovakia - Y-o-Y Slovakia - 2008=1
CE4 growth and investments – Czech R & Slovakia
0,800,850,900,951,001,051,101,15
2006
2007
2008
2009
2010
F
2011
F
2012
F
2013
F
2014
F
2015
F
0,80
0,85
0,90
0,95
1,00
1,05
GDP Investments
6,8 6,1
2,5
-4,3
3,5 3,5
1,6 2,4 3,1 3,3
-6,0-4,0-2,00,02,04,06,08,0
2006
2007
2008
2009
2010
F
2011
F
2012
F
2013
F
2014
F
2015
F
-10,0
-5,0
0,0
5,0
10,0
15,0GDP Investments
10,6
6,2
-4,7
5,04,02,2
4,33,83,1
8,5
-6,0
-3,0
0,0
3,0
6,0
9,0
12,0
2006
2007
2008
2009
2010
F
2011
F
2012
F
2013
F
2014
F
2015
F
-15,0
-10,0
-5,0
0,0
5,0
10,0
15,0GDP Investments
0,800,850,900,951,001,051,101,151,20
2006
2007
2008
2009
2010
F
2011
F
2012
F
2013
F
2014
F
2015
F
0,800,850,900,951,001,051,101,151,20
GDP Investments
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Poland - Y-o-Y Poland - 2008=1
Hungary - Y-o-Y Hungary - 2008=1
CE4 growth and investments – Poland & Hungary
6,26,8
4,9
2,73,4
3,54,04,2
2,6
1,71,02,03,04,05,06,07,08,0
2006
2007
2008
2009
2010
F
2011
F
2012
F
2013
F
2014
F
2015
F
-5,0
0,0
5,0
10,0
15,0
20,0GDP Investments
0,80
0,90
1,00
1,10
1,20
1,30
2006
2007
2008
2009
2010
F
2011
F
2012
F
2013
F
2014
F
2015
F
0,70
0,80
0,90
1,00
1,10
1,20
GDP Investments
4,1
0,7
-6,5
-0,3
3,50,9
3,54,03,42,7
-8,0-6,0-4,0-2,00,02,04,06,0
2006
2007
2008
2009
2010
F
2011
F
2012
F
2013
F
2014
F
2015
F
-10,0
-5,0
0,0
5,0
10,0
15,0GDP Investments
0,90
0,95
1,00
1,05
1,10
2006
2007
2008
2009
2010
F
2011
F
2012
F
2013
F
2014
F
2015
F
0,90
0,95
1,00
1,05
1,10
1,15
1,20
GDP Investments
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Interest rate premium ( vs. German government, 10 yrs, in % )
Slovakia benefits due to euro adoption, but Czech R is close second
0,91,1
2,4
4,3
0,3
1,0
3,3
4,9
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
5,0
Slovakia Czech R Poland Hungary
today (10Y)
before crisis (10Y)
today (1Y)
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Hourly (total) labour costs in manufacturing (EUR)
Note: Labour costs include all costs borne by an employer. CE exports mainly consist of industrial goods. The average annual increase for CE costs was 8.5% in 1996-2006 period while it was 3% for EU15 and 1.7% for Germany.
Source: 1996 -2008 is EUROSTAT data, the rest is an estimate. The latest data based on present exchange rates.
1996 2008 Mar-10 % of CE4 avg % of EU15 avg
Czech Republic 2.6 8,6 8,9 119,1 29,9Hungary 2.7 7,0 6,8 90,8 22,8
Poland 2.7 7,0 6,7 89,2 22,4
Slovakia 2.3 7,3 7,5 100,9 25,3
CE4 average 2.6 7,5 7,5 100,0 25,1
Old EU15 avg. 19.4 29,4 29,7 28,9 100,0
Germany 24.8 32,7 32,6 33,1 109,8
Slovakia got sharply more expensive in relative terms
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% premium/discount to CE4 average
Slovakia cannot react to slowdown via exchange rate, becomes more expensive
-12%-10%
-7%
-16%-14%
-22% -22%
-14%
-10%
-14%-12%
-5%-2%
6%
1%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
96 97 98 99 00 01 02 03 04 05 06 07 08 09 III.10
Czech R Hungary Poland Slovakia
% deviation from CE average
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Industry (manufacturing, s.a., July 2008 = 100)
Slovakia was hit the hardest, but stronger recovery
0,89
0,93
0,85
0,88
1,02
0,94
0,75
0,80
0,85
0,90
0,95
1,00
1,05
IX.0
8X.0
8XI.0
8XII.
08 I.09
II.09
III.0
9
IV.0
9V.0
9VI.0
9VII.
09
VIII.0
9IX
.09
X.09
XI.09
XII.09 I.1
0
EU-15 Czech Republic GermanyHungary Poland Slovakia
Source: Eurostat, UniCredit calculation
22
Construction (sept 2008 = 100, seas. adjusted, 3M MA)
Slovakia was the most hit, Hungary 2nd worst
0,94
0,89
1,04
0,770,75
0,80
0,85
0,90
0,95
1,00
1,05
1,10
IX.0
8X.0
8XI.0
8XII.
08 I.09
II.09
III.0
9
IV.0
9V.0
9VI.0
9VII.
09
VIII.0
9IX
.09
X.09
XI.09
XII.09 I.1
0
Czech Republic Hungary Poland Slovakia
Source: Eurostat, UniCredit calculation
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Real estate construction (sept 2008 = 100, seas. adjusted, 3M MA)
Slovakia and Hungary was the most hit
0,96
0,78
0,88
0,750,75
0,80
0,85
0,90
0,95
1,00
IX.0
8X.0
8XI.0
8XII.
08 I.09
II.09
III.0
9
IV.0
9V.0
9VI.0
9VII.
09
VIII.0
9IX
.09
X.09
XI.09
XII.09 I.1
0
Czech Republic Hungary Poland Slovakia
Source: Eurostat, UniCredit calculation
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Construction - survey on current orders (s.a.)
Orders still very low
Source: Eurostat
-80
-70
-60
-50
-40
-30
-20
-10
0
10
I.06
IV.0
6
VII.
06
X.0
6
I.07
IV.0
7
VII.
07
X.0
7
I.08
IV.0
8
VII.
08
X.0
8
I.09
IV.0
9
VII.
09
X.0
9
I.10
Czech Republic Hungary Poland Slovakia
25
Retail sales (w/o cars, 2008 average = 100)
Slovakia was hit the hardest, 10% below average 2008 level
Source: Eurostat, UniCredit calculation
0,87
0,89
0,91
0,93
0,95
0,97
0,99
1,01
1,03
1,05
IX.0
8
X.0
8
XI.0
8
XII.
08
I.09
II.0
9
III.0
9
IV.0
9
V.0
9
VI.0
9
VII.
09
VIII
.09
IX.0
9
X.0
9
XI.0
9
XII.
09
I.10
EU15 CZ DE
HU PL SK
26
GDP output (pre-crisis level 100%, quarterly development, s.a.)
Slovakia was the most hit, but strongly rebounds
Source: Eurostat
0,97
0,95
1,03
0,96
0,90
0,92
0,94
0,96
0,98
1,00
1,02
1,04
2008Q04 2009Q01 2009Q02 2009Q03 2009Q04
Czech Republic Hungary
Poland Slovakia
27
Unemployment (an increase since the start of the crisis, s.a.)
Slovakia was the most hit
Source: Eurostat
3,9
3,3
2,1
4,9
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
5,0
IX.0
8X.0
8XI.0
8XII.
08 I.09
II.09
III.0
9
IV.0
9V.0
9VI.0
9VII.
09
VIII.0
9IX
.09
X.09
XI.09
XII.09 I.1
0
Czech Republic Hungary
Poland Slovakia
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EUR race, no quick euro candidate in CE3
Source: UniCredit, Barclays
Pre-euro ERMII entry Euro adoption date
Slovakia 2H05-2008 2009
Estonia 2004-2010 2011
Latvia 2004-2013 2014
Lithuania 2004-2013 2014
Bulgaria Currency board to 2013 2014
Hungary 2012-2014 2015
Poland 2013-2015 2016
Czech Republic 2015-2017 2018
Slovak neighbors will continue to have floating exchange rate
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Faced with a short-term deflationary/disinflationary environment, global corporations will lack pricing power and will have to work aggressively on costs to support the bottom line. This will continue to have important implications for CEE markets that have benefited from off-shoring.
In terms of the geographic location of production such pressures could end up producing more not less off-shoring
Potential threat: due to high fiscal deficit numbers, taxes could be increased in the future
On-going hope for CEE
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Contacts Jaroslav Habo Large and multinationals
Tel: +421 2 4950 4319
E-mail: [email protected]
František Doležal Mid segment
Tel: +421 2 4950 2272
E-mail: [email protected]
Marian Burian SME clients
Tel: +421 2 4950 3207
E-mail: [email protected]
Margita Slaninková Real Estate Financing
Tel: +421 2 4950 2271
E-mail: [email protected]
Ján Tóth Research
Tel: +421 2 4950 2267
E-mail: [email protected]
David Derenik Research – Real Estate
Tel: +421 2 4950 2368
E-mail: [email protected]
