Latvijas Banka 6 June 2014 Press Conference - Presentation Slides
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Transcript of Latvijas Banka 6 June 2014 Press Conference - Presentation Slides
Presentation of Ilmārs Rimšēvičs, Governor of Latvijas Banka,
delivered at 6 June 2014 Press Conference.
Growth resumes in the euro area, but recovery is still fragile
2
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
20
10
Q1
20
10
Q2
20
10
Q3
20
10
Q4
20
11
Q1
20
11
Q2
20
11
Q3
20
11
Q4
20
12
Q1
20
12
Q2
20
12
Q3
20
12
Q4
20
13
Q1
20
13
Q2
20
13
Q3
20
13
Q4
20
14
Q1
Quarterly growth (%) Annual growth (%)
Changes in euro area real GDP, %
Source Eurostat
Low inflation persists in the euro area
3
0
0.5
1
1.5
2
2.5
3
3.5
20
10
Jan
20
10
Mar
20
10
May
20
10
Jul
20
10
Sep
20
10
No
v
20
11
Jan
20
11
Mar
20
11
May
20
11
Jul
20
11
Sep
20
11
No
v
20
12
Jan
20
12
Mar
20
12
May
20
12
Jul
20
12
Sep
20
12
No
v
20
13
Jan
20
13
Mar
20
13
May
20
13
Jul
20
13
Sep
20
13
No
v
20
14
Jan
20
14
Mar
20
14
May
Euro area inflation (HICP), %
Source: Eurostat
Problem countries of the euro area can borrow at ever lower rates
4 Source: Eurostat
0.00
5.00
10.00
15.00
20.00
25.00
30.00
20
11
M0
1
20
11
M0
4
20
11
M0
7
20
11
M1
0
20
12
M0
1
20
12
M0
4
20
12
M0
7
20
12
M1
0
20
13
M0
1
20
13
M0
4
20
13
M0
7
20
13
M1
0
20
14
M0
1
20
14
M0
4
6.20 Greece
3.82 Portugal 3.23 Italy 3.11 Spain 2.90 Ireland
1.46 Germany
Budget balances have improved markedly since the crisis (debt servicing not included)
5
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
Irel
and
Port
uga
l
Cyp
rus
Fran
ce
Mal
ta
Slo
ven
ia
Spai
n
Bel
giu
m
Slo
vaki
a
The
Net
her
lan
ds
Au
stri
a
Latv
ia
Ital
y
Fin
lan
d
Esto
nia
Ger
man
y
Luxe
mb
ou
rg
Gre
ece
2010
2013
Strukturālā budžeta bilance. Avots: EK
38.1
0
20
40
60
80
100
120
140
160
Gre
ece
Ital
y
Be
lgiu
m
Port
uga
l
Ge
rman
y
Fran
ce
Mal
ta
Au
stri
a
Cyp
rus
The
Net
her
lan
ds
Spai
n
Fin
lan
d
Slo
vaki
a
Irel
and
Slo
ven
ia
Latv
ia
Luxe
mb
ou
rg
Esto
nia
2007 2013
Growth in the indebtedness of some euro area countries is worrisome
Avots: Eurostat
Limit of stability and growth pact = 60%
6
The ECB’s policy of low interest rates has not been passed through to the real economy
7
3.13
0
1
2
3
4
5
6
7
Cyp
rus
Gre
ece
Mal
ta
Port
uga
l
Slo
ven
ia
Ital
y
Slo
vaki
a
Spai
n
Ge
rman
y
Latv
ia
Irel
and
The …
Be
lgiu
m
Esto
nia
Fran
ce
Au
stri
a
Luxe
mb…
Som
ija
Interest rates of loans granted by banks to non-financial businesses in the euro area countries in March 2014 (%)
Source: ECB
ECB benchmark rate 0.25%
At the June 2014 meeting the Governing Council further reduced the key ECB interest rates
0.00% -0.10%
* šādā līmenī kopš VII 2012
Deposit facility rate
0.25% 0.15%
Main refinancing operations rate
0.75% 0.40% Marginal lending facility rate * šādā līmenī kopš XI 2013
* šādā līmenī kopš XI 2013
In addition, the Governing Council adopted a number of other measures
o New targeted longer term refinancing operations(TLTRO):
- to support bank lending to households and non-financial corporations
- attractive interest rates
- some 400 billion euro
- as of September 2014
o Continue conducting the MROs as fixed rate tender procedures with full allotment at least until December 2016.
o Suspend the weekly fine-tuning operation sterilising the liquidity injected under the Securities Markets Programme.
o Intensify preparatory work related to outright purchases in the asset based securities (ABS) market, should it become necessary in the future.
o GovC is unanimous in its commitment to using also unconventional instruments within its mandate should it become necessary
o Changed forward guidance– the key ECB interest rates will remain at present levels for an extended period of time.
9
With the GDP growth rate falling, Latvia is still the fastest growing economy in the euro area
10
2.4
-4.5 -4.0 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5
Latv
ia
Ger
man
y
Slo
vaki
a
Bel
giu
m
Port
uga
l
Au
stri
a
Fran
ce
Spai
n
Ital
y
The
Net
her
lan
ds
Fin
lan
d
Gre
ece
Esto
nia
Cyp
rus
GDP growth in the first quarter of 2014, %, seasonally adjusted data; source: Eurostat
Exports grow overall, yet export to Russia falls
-20.0
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
Y-o-Y changes in Latvian goods exports (%)
Total exports (%) Exports to Russia (%)
-1.8%
+6.1%
11
Proportion of goods exports to Russia in total Latvian exports
11.5%
2013.data
Source: CSB
The Bank of Latvia’s GDP forecast for 2014
12 Source: LB
Previous forecast
Current forecast*
4.0% 3.3%
* adjusted in mid- 2014
Inflation level reflects moderate growth; the negative contribution of supply side factors diminishing
13
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
I 2
01
2
II
III
IV
V
VI
VII
VII
I
IX
X
XI
XII
I 2
01
3
II
III
IV
V
VI
VII
VII
I
IX
X
XI
XII
I 2
01
4
II
III
IV
Contribution of food prices in y-y changes in inflation
Contribution of energy prices in y-y changes in inflation
Total inflation (%)
Core inflation (%)
Source: CSB, LB calculation
Contribution of energy and food prices in the annual inflation(pp), core inflation (%)
national consumer price index
The Bank of Latvia’s inflation forecast for 2014
14 Source: LB
Previous forecast
Current forecast*
1.7% 1.1%
* SPCI; forecast adjusted in mid-2014.
LB and FM budget deficit forecasts for 2014 (% of GDP)
15
-1.0 -1.0
-0.3
-0.2
-1.6
-1.4
-1.2
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
% n
o IK
P
-1.5%
Source: Latvia’s Stability Programme 2014-2017; LB estimates
Budget deficit planned by
Ministry of Finance
Current budget deficit
forecast by LB FM planned budget
deficit
Budget deterioration
because of lower
economic growth and
increased expenditure
Budget deterioration as a
result of EKS adjustment
Budget deficit has been shrinking every year since the crisis. We must not repeat the mistakes of the boom years!
16
-4.4
-9.2
-8.2
-3.5
-1.3 -1
-1.5
-10
-9
-8
-7
-6
-5
-4
-3
-2
-1
0
2008 2009 2010 2011 2012 2013 2014
% n
o IK
P
Source: Eurostat; 2014 LB estimates
Balance of general government budget
(Prognoze)