despite Political Uncertainty Economic Analysis and Outlook for - PowerPoint PPT Presentation

Wiener Institut für The Vienna Institute for www.wiiw.ac.at Internationale International Economic Wirtschaftsvergleiche Studies Press conference, 29 June 2017 Economic Convergence despite Political Uncertainty Economic Analysis and Outlook for Central, East and Southeast Europe and its Economic Relations with Austria Julia Grübler  1

International Contributions Relations Overview Conclusion Environment to growth with Austria Growth projections for the CESEE region were for the most part revised upwards, to 2.4% in the aggregate for the year 2017 EU members in Central and Eastern Europe  EU-CEE 3.5 Bulgaria BG 3.5 Croatia HR 2.7 Czech Republic CZ 2.7 Estonia EE 2.3 Hungary HU 4.0 Latvia LV 2.9 Lithuania LT 3.0 Poland PL 3.3 Romania RO 4.8 Slovakia SK 3.3 Slovenia SI 3.5  Visegrád V-4 3.3  3 Source: wiiw forecast (June 2017).

International Contributions Relations Overview Conclusion Environment to growth with Austria Growth projections for the CESEE region were for the most part revised upwards, to 2.4% in the aggregate for the year 2017 Western Balkan  WB 2.9 Albania AL 3.9 Bosnia and Herzegovina BA 3.2 Kosovo XK 3.7 Macedonia MK 2.6 Montenegro ME 2.5 Serbia RS 2.5  CIS & Ukraine 1.5 Kazakhstan KZ 2.5 Russia RU 1.3 Belarus BY 1.4 Ukraine UA 2.0  Turkey TR 2.8  5 Source: wiiw forecast (June 2017).

International Contributions Relations Overview Conclusion Environment to growth with Austria Economic confidence indicators for the EU show highest scores since the onset of the global economic crisis Economic sentiment indicator, 2000-2017 Austria EU-CEE European Union (28 countries) 120 EU-28 May 2017 110 100 90 80 70 60 2000M01 2001M01 2002M01 2003M01 2004M01 2005M01 2006M01 2007M01 2008M01 2009M01 2010M01 2011M01 2012M01 2013M01 2014M01 2015M01 2016M01 2017M01 Note: Index of 100 shows the long-term average of EU-28.  6 Source: Eurostat: Economic sentiment indicator.

International Contributions Relations Overview Conclusion Environment to growth with Austria The economic recovery in the euro area boosts exports of the CESEE region Exports of goods (nominal, euro-based), 2012-2017 Change against previous year in %, 3-month moving average CZ SK PL BG RO EE LV LT HU SI HR 25 25 20 20 15 15 10 10 5 5 0 0 -5 -5 -10 -10 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 AL MK ME TR KZ RU UA RS BA 40 40 30 30 20 20 10 10 0 0 -10 -10 -20 -20 -30 -30 -40 -40 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17  7 Source: wiiw Monthly Database incorporating national and Eurostat statistics.

International Contributions Relations Overview Conclusion Environment to growth with Austria The relatively low oil price is beneficial for private consumption in energy importing countries The assumption underlying the wiiw summer forecast report is a relatively stable oil price at around 50-55 US dollar. 140 120 100 80 60 40 2015-01-13, 45.13 20 2016-01-20, 26.01 2017-06-14, 45.47 0 2012-06-05 2013-06-05 2014-06-05 2015-06-05 2016-06-05 2017-06-05  8 Source: eia – U.S. Energy Information Administration.

International Contributions Relations Overview Conclusion Environment to growth with Austria Higher contributions of EU-cofinanced investments to GDP growth are expected already for this year Operating budgetary balance in % GDP, 2011-2015 4.4 5 3.8 3.6 3.6 4 2.9 2.8 2.8 2.7 3 2.3 2.2 2.1 1.9 1.5 2 1.1 1 0.3 0.3 0.2 0.1 0 -0.1 -0.3 -0.3 -0.3 -0.4 -0.3 -0.3 -0.4 -0.5 -0.5 -0.5 -1 -2 NL SE DE DK BE UK FR AT FI IT LU CY IE ES HR MT SI PT CZ SK RO EL EU-CEE EE PL BG LV LT HU Source: European Commission.  9 (http://ec.europa.eu/budget/figures/interactive/index_de.cfm). wiiw calculation.

International Contributions Relations Overview Conclusion Environment to growth with Austria Positive wage developments are backing household consumption in the EU-CEE GDP growth in 2016 and 2017 in % and contribution of individual demand components in percentage points Gross fixed capital formation Household final consumption Net exports GDP (growth in %) 6 5 4 3 2 1 0 -1 ‚’ 16 | ‘17 -2 -3 -4 -5 EE HR CZ LV LT PL SK BG SI HU RO Note: Ranking by growth rates for the year 2017.  10 Source: wiiw Annual Database incorporating national and Eurostat statistics; wiiw forecast (June 2017).

International Contributions Relations Overview Conclusion Environment to growth with Austria Negative effects of political turmoil materialise in Western Balkans and Ukraine; not (yet) in Turkey GDP growth in 2016 and 2017 in % and contribution of individual demand components in percentage points Gross fixed capital formation Household final consumption Net exports GDP (growth in %) 10 8 6 ‚’ 16 | ‘17 4 2 0 -2 -4 -6 -8 RU BY UA ME RS KZ MK TR BA XK AL Note: Ranking by growth rates for the year 2017.  11 Source: wiiw Annual Database incorporating national and Eurostat statistics; wiiw forecast (June 2017).

International Contributions Relations Overview Conclusion Environment to growth with Austria A trade reorientation towards the East is set to continue; however, trade with Germany is still dominant Austrian trade in goods, 2005 and 2016, top 10, shares in % (ranking 2016) 2005 2016 Rest of Rest of World World DE DE Export of goods Other Other CESEE CESEE PL PL US US UK UK HU HU IT IT CZ CZ FR CH CH FR SK SK 2005 2016 Rest of Rest of World World Other Other CESEE CESEE DE DE Import of goods US US FR FR SK SK HU HU CN CN NL NL CZ CZ CH IT IT CH  12 Source: COMEXT Eurostat.

International Contributions Relations Overview Conclusion Environment to growth with Austria Austria continues to be one of the main investors in CESEE Austrian foreign direct investments, 2016 Top 10, shares in % FDI stocks FDI income CZ DE Rest of Rest of World World DE NL CN CZ Other Other CESEE CESEE LU AE RU US SK CH HR HU CH UK RO RO SK NL  13 Source: OeNB.

International Contributions Relations Overview Conclusion Environment to growth with Austria Visegrád countries form the core of investment activity ... Number of greenfield projects in CESEE with Austria as investor, 2015 and 2016 (ranking 2016) 2015 2016 8 7 6 5 4 3 2 1 0 PL RS SK CZ HU RO TR RU SI BG BA BY HR KZ UA  14 Source: FT fdimarkets.com.

International Contributions Relations Overview Conclusion Environment to growth with Austria ... and engagement of Austrian banks Foreign claims of Austrian banks and non-performing loans, 2016 Germany and top 14 CESEE, shares in % 35 UA 30 Non-performing loans 25 20 RS BG AL 15 HR BY BA 10 RO HU PL SI 5 RU CZ SK DE 0 0 5 10 15 20 25 Austrian consolidated claims  15 Sources: Foreign claims: BIZ (RBI for Kosovo in 2016).

International Contributions Relations Overview Conclusion Environment to growth with Austria Unemployment rates for Austrians and CESEE nationals decreased, but vary by country of origin Share of unemployed people and unemployment rate in Austria by nationality, 2016 Germany and top 10 CESEE (ranking by population) Registered unemployed Registered unemployment rate share in % in % Total Female Total Female 40 4.0 35 3.5 30 3.0 25 2.5 20 2.0 15 1.5 10 1.0 5 0.5 0 0.0 DE RS, TR BA RO HR HU PL SK RU BG DE RS, TR BA RO HR HU PL SK RU BG ME ME Note: Serbia and Montenegro are taken together and include former Yugoslavia. The unemployment rate is defined as unemployed in % of the labour force.  17 Sources: BALI, Austrian Federal Ministry of Labour, Social Affairs and Consumer Protection, wiiw calculations.

International Contributions Relations Overview Conclusion Environment to growth with Austria N eighbourhood accounts for lion’s share of wages paid - in addition Western Balkans and Turkey important for remittances Compensations of employees and migrant workers' remittances according to the balance of payments by partner countries, 2016, top 8, shares in % HU DE SK SI CZ PL RO IT Other CESEE Rest of World Compensation of employees 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% HU TR PL RS DE BA SK RO Other CESEE Rest of World Remittances 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%  18 Source: OeNB.

International Contributions Relations Overview Conclusion Environment to growth with Austria CESEE on wage convergence track... Gross monthly wages and wage increase in relation to Austria 8 Real wage growth rate p.a. in %, BG 7 BY XK RO 6 2006-2016 5 KZ 4 EE LV RU UA PL AL ME LT BA 3 SK 2 RS MK CZ HU SI 1 HR AT 0 0 20 40 60 80 100 Wage level in % of Austria at PPP, 2016  19 Source: wiiw Database, Eurostat.