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Bsef2012 session2 strategic_areasfordevelopment_ziemba

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RACHEL ZIEMBA, Director of Central and Eastern Europe, Middle East and Africa and global macroeconomics at Roubini Global Economics - Black Sea Region Amid Global Risks

RACHEL ZIEMBA, Director of Central and Eastern Europe, Middle East and Africa and global macroeconomics at Roubini Global Economics - Black Sea Region Amid Global Risks


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  • 1. By Rachel Ziemba, Director of Emerging Europe and Global Macro© Roubini Global Economics Copyright 2011No reproducing or redistribution without written consent. Roubini Global Economicsroubini.com | americas@roubini.com Tel: 212.645.0010 | europe@roubini.com / asia@roubini.com Tel: +44 (0) 207 420 2800
  • 2. Global Headwinds For the Black Sea Region • Global outlook remains bleak especially in Europe, with recession risks high. • Policy response (stimulus) has bought time which helps EM, especially with greater trade/financial ties to EZ. • Black sea countries have all slowed sharply in 2012, even Russia and Long-term growth remains uncertain • Policy Response – Use policy space available to improve balance sheets – Infrastructure and Institutionsroubini.com | americas@roubini.com Tel: 212.645.0010 | europe@roubini.com / asia@roubini.com Tel: +44 (0) 207 420 2800 2
  • 3. Global Growth: DM Stall, EZ Recession , EM Slowdown Growth Inflation 2012 2013 2012 2013 U.S. 2.2 1.6 2 1.8 EZ -0.4 -0.6 2 1.7 Japan 2.1 1.1 0.1 -0.4 China 7.6 7.4 2.8 2.4 G7 1.4 1.0 1.9 1.6 Advanced Economies ₁ 1.2 0.8 1.8 1.5 Emerging and Frontier Markets 5.1 5.2 5.0 4.7 Asia/Pacific ₂ 5.4 5.4 3.2 2.9 Emerging Asia ₃ 6.2 6.3 3.9 3.5 Latin America 6 3.4 3.6 8.5 7.8 Emerging Europe 5 2.8 3.0 5.8 6.1 Middle East and Africa 6 3.4 3.3 5.8 6.2 BRIC 6.1 6.5 4.4 4.2 World 3.2 3.0 3.4 3.1 1. U.S., Canada, Japan, UK, the eurozone, Sweden, Norway, Australia, Switzerland 2. Japan, Australia, China, India, Hong Kong, Indonesia, Malaysia, Philippines, Singapore, Vietnam, South Korea, Taiwan, Thailand 3. Asia/Pacific ex-Japan and Australia 4. Brazil, Argentina, Mexico, Chile, Peru, Colombia, Venezuela 5. Czech Republic, Hungary, Poland, Turkey, Russia 6. Israel, Egypt, Saudi Arabia, the United Arab Emirates, South Africa Based on IMF PPP Weights for 2011 and 2012 roubini.com | americas@roubini.com Tel: 212.645.0010 | europe@roubini.com / asia@roubini.com Tel: +44 (0) 207 420 2800 3
  • 4. Buying Time… But will Policymakers Respond Enough • ECB responses have bought time, but growth remains illusive, underming the outlook. Extensive coordination required to create a more consistent Eurozone. • A disorderly default could add to financing strains – The chance of a Greek exit in next 12 months remains. • US too will barely grow, as fiscal drag weighs on weak consumers • Chinese growth is slowing – After a small bounce in late 2012, Growth will begin structural downshift in H2 2013, weighing on commodities (especially base metals) • EM too will be affected through trade and financing channels. • EMEA most exposed due to trade links and weaker balance sheets – still recovering from past credit/asset booms. • Some good news –Inflation is mostly in check. Food prices are a risk. EEMEA epicenter of drought meaning food prices an upside risk. roubini.com | americas@roubini.com Tel: 212.645.0010 | europe@roubini.com / asia@roubini.com Tel: +44 (0) 207 420 2800 4
  • 5. EM Europe: Balance Sheet Vulnerabilities • Tepid recovery has prevented more of an improvement in regional balance sheets. • Eurozone supported regional recovery, especially Czech R and other countries shifted to exports as primary growth driver. • New Trading partner - Countries are also trading more with China (especially commodities) and receiving finance • Many economies (Hungary, Romania, Ukraine Baltics) had to begin fiscal austerity, weakening domestic demand and overall growth. • Turkey has seen the size of its external deficit grow, credit growth soar, and now has less policy space than in 2008. • Romania, Bulgaria and others remain constrained by high levels of FX lending and debt service which adds to weak domestic demand and bank balance sheets. • But –EZ/US stimulus allowing some easingroubini.com | americas@roubini.com Tel: 212.645.0010 | europe@roubini.com / asia@roubini.com Tel: +44 (0) 207 420 2800 5
  • 6. Effect on Black Sea – Financing strains could put pressure on currencies, debt and banks -> NPL, increase debt service – Global weaknesses will exacerbate any domestic vulnerabilities, especially for Ukraine, Romania – But policy space remains constrained, more so than in 2008. – Medium-term outlook also uncertain as there is room to improve.roubini.com | americas@roubini.com Tel: 212.645.0010 | europe@roubini.com / asia@roubini.com Tel: +44 (0) 207 420 2800 6
  • 7. Emerging Europe/CIS Growth Slowing DownGrowth Falling or Staying Below Trend OECD Leading Indicators Point to Slowdown 106 104 102 100 98 96 94 92 90 Jul-2007 Jul-2008 Jul-2009 Jul-2010 Germany Czech Republic Jul-2011 Hungary Poland roubini.com | americas@roubini.com Tel: 212.645.0010 | europe@roubini.com / asia@roubini.com Tel: +44 (0) 207 420 2800 7
  • 8. How Much Policy Space • EMEA balance sheets still weaker than Asia/Latam -> FX denominated debt. • FX mismatches increase vulnerability to FX depreciation. • CBs still have cushions but are starting to run out of reserves ammunition. • Easing Inflation, weakening growth prompts easing and liquidity provision • Limited fiscal space.roubini.com | americas@roubini.com Tel: 212.645.0010 | europe@roubini.com / asia@roubini.com Tel: +44 (0) 207 420 2800 8
  • 9. Balance Sheet Repair Is Underway External Debt (%GDP) Leveling Off External Deficits Forced to ImproveHefty FX debt burden in Bulgaria, Romania Loan to Deposit Ratios Starting to Improve Domestic FX loans (latest) (% GDP) of which % FX credit in total lending Total pvt sector Corp. HH /2 Bulgaria 44.7 34.7 10.0 61.9 Georgia 20.2 … … 74.3 Romania 24.9 12.4 12.5 62.5Russia 9.1 8.3 0.7 20.3Turkey 14.9 … … 27.8 Ukraine 31.8 19.1 12.7 46.3 roubini.com | americas@roubini.com Tel: 212.645.0010 | europe@roubini.com / asia@roubini.com Tel: +44 (0) 207 420 2800 9
  • 10. Black Sea Region: Still Scope to Improve Region: EM Eur CIS Jun-12 Bulgaria Russia Ukraine Romania Turkey Georgia Average Greece Average Scores First pillar: External adjustment capacity 6.8 7.3 3.6 6.9 5.7 5.304413 5.9 3.524465 5.9 Second pillar: Institutional robustness 7.8 6.8 5.6 7.7 5.7 5.731839 6.6 4.663801 6.9 Third pillar: Medium term growth potential 4.0 4.6 4.6 4.0 5.2 5.204191 4.6 3.436175 4.7 Fourth pillar: Social inclusion 6.8 5.5 6.0 6.0 6.1 6.81744 6.2 7.651164 6.7 Sovereign Risk Index 7.3 7.1 4.6 7.3 5.7 5.518126 6.2 4.094133 6.4 Total Indebtedness Indicator 7.7 9.2 7.7 9.4 8.6 8.913358 8.6 0.977564 7.7 Vulnerability to Outflows 7.9 8.5 5.7 7.8 4.9 5.530949 6.7 3.369701 6.9 Government Stimulus Ability 7.7 7.8 5.3 7.7 6.2 7.098906 6.9 3.080888 6.8 Economic Flexibility 5.1 5.6 4.1 5.3 4.7 5.552529 5.1 3.507896 5.3 Political Risk Indicator 5.6 2.7 5.0 5.3 3.9 4.002652 4.4 5.291576 5.4 Business Environment 5.2 2.3 2.3 5.2 4.6 7.261583 4.5 5.046362 4.7 Property Rights and Corporate Governance 4.1 3.5 3.5 4.6 4.6 4.002652 4.0 5.291576 4.7 Innovation Capacity Indicator 3.0 4.5 3.5 2.5 3.5 2.489073 3.3 3.350159 4.4 Multi-Dimensional Poverty Indicator 8.4 7.0 7.2 7.3 7.7 7.974089 7.6 9.466624 8.0 Trade Vulnerability 6.5 1.2 5.6 8.6 9.6 5.234861 6.1 8.009526 7.4 Quality of Governance 5.6 2.6 2.8 5.6 5.7 5.263814 4.6 6.621294 5.5 Quality of Infrastructure 7.5 7.1 6.8 6.4 7.6 6.528074 7.0 8.095992 7.3 Telecom Infrastructure 9.8 9.6 7.8 9.5 8.2 4.942433 8.3 9.708871 9.4 Utility Infrastructure Indicator 7.9 7.1 7.7 5.6 8.4 8.70372 7.6 8.774535 7.8 Transport Infrastructure Indicator 4.8 4.5 4.9 4.1 6.2 5.938068 5.1 5.804571 5.0 Social, Institutional and Regulatory Risk 5.1 2.8 3.4 5.2 4.7 5.350367 4.4 5.452869 5.0 roubini.com | americas@roubini.com Tel: 212.645.0010 | europe@roubini.com / asia@roubini.com Tel: +44 (0) 207 420 2800 10
  • 11. Country by country: Medium-Term Challenges • Like many EM Medium-term growth outlook has stagnated as reforms put on hold during crisis. • These reforms can increase resiliency to future shocks and increase potential growth, compensating for weak demographics/commodity dependency. • Innovation/business environment low compared to other EM regions • Infrastructure ok, with telecoms stronger – space to improve transport, particularly within country • Divided by demographics – strong in Turkey. • Governance stronger in Romania, Bulgaria and Turkey roubini.com | americas@roubini.com Tel: 212.645.0010 | europe@roubini.com / asia@roubini.com Tel: +44 (0) 207 420 2800 11
  • 12. Long-term positives • Agriculture -> Increase in productivity. Global Population growth -> agricultural commodities • Space for infrastructure, especially transport technology transfer • Convergence/catch up with advanced economies • Increase intra-regional trade reduce barriers • Improving macro/institutional frameworks. • Encourage innovation,roubini.com | americas@roubini.com Tel: 212.645.0010 | europe@roubini.com / asia@roubini.com Tel: +44 (0) 207 420 2800 12
  • 13. Roubini Global Economics Offices Roubini Global Economics Corporate Headquarters/The Americas 95 Morton Street, 6th Floor New York, New York 10014 Tel: 212.645.0010 Fax: 212.645.0023 americas@roubini.com RGE Europe, Middle East, Africa and Asia 174-177 High Holborn, 7th Floor London, WC1V 7AA, United Kingdom Tel: +44 (0) 207 420 2800 Fax: +44 (0) 207 836 5362 europe@roubini.com asia@roubini.com Editorial Suggestions To suggest new coverage, resources or content to RGE, e-mail our research team at editor@roubini.com. General Information RGE welcomes your feedback! Please send us your comments or questions via e-mail at americas@roubini.com. Technical Support For technical support or questions about using our site, please contact support@roubini.com.roubini.com | americas@roubini.com Tel: 212.645.0010 | europe@roubini.com / asia@roubini.com Tel: +44 (0) 207 420 2800 13
  • 14. Disclaimer/Terms & Conditions http://www.roubini.com/terms-and-conditions.php RGE analysis is the property of Roubini Global Economics, LLC for the internal use of RGE clients. Any redistribution, including summarizations or synopses, is expressly prohibited without prior agreement from RGE. All rights reserved, Roubini Global Economics, LLC. For questions about reprints or permission to excerpt or redistribute RGE content, clients should contact their RGE account representative. Disclaimer of Liability and Warranty. • RGE’s disclaimers of liability in this Section are in addition to any other disclaimers elsewhere. • RGE has the right, but not the obligation, to monitor, modify, restrict the contribution of and/or remove User-Supplied Content, in RGEs sole discretion. RGE has no liability or responsibility to Users for performance or nonperformance of such activities. RGE is not responsible to you for your reliance on or use of any content or materials constituting all or part of any RGE Content, any User-Supplied Content, or any other aspect of the Service. You understand and agree that any loss or damage of any kind that occurs as a result of the use of any User-Supplied Content that you access through your use of the Service, is your sole risk and responsibility. By viewing the Service, you may be exposed to content that you rely upon to your detriment. You take sole responsibility for such exposure and reliance. • Because user authentication on the Internet is difficult, RGE cannot and does not confirm that each User is who they claim to be. Because we do not and can not be involved in user-to-user dealings, nor do we control the behavior of participants on any portion of the Service, you release RGE (and our licensors, agents and employees) from claims, demands and damages (actual and consequential, direct and indirect) of every kind and nature, known and unknown, suspected and unsuspected, disclosed and undisclosed, arising out of or in any way connected with any dispute among or between you and one or more Users. If you are a California resident, you waive California Civil Code Section 1542, which says: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." • THE SERVICE IS PROVIDED ON AN "AS IS" BASIS WITHOUT ANY WARRANTIES OF ANY KIND. RGE, TO THE FULLEST EXTENT PERMITTED BY LAW, DISCLAIMS ALL WARRANTIES, WHETHER EXPRESS OR IMPLIED.roubini.com | americas@roubini.com Tel: 212.645.0010 | europe@roubini.com / asia@roubini.com Tel: +44 (0) 207 420 2800 14

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