Changes in economic environment. Macro overview and outlook for 2013-2014

  • 1,451 views
Uploaded on

A presentation by Mārtiņš Kazāks about «Changes in economic environment. Macro overview and outlook for 2013-2014.» …

A presentation by Mārtiņš Kazāks about «Changes in economic environment. Macro overview and outlook for 2013-2014.»
Presented on 27th March, 2013 in Riga Business School.

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads

Views

Total Views
1,451
On Slideshare
0
From Embeds
0
Number of Embeds
1

Actions

Shares
Downloads
10
Comments
0
Likes
0

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. Changes in economic environmentMacro overview and outlook for 2013-2014Mārtiņš Kazāks, PhDDeputy Group Chief EconomistChief Economist in LatviaSwedbank27 March, 2013
  • 2. 2Global2012 was the year of the ECB bazooka… what next?
  • 3. © Swedbank 3GDP growth: has been weak and will remain such inthe near future, euro area in recession also in 2013…-9-6-30369GDP annual growth, %Sweden GermanyEuro area USAAverage for 2000-2007-15-10-50510152007 2008 2009 2010 2011 2012China RussiaSource: Ecowin, Swedbank forecasts2013f 2014f
  • 4. © Swedbank 4Confidence: the worst is behind us, but the recentscare is still to show up in the macro data…3040506070Purchasing managers index in manufacturingSweden USAGermany Eurozoneabove 50denotes expansion30405060702007 2008 2009 2010 2011 2012 2013China RussiaSource:Reuters EcoWin
  • 5. © Swedbank 5Financial markets: fragility and uncertainty to remain aseconomies are weak, QE widens, speculations on exitstrategies loom and Basel 3 closes in…01234562007 2008 2009 2010 2011 2012 2013 2014 2015Monetary policy and stress in financial marketsTED spread, ppECB policy rate, %3m LIBOR, euro area, %Source: Reuters Ecowin, Swedbank forecasts2013f 2014fAverage for2000-2007Game changers of 2012:• ECB bazooka and EU political resolve• US housing market recovery, fiscalcliff turns into a fiscal slope• China power handover rather smoothso far, less hard landing risks
  • 6. © Swedbank 6Financial markets: flushing liquidity builds fertile soilfor bubbles and punitive side effects… permanently higherinflation targets?-2024682008 2009 2010 2011 2012 2013 2014Government 2Y bond yields, %Average for 2000-2007-2024682008 2009 2010 2011 2012 2013 2014Government 10Y bond yields, %02468Germany, EUR Sweden, SEK Italy, EUR Spain, EURSource: Reuters
  • 7. © Swedbank 7Financial markets: deleveraging and credit squeezestill out there, especially among weaklings…-20-1001020304050602003 2005 2007 2009 2011 2013GermanySpainItalyDiffusion index of credit standards (for enterprises, past 3 months)Source: ECB lending surveyTightening3Q12-1Q13:expectations fornext 3 months
  • 8. © Swedbank 8Outlook for 2013-2014: more balanced tailrisks, but still plenty of challenges…Muddlingthrough65%(60%)Worse20%(35%)Better15%(5%)GDP growth, % 2012e 2013f 2014fUSA 2.2 2.0 2.3-0.4 -0.3 0.7of which Germany 0.9 0.2 1.5China 7.7 7.9 7.5Russia 3.6 3.7 4.1Euro area• Policy challenges will behandled, but at the last minute– Increased fin.mktvolatility, widening SPand IT spreads– US political gridlock– Higher commodityprices– Geopolitical risks, e.g.China and Japan+ Higher confidence inthe EU and US+ Emerging marketstimulus+ More positive resultsfrom QE+ Lower commodityprices
  • 9. © Swedbank 9Outlook for 2013-2014: overall quite weak and stillon life support but with some brighter spots...
  • 10. © Swedbank 10BalticsSo far so good, but how to keep growing fast and sustainably?
  • 11. © Swedbank 11GDP growth: balanced, broad based and stillkeeping up good speed...-20-15-10-50510152004 2005 2006 2007 2008 2009 2010 2011 2012EstoniaLatviaLithuania-3%-4%-12%Source: EurostatReal GDP growth, %2013f 2014f-12-8-40482004 2005 2006 2007 2008 2009 2010 2011 2012LV, QoQ4Q 2012, % belowthe peak
  • 12. © Swedbank 12Growth model: consumption has strengthened,the underlying long term growth will remain to be drivenby exports…Manufacturing and retail trade, annual growth in %6-12-40-30-20-10010203040502007 2008 2009 2010 2011 2012 2013Estonia2012 vs. 2007, %6080100120140 Manufacturing output Retail trade turnover w/o motor vehiclesSource: Eurostat9-25-40-30-20-10010203040502007 2008 2009 2010 2011 2012 2013Latvia13-15-40-30-20-10010203040502007 2008 2009 2010 2011 2012 2013Lithuania
  • 13. © Swedbank 13Labour market: improving as employment and wagesrise but unemployment falls, future risk is too slowproductivity growth…Unemployment rate (jobseekers), annual growth of wages and productivity, %2006 2007 2008 2009 2010 2011Unemloyment rate Real average gross wage Productivity per full-time equivalentSource: Eurostat, national statistics-15-10-505101520252008 2009 2010 2011 2012Estonia-15-10-505101520252008 2009 2010 2011 2012Latvia-15-10-505101520252008 2009 2010 2011 2012Lithuania
  • 14. © SwedbankDeleveraging: how far to go and when does it end?Resident credit stock, %14-20-1001020304050602008 2009 2010 2011 2012Estonia2008 2009 2010 2011 2012Latvia-40-200204060801001202008 2009 2010 2011 2012Lithuania-200020022222Household and corporate loans as % of GDP Households, annual growth Non-fin.corp., annual growthSource: national central banks, Eurostat-2% YoY growth, if net ofParex and LKB
  • 15. © SwedbankReal estate: ups, this is a tough one... can afford it butdo you need one?Residential real estate market indicators03006009001200150018002007 2008 2009 2010 2011 2012Talinn+7%03006009001200150018002007 2008 2009 2010 2011 2012Riga+7%03006009001200150018002007 2008 2009 2010 2011 2012Vilnius+2%Number of transactions Price, EUR/ m2Source: Source: Swedbank, CSBL, State Land Register152012 over 2011
  • 16. © SwedbankReal estate: affordability has improved, but real interestrates are high...164060801001201401601802002005 2006 2007 2008 2009 2010 2011 2012Swedbank housing affordability indexTallinnRigaVilniusSources:National central banks,ECB, National statistical departments,LithuanianCentre of Registers, Latvian State Land Service and National Real EstateCadastre,Estonian Land Board and Swedbank.-15-10-50510152005 2006 2007 2008 2009 2010 2011 2012 2013Households, realNFI, realHouseholds, nominalNFI, nominalNote: Forward looking inflation; new lending rates for NFI are averagefor new lending rates for loans up to 1 year. Household rates are formortgagesLV: lending rates (new lending in EUR), %Source: Bank of Latvia, CSBL, Swedbank
  • 17. © Swedbank 17And competitors are out to fight: investto maintain hard earned competitiveness gains!-20-15-10-5051015IELVGRLTESPTEESESKPLDKCZITNTFRATSIDEBEHUFIUKLUROBUSource: DG ECFINCompetitiveness * improvement (-), worsening (+),2012 vs. 2008, %* measured as real effective exchange rate deflatedwith unit labour costs-45-30-150153045-60-40-2002040602007 2008 2009 2010 2011 2012 2013 2014Estonia LatviaLithuaniaReal gross fixed capital formation, annual growth %Source: Reuters EcowinAs % of GDP (9M 2012)
  • 18. © Swedbank 18Outlook: global muddling through is kind of ok for theBaltics, but certainly there is no reason for complacency…2012e 2013f 2014fEstoniaGDPgrow th, % 3.0 3.1 4.5CPI grow th, % 3.9 3.2 2.7Real gross monthly w age grow th, % 2.0 2.8 3.9Unemployment rate, % 10.3 10.0 9.4LatviaGDPgrow th, % 5.4 4.1 5.0CPI grow th, % 2.3 1.9 3.5Real net monthly w age grow th, % 1.4 2.7 2.9Unemployment rate, % 15.0 13.6 11.6LithuaniaGDPgrow th, % 3.3 4.0 4.0CPI grow th, % 3.9 3.2 2.7Real net monthly w age grow th, % -0.2 1.6 2.0Unemployment rate, % 13.2 11.5 10.0Source: national statistics and Swedbank f orecasts (Jan 2013)
  • 19. © Swedbank 19GLOBAL: getting better, but not out of the woods yetstill muddling through, subpar growth, tougher competition, moodiness andfinancial market fragility, low interest ratesBALTICS: sustain competitiveness and keep growingproductivity growth is the key, need for investment, still the same growthmodel (i.e., export driven)… CRISES DO PASS AND WHAT DO YOU DO THEN?
  • 20. © Swedbank 20Thank you!For detailed analysis, see:Swedbank Economic Outlookhttp://www.swedbank.lv/eng/docs/materiali.php?nmid=0&naid=2To subscribe to all reports:http://www.swedbank-research.com/latvian/subscribe.csp