EBRD Transition Report Sustaining Growth

Transcription

1 Presentation of the EBRD Transition Report Sustaining Growth January 31, 2018 Discussion by Doris Ritzberger-Grünwald Director of the Economic Analysis Department Oesterreichische Nationalbank

2 Transition Report 1. Assessed from an outsider s perspective 2. Complemented by some OeNB products

3 Percentage points 1. TR gone over with a fine-tooth comb I. On REVERSING POST-CRISIS SLOWDOWN IN THE REGION Factor Decomposition of Potential GDP growth in a Cobb- Douglas Accounting Framework LVA LTU EST BGR SVK ROM POL CZE SVN HUN HRV Capital accumulation Total labour TFP Potential growth Source: based on computations of the EC

4 % 1. TR gone over with a fine-tooth comb I. On REVERSING POST-CRISIS SLOWDOWN IN THE REGION 40% Contribution of production factors to the change in potential output after the crisis 20% 0% -20% -40% -60% -80% -100% LVA LTU EST BGR SVK ROM POL CZE SVN HUN HRV Total labour Capital accumulation TFP Source: based on computations of the EC

5 1. TR gone over with a fine-tooth comb I. On REVERSING POST-CRISIS SLOWDOWN IN THE REGION Is the decline in TFP after the crisis interpretable in the neo- Schumpeterian framework thus linking Chapter 1 and 2? i.e. have the economies grown richer and caught up with the technological frontier so that TFP growth has permanently slowed down? If so, why after the crisis? To challenge the neo-schumpeterian hypothesis: wouldn t one expect that a catching-up economy converges to the technological frontier and exhibits rather a high or even growing contribution of TFP to growth? Alternative production function estimations might be necessary to allow deeper policy conclusions.

6 1. TR gone over with a fine-tooth comb II. On the INVESTMENT GAP IN THE REGION Not quite clear what exactly the comparators levels are and how they have been computed. Moreover, the computation of investment is a tricky issue the outcome of which hinges extremely on the methodology and data employed.

7 1. TR gone over with a fine-tooth comb II. On the INVESTMENT GAP IN THE REGION 50,0% Capital-preserving investment (range) vs. actual investment (% of GDP) Capital stock source: Penn World Tables 45,0% 40,0% 35,0% 30,0% 25,0% 20,0% 15,0% 10,0% 5,0% 0,0% GR UK PT CY IT LU LT MT DK DE EU NL PL SI HU IE FI HR FR ES AT SK BE LV BG SE CH EE CZ RO TR Benchmark range (Neoclassical growth model) Post-crisis average investment ( ) Pre-crisis average investment ( ) Source: own calculations based on the Solow model and the Penn World Tables

8 1. TR gone over with a fine-tooth comb II. On the INVESTMENT GAP IN THE REGION 50,0% Capital-preserving investment (range) vs. actual investment (% of GDP) Capital stock source: Eurostat 45,0% 40,0% 35,0% 30,0% 25,0% 20,0% 15,0% 10,0% 5,0% 0,0% GR UK PT CY IT LU LT MT DK DE EU NL PL SI HU IE FI HR FR ES AT SK BE LV BG SE CH EE CZ RO TR Benchmark range (Neoclassical growth model) Post-crisis average investment ( ) Pre-crisis average investment ( ) Source: own calculations based on the Solow model and Eurostat

9 1. TR gone over with a fine-tooth comb III. Some claims might require a MORE EMPIRICAL SUPPORT Example 1: aggregate CO2 emissions per capita are ( ) strongly negatively correlated with the size of stock markets. REALLY? Relative size of the equity market and pollution

10 1. TR gone over with a fine-tooth comb III. Some claims might require a MORE EMPIRICAL SUPPORT Example II: productivity growth stronger at earlier stages of development

11 Transition Report 1. Assessed from an outsider s perspective 2. Complemented by some OeNB products

12 2. TR complemented by some OeNB products I. Active FINTECH scene in some countries of the innovation-light EBRD-region The TR argues that the EBRD region lags behind in terms of innovation. Yet some OeNB research suggests that there are some interesting pockets of innovation. E.g. Stern (Focus on European Economic Integration Q3/2017) stocktaking exercise of the use of financial technologies in the banking sector in CESEE Focusing on three business areas (1) financial services, (2) payments and (3) financing the study finds that the level of adoption of new technologies varies across the CESEE countries. a handful of countries have a more active fintech scene in some areas (e.g. peer-topeer lending) than many of their Western neighbors

13 2. TR complemented by some OeNB products I. Active FINTECH scene in some countries of the innovation-light EBRD-region Stern (Focus on European Economic Integration Q3/2017)

14 2. TR complemented by some OeNB products I. Active FINTECH scene in some countries of the innovation-light EBRD-region Stern (Focus on European Economic Integration Q3/2017) Absolute volumes of P2P lenders in CESEE much smaller than those of leading global platforms. But, in some countries P2P lending highly relevant in the consumer loan market? E.g. in LV and LT P2P lending makes up one quarter of average new consumer loans.

15 2. TR complemented by some OeNB products II. The middle-income trap reflected in mixed long-term household sentiments? OeNB Euro Survey (fall 2017): Household sentiment of current economic situation has improved with the economic upswing Currently, the economic situation of my country is very good (2017) EU member countries (Potential) candidate countries Normalized sample means per country (-2.5 fully disagree, 0 neutral, +2.5 fully agree) Normalized sample means per country (-2.5 fully disagree, 0 neutral, +2.5 fully agree) Chart Fall 2007 Fall 2008 Fall 2009 Fall 2010 Fall 2011 Fall 2013 Fall 2017 Bulgaria Croatia Czech Republic Hungary Poland Romania -2.5 Fall 2007 Fall 2008 Fall 2009 Fall 2010 Fall 2011 Fall 2013 Fall 2017 Albania Bosnia and Herzegovina FYR Macedonia Serbia Source: OeNB Euro Survey.

16 2. TR complemented by some OeNB products II. The middle-income trap reflected in mixed long-term household sentiments? however, expectations about more distant future rather gloomy. Hence, current improving sentiments likely to be cyclical, but a sustainable long-term convergence not expected by private households. Over the next five years, the economic situation of my country will improve (2017) EU member countries Normalized sample means per country (-2.5 fully disagree, 0 neutral, +2.5 fully agree) 1.0 (Potential) candidate countries Normalized sample means per country (-2.5 fully disagree, 0 neutral, +2.5 fully agree) 1.0 Chart Fall 2007 Fall 2008 Fall 2009 Fall 2010 Fall 2011 Fall 2013 Fall 2015 Fall 2017 Bulgaria Croatia Czech Republic Hungary Poland Romania -1.5 Fall 2007 Fall 2008 Fall 2009 Fall 2010 Fall 2011 Fall 2013 Fall 2015 Fall 2017 Albania Bosnia and Herzegovina FYR Macedonia Serbia Source: OeNB Euro Survey.

17 2. TR complemented by some OeNB products III. Could remittances help out of the middle-income trap? Remittances are a large source of external funding in the region. Tend to be more stable than other private capital flows (FDI), counter-cyclical from the receiving country s perspective Yet their effect on (potential) growth hinges on their utilization: consumption vs. investment Inflows to CESEE Inflowsof remittances, O DA and FDI to CESEE current USD, billion 160 Inflows of remittances to CESEE, by destination economy current USD, billion Foreign direct investment, net inflows (BoP, current US$) Net official development assistance and official aid received (current US$) Personal remittances, received (current US$) Albania Bulgaria Czech Republic Macedonia, FYR Romania Bosnia and Herzegovina Croatia Hungary Poland Serbia Source: World Development Indicators.

18 2. TR complemented by some OeNB products III. Emigration poses another challenge w.r.t. the middle-income trap (Raggl (2017b) in FEEI Q4/2017) CESEE-average: Population by education and migration intentions (2014) Age group Share in population (in %) Low education Low education - migration intentions Medium education Medium education - migration intentions High education High education - migration intentions Total population after emigration Source: OeNB Euro Survey (2014). Black line = hypothetical pyramid that could result if all migration intentions were realized immediately and contemporaneously, ceteris paribus. Policy implications: increase incentives for return migration, immigration, staying Males Females Chart 2

19 2. TR complemented by some OeNB products IV. The New Silk Road and its impact (Barisitz and Radzyner, FEEI Q3/2017) China s New Silk Road (NSR) initiative launched in Aims at enhancing overall connectivity between China and Europe by both building new and modernizing existing overland and maritime infrastructures. The NSR runs through several Eurasian emerging markets with important growth potential. Given the generous financial means and Chinese firms expertise in infrastructure projects, many undertakings are well under way and promise to bring about considerable changes in connectivity, commerce and economic dynamism. Most Chinese NSR investments go to large countries (e.g. Pakistan, Malaysia, Indonesia, Russia, Kazakhstan and Kenya) Yet the strategically situated smaller countries (e.g. Djibouti, Sri Lanka, Kyrgyzstan, Laos, Serbia and Montenegro) typically benefit the most (in relation to the size of their economies). Progress has been made in strengthening the maritime infrastructural trade links with the EU (e.g. through the modernization of deep-water ports) Focus on connectivity in Eurasia, Europe and especially in Southeastern Europe (SEE), i.e. upgrading the rather weak trans-eurasian railroad and highway links (e.g. via Kazakhstan, Russia, Serbia)

20 2. TR complemented by some OeNB products IV. The New Silk Road and its impact (Barisitz and Radzyner, FEEI Q3/2017)

21 2. TR complemented by some OeNB products IV. The New Silk Road and its impact (Barisitz and Radzyner, FEEI Q3/2017) Flagship Chinese NSR projects in Europe: Port of Piraeus Rail connection Budapest - Belgrade planned to be extended to Macedonia and Greece Economic impact of Chinese investment in some countries significant (in % of FDI): Serbia: 8% Albania: 10% Montenegro: 26% Romania: 26% Bosnia und Herzegovina: 48% The short-term spillovers to the local economies may be limited: Chinese investors often employ their own workers and scarcely rely on local resources. However, the extent of long-term expected positive results remains to be seen

22 Thank you for your attention!

23 ANNEX: Additional information OeNB Euro Survey: A representative survey of CESEE households Currently, the OeNB Euro Survey is conducted in the following 10 countries: 6 EU Member States: Bulgaria, the Czech Republic, Croatia, Hungary, Poland, Romania 4 EU candidate and potential candidate countries: Albania, Bosnia and Herzegovina, the former Yugoslav Republic of Macedonia, Serbia Surveys are conducted in October/November. The first survey wave was carried out in fall 2007 (up to 2015: two survey waves per year) Samples consist of 1,000 randomly selected respondents per country and represent the population over 14 years Samples are representative with respect to age, gender and regional distribution Rich set of demographic and socioeconomic variables as well as para data and geographic information at the level of primary sampling units (PSUs) Euro-Survey

24 ANNEX: Additional information Some key One Belt, One Road projects and their financial support