Download Snapshot: Economic forecasts of 2013 in Hungary and the

PROFESOR ÁRPÁD KOVÁCS
UNIVERSITY OF SZEGED
FISCAL COUNCIL
HUNGARIAN ECONOMISTS ASSOCIATION
Economic performance of Germany
Central and Eastern European
countries closing the gap
The Hungarian Viewpoint
2013 spring
Table of contents
1. Snapshot: Economic forecasts of 2013 in
Hungary and the surrounding countries, fiscal
environments
2. Broader outlook: Business contexts home and
abroad, the pull of the german economy
3. Hopes and chances: The possibility of a virtous
circle, conditions of stability and growth in
Hungary and surrounding countries
Table of contents
1. Snapshot: Economic forecasts of 2013 in
Hungary and the surrounding countries, fiscal
environments
2. Broader outlook: Business contexts home and
abroad, the pull of the german economy
3. Hopes and chances: The possibility of a virtous
circle, conditions of stability and growth in
Hungary and surrounding countries.
According to the European Council, the CEE countries look
forward to a better year
Growth can become stronger
Exportdynamics can speed up
significantly
Inflation rates can sink
But unemployment rates can stay
relatively high
Source: European Commission (EC), *: EC Winter 2013 macroeconomic forecast (February 2013); annual average changes, %; except unemployment (%)
Since the autumn forecast of the EU, growth outlooks have worsened, so
the fiscal plans look less bright as well
Change in growth forecasts
(year/year, %)
Fiscal forecasts (as a % of GDP)
Source: European Commission (EC), Autumn 2012 forecast – November 2012; Winter 2013 forecast – February 2013
A welcome sight, that due to the low international rates, investors are
looking for government bonds with relatively high rates…
Yields of long term government bonds in the
EU27 countries, 2012 december, %
1,51 1,60
1,07
3,24
4,00
4,67 1,60 1,56
3,88
2,10 1,30
1,43 2,12 3,92
1,776,44
2,01
5,33
6,65
3,44
4,54
7,25 5,34
13,33
Source: EUROSTAT
… thus the CDS spreads could decrease. It also warns us that the attention
of the investors can quickly change
CDS spreads (basepoint)
Source: ÁKK, REUTERS
Yields of 10 year government bonds (%)
Table of contents
1. Snapshot: Economic forecasts of 2013 in Hungary and
the surrounding countries, fiscal environments
2. Broader outlook: Business contexts home and abroad,
the pull of the german economy
3. Hopes and chances: The possibility of a virtous circle,
conditions of stability and growth in Hungary and
surrounding countries
Foreign Trade between Hungary and Germany, Austria; investments from
said countries to Hungary
Hungary’s foreign trade with Germany and Austria (EUR bn)
(bázispont)
Export ranking (2012):
Germany
Romania
Slovakia
Austria
– 1st
– 2nd
– 3rd
– 4th
Import ranking (2012):
Germany
Russia
Austria
– 1st
– 2nd
– 3rd
Foreign direct investment in Hungary (EUR bn)
Invesments ranking (2012):
Germany
The Netherlands
Austria
Source: MNB, KSH
– 1st
– 2nd
– 3rd
Import from Germany in the EU10 countries, % of total German Import
8,0%
7,0%
6,0%
5,0%
2008
2009
4,0%
2010
2011
2012
3,0%
2,0%
1,0%
0,0%
HUNGARY
BULGARIA
Source:EUROSTAT
CZECH
REPUBLIC
(CS->1992)
ESTONIA
LITHUANIA
LATVIA
POLAND
ROMANIA
SLOVENIA
SLOVAKIA
Export to Germany from the EU10 countries, % of total German Export
7,0%
6,0%
5,0%
2008
4,0%
2009
2010
2011
3,0%
2012
2,0%
1,0%
0,0%
HUNGARY
BULGARIA
Source:EUROSTAT
CZECH
REPUBLIC
(CS->1992)
ESTONIA
LITHUANIA
LATVIA
POLAND
ROMANIA
SLOVENIA
SLOVAKIA
FDI, % of German FDI to EU10 countries
35,00%
30,00%
25,00%
20,00%
2007
2008
2009
15,00%
2010
10,00%
5,00%
0,00%
Slovakia
Slovenia
Source:Bundesbank
Poland
Hungary
Romania
Bulgaria
Estonia
Latvia
Lithuania
Czech
Republic
The main issue is that due to structural problems, Hungary is still
considered the last of its peers in the region
Expected economic growth (Focus Economics, 2013. february; %)
Forrás: Focus Economics, CEE :V4+Romania+Bulgary
Structural issues (1): investment rates are the lowest in the region
Investments as a percent of GDP
Source: Eurostat, CEE : V4+Romania+Bulgary
Structural issues (2): lending activity is the lowest in Hungary in the
region
Bank sector’s lending to private sector
(seasonally adjusted, as % of GDP)
Source: National Banks, CEE=V4+Romania+Bulgary
Structural issue (3): Fiscal expenditures are very high in Hungary,
compared to the region
Total expenditures of the consolidated bugdet (as a % of GDP)
Source: Eurostat, European Commission Winter 2013 forecast
Structural issues (4): Hungary is the only country in its region with a
debt level similar to the developed countries, which increases its
vulnerability
Consolidated debt (as a % of GDP)
Source: Eurostat, European Commission Winter 2013 forecast
Naturally, not only structural issues, but specific events and the fiscal policy
itself also change how a country is viewed from abroad
CDS spreads of the CEE region and the specific positions of the countries
Source: REUTERS, CEE avg. is the average of the countries, the individual lines represent the derivation from the average
Per cent of GDP
Per cent of GDP
Fiscal Balance and Government Debt
100
6
Excluding Private Pension Fund Effect
Magán-nyugdíjpénztári reform nélkül
Cyclically adjusted structural primary balance
Source: Simor András: Stabilitás, kiszámíthatóság, bizalom, Hitelintézeti Szemle, 2013/12-1.
2013 F
2012 F
2011
-9
2010
0
2009
-6
2008
20
2007
-3
2006
40
2005
0
2004
60
2003
3
2002
80
2008. okt.
nov.
dec.
2009. jan.
feb.
márc.
ápr.
máj.
jún.
júl.
aug.
szept.
okt.
nov.
dec.
2010. jan.
feb.
márc.
ápr.
máj.
jún.
júl.
aug.
szept.
okt.
nov.
dec.
2011. jan.
feb.
márc.
ápr.
máj.
jún.
júl.
aug.
szept.
okt.
nov.
dec.
2012. jan.
feb.
márc.
ápr.
máj.
jún.
júl.
aug.
szept.
okt.
nov.
dec.
120
%
Corporate lending in the region
BG
PL
CZ
HU
RO
SK
Source: Simor András: Stabilitás, kiszámíthatóság, bizalom, Hitelintézeti Szemle, 2013/12-1.
%
Baltic states
Eurozone
120
115
115
110
110
105
105
100
100
95
95
90
90
85
85
80
80
75
75
Table of contents
1. Snapshot: Economic forecasts of 2013 in
Hungary and the surrounding countries, fiscal
environments
2. Broader outlook: Business contexts home and
abroad, the pull of the german economy
3. Hopes and chances: The possibility of a virtous
circle, conditions of stability and growth in
Hungary and surrounding countries
Competitiveness reflects social performances, governmental efficiency is
low in the CEE countries
Competitiveness (place)
Governmental efficiency (place)
25
25
ÁTLAG RO-BG
ÁTLAG CZ-SK-PL
30
ÁTLAG PT-ES-GR-SI
30
HU
35
35
40
40
45
45
50
50
55
55
Source: IMD World Competitiveness Yearbook rankings
Growth and countercyclical fiscal policy
Budget balance (as percent of GDP)
Source: European Committee, 2012 autumn forecast
GDP growth (%, year/year)
Potential growth rate currently stagnates or recede. To achive fiscal
policy goals, a change in growth patterns is a must
Potential growth (year/year, %)
Source:European Committee, AMECO database
Weaknesses, threads
● Weaknesses
15 May 2017
25
 Blue collar efficiency increase was lower than
expected
 Praxis oriented education is on low level, does
not cope with the requirements of the industry
 Low level mobility for blue collar workers
 Suppliers have low level IP contribution to
products, R&D capability is missing
 Low level of networking on supplier level
 Other means of transport (waterway, air)
Weaknesses, threads
● Threads
 Entrepreneurial culture of Hungarian owned
companies (mostly SMEs) will not change as
requested
 Old hierarchies and traditions in education
system will not be overcome
Source: Prof. Dr. László Palkovics: Hungarian example: Challenges in the
subcontracting industry (transport) with special attention to the human relation issues
15 May 2017
26
 Co-operation among companies and institutions
will not develop as required
A change in growth patterns is hard in most of the CEE countries, as the
sweep for fiscal policy steps is narrow and burdened with risks
External capabilites:
Links to the world economy, conditions and challenges, effects of the regional
environment
average strength links, conformity pressures, dependancy
on german economy
Foreign dept
countries of the region, but especially Hungary, are vulnerable,
dependancy on financial markets
Integration conditions
conformity commitment, boundaries
Internal attributes:
Inherited attributes of real economy
unfavorable, dual economy, structurally
weak competitiveness, growing lack of skilled labour
Attributes, interests and values of domestic actors
controversial values of the
population, troubles in market adaptation, profitability and judging possibilites
Social implementation of the governmental management
varying
Trust of economic actors
With the exception of Poland, Czech Republic and
Slovakia, to a varying degree, but mostly weak
Differentiated positions of multinational companies and domestic suppliers
In financial sector, services investment willingness was damaged, occasional nonneutral sectoral taxes and subsidization
Public finance
not stable everywhere, but with losses in growth
Seek for break-out opportunities for economic
growth (cont’ed)
 Employment decreased by 2%
 Weak financial position of firms
 Slow industrial growth recovery (0,5-1,0 % in 2013)
 Low performance of the small and medium-sized
enterprises
15 May 2017
28
● Consequently, in parallel with the development of the
small and medim sizeed enterprises need for further
integration of foreign companies to Hungarian
economy.
Important aims of Hungarian economic
policy
● Financial and fiscal stability
● Reducing public debt
● To increase the level of labour market participation
and employment
15 May 2017
29
● Structural reforms (pension system, public
transport, higher education, state and municipal
financing etc)
The essential tool to the success of reaching a virtous circle is the
restoration of confidence
 Enhancing stability and predictability, careful and sensitive
harmoniaztion and bargaining,
 strengthening the ability to attract foreign capital inflows, without it
there can be no real improvement in competitiveness, sustainable
growth,
 improving the friendliness of taxation, ensuring that different sector
taxes are consistent with growth interests,
 reducing the reflexivity of chosen correction measures, better
assessment of spill-over effects,
 we need to convince our partners, that our actions are defined not by
tactical impulses but with the intention of long-term cooperation
The condition for success is a strict and strong growth-friendly fiscal
policy, because only then can a sustainable decline in the public debt
occur
 strict fiscal policy aimed at reducing public debt is important
because the aging of european societies as well,
 pensions and other social transfers must be consistent with the
economic performance,
 the health and education systems, as well as the public finances
have to be cost-effective, as this can contribute greatly to
economic
 in case of harmonized growth and stability interests the real
economy results can compensate the adverse effects of
restrictions on the population and on the institutions in the region
THANK YOU FOR YOUR
ATTENTION!