Download Robust recovery under way - prospects for the polish economy

10 years of success
- now the real challenge begins
Lars Christensen
Senior Analyst, Head of New Europe Research
+ 45 33 44 05 45 (direct)
+ 45 40 74 49 51 (mobile)
[email protected]
Danske Research, Danske Bank
www.danskebank.com/danskeresearch
Sofia, September 18 2007
A real success
– the numbers speak for themselves (I)
250
1991-1997
1998-2006
200
150
100
50
0
Inflation (%)
Public debt (% of GDP)
2
A real success
– the numbers speak for themselves (II)
12
10
8
1991-1997
1998-2006
6
4
2
0
-2
GDP-growth (%)
Budget balance (% of GDP)
FDI (% of GDP)
-4
-6
-8
3
The success is unquestionable
but is it a permanent solution?
•
There are two schools of thought:
•
The Hanke-Schuler position:
•
•
The CBA is a permanent solution
The Friedman-position
•
The CBA is one many possible ways to
monetary stability
• The CBA is a “tool” to bring down inflation and
“import” credibility in monetary policy (this has
been a highly successful strategy in the case of
Bulgaria)
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Some reasons for concern
•
Inflation has consistently been too
high (average of 6.3% since 2000)
• External imbalances have grown
to unsustainable levels
• Credit and money supply growth is
too strong to be non-inflationary
• Asset markets show signs of
bubbles
13 % å/ å
11
% å/ å 13
11
Inflation, Bulgaria
9
9
7
7
5
5
3
3
1
1
-1
-1
00
01
02
03
04
05
06
percent
While Bulgaria’s currency board
has brought inflation down and
brought stability some
developments give reason for
concern:
percent
•
07
.
5
Inflationary currency boards?
Inflation
14
Bulgaria
12
Latvia
10
Hungary
8
Lithuania
6
Estonia
Romania
4
Czech Republic
Slovakia
2
Current account deficit (% of GDP)
Poland
0
0
5
10
15
20
25
30
35
6
Next step – continue the right
policy
•
What is the next step for monetary policy in
Bulgaria?
•
•
•
•
The CBA has in general been a success so
there is no reason to change track now
But the CBA needs to be balanced by tight
fiscal policies and continued structural reforms
Efforts to slow credit growth and reduce
imbalances in the economy most be stepped up
CBA is a temporary solution and hence effort to
join the euro should be kept on track
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Thank you for you time and
CONGRATULATIONS
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