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Slovenian Approach to EMU
Boštjan Jazbec
Member of the Governing Board
The views expressed herein are those of the author and not necessarily
those of the Bank of Slovenia.
Contents
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Macroeconomic Stabilization and Transition
Macroeconomic Perfomance
Maastricht Criteria
Entry to ERM2 and Adoption of Euro
Conclusions
Macroeconomic Stabilization and
Transition
•
•
•
•
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Better initial conditions than in other transition economies
Money-based stabilization program
Rehabilitation of the banking sector
Sound macroeconomic performance
Inflation
GDP per capita
200
GDP per capita (EU(12) = 100, at PPS, 2001, in %)
180
160
140
120
100,4
100
80
69,1
60
51,2
47,9
39,9
Slovakia
Poland
Portugal
57,5
Hungary
Spain
68,3
Czech Republic
73,2
Greece
82,6
Slovenia
100,2 100
United Kigdom
EU15
France
Sweden
Germany
Italy
Finland
Belgium
Netherlands
Austria
Ireland
198,0 119,1 118,9 113,9 112,6 106,8 105,1 105,0 104,5 104,2 102,2
Denmark
0
Luxembourg
20
Euro area
40
Openness
(exports and imports in % GDP)
300
Export and import shares in GDP (2001; in %)
250
200
150
120,5
100
70,7
61,5
56,6
54,9
54,3
52,5
Italy
France
Greece
Finland
68,3
United Kingdom
71,7
Spain
72,9
Germany
73,1
EU15
84,6
Portugal
Netherlands
84,8
Euro area
Belgium
104,9
Sweden
125,3
Denmark
167,2
Austria
181,6
Slovenia
287,1
Ireland
0
Luxembourg
50
Foreign Trade with EU
(in % of export and import, 2001)
80
70
61,7
61,0
60
50
40
30
Denmark
Austria
Netherlands
France
59,3
58,9
55,8
55,3
55,0
Greece
Spain
59,4
Germany
64,3
Italy
65,7
Finland
66,4
Ireland
67,1
Sweden
69,6
EU
72,9
Belgium,
Luxembourg
0
76,9
Portugal
10
Slovenia
20
5
4
3
2
1
0
-1
-2
-3
-4
-5
-6
-7
-8
-9
-10
-4.2
-6.5
-9.1
Czech Republic
Hungary
-3.0
-3.6
Poland
-1.8
-3.1
Germany
-2.7
France
Convergence crit.
-2.3
Portugal
-2.2
Italy
-1.4
Euro area
Slovenia
-1.2
United Kingdom
-1.1
Greece
-0.6
Netherlands
-0.1
Austria
-0.1
Ireland
Spain
1.2
Belgium
1.9
Sweden
2.6
Denmark
4.7
Luxembourg
Finland
Government Deficit
Government deficit (% GDP, 2002)
0.0
Government Deficit
10
Government balance (% BDP; 2001, ESA 95)
5
5,2
0,9
0,6
0,6
0,0
-1,5
-0,3
-1,5
-1,6
-2,6
-2,8
-4,2
Portugal
6,1
Germany
0
-0,9
-2,8
Slovenia
Italy
Euro area
France
Greece
EU15
Spain
Netherlands
Austria
Belgium
Ireland
Finland
Luxembourg
-5
Public Debt (% GDP; ESA95)
120
Public debt (% GDP; 2001)
100
80
63,1
60
40
33,6
56,6
57,1
57,3
59,5
Finland
Denmark
Netherlands
Portugal
Sweden
Spain
France
Germany
63,2
69,2
107,0
107,6
109,8
Italy
55,5
Belgium
52,8
Greece
44,7
Euro area
43,4
Austria
39,1
EU 15
36,4
United Kingdom
Slovenia
5,6
Luxembourg
0
Ireland
20
Price Level
Price level (EU(12) = 100, 2001, in %)
140
120
100,0
100
80
66,3
60
40
France
Belgium
Austria
Netherlands
85,4
76,5
50,5
42,1
42,1
35,8
Slovakia
Germany
90,9
Hungary
Luxembourg
95,3
Czech Republic
105,3
Poland
109,8
Slovenia
112,0
Portugal
113,1
Greece
113,1
Spain
115,3
Italy
116,4
Euro area
127,5
Ireland
0
Finland
20
Relative Price Convergence
Y-on-Y Final Quarter Inflation
Maastricht Criteria
Synchronization of Business Cycles
GDP Composition by Activity
Financial Sector
Banking Sector by Total Assets
Slovenia vs. Greece vs. Portugal
Disinflation Trend in Slovenia
30
25
20
15
10
5
0
1994
1996
inflation (SA)
1998
2000
2002
2004
stylized inflation trend
The disinflation trend displays a breaks due to a combination of shocks in 1999:
introduction of the VAT, demand boom, oil shock.
Exchange Rate Pass-Through
30
25
20
15
10
5
0
19
94
19
95
19
96
19
CPI
97
19
DEM/SIT
98
19
99
Poly. (CPI)
20
00
Poly. (DEM/SIT)
20
01
ERM2 - Why as Early as Possible?
• Are there any reasons to wait?
• Can small open economy run independent monetary policy?
• Sound macroeconomic performance
ERM2 Risks
• Capital inflows entail risks of volatility and exchange rate pressures
• Credit demand and booms:
– low interest rates, demand boom and falling saving ratios can produce
overheating, CA deficit and asset price bubbles.
• Balassa-Samuelson effect may generate inconsistencies between the
inflation and exchange rate criteria.
– Estimates for Slovenia range between 1 and 1.5%.
ERM2 Policy Mix
Joint program between BoS and the Slovenian Government from Nov. 2003.
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Monetary policy: ER management in line with the ERM2 criterion. BoS has acquired
experience and designed its instruments to stabilize the ER movements.
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Fiscal measures: low fiscal deficits, counter-cyclical spending, reduced rigidities and formuladriven social transfers, buffer stock relative to the Stability and Growth Pact (SGP).
•
Wage and price flexibility needed to absorb asymmetric shocks (progressive deindexation).
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Synchronization of activity with euro area implies a consistency with the ECB stance.
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Financial market supervision
•
Appropriate central parity
Conclusions
Wish us all the best.
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