Download Potential candidates

Economic challenges
for
Candidate and potential candidate
countries
Conference on Effective support for Enlargement,
Brussels, 19 October 2009
Christophe Pavret de La Rochefordière,
European Commission – DG ECFIN
1
Revenue levels
GDP per capita in 2008
(based on purchasing power parity)
20.000
15.000
10.000
5.000
rb
ia
Se
eg
ro
te
n
M
on
B
os
n
ia
Hz
.
ni
a
A
lb
a
y
rk
e
Tu
oM
fY
R
C
ro
at
ia
0
2
Pre-crisis growth
patterns
1.
2.
3.
4.
5.
6.
Key features of recent economic developments
(pre-crisis, 2000-2008)
High growth average 5-7% end period
Growth boosted by high credit growth
High external imbalances, large trade and current
account deficits
High reliance on capital inflows, both in the form
of FDI and external debt (mainly private).
End of period: fiscal policies were relaxed, in a
number of countries fiscal expansion.
Western Balkans: Low investment in tradables.
3
Crisis main
features (1)
1.
2.
3.
4.
5.
External trade severely affected, imports
sharp adjustment. Double digit downturn
Industrial production down
Current account imbalances moderate
But: FDI going sharply down as well
Resilient banking sector: only one
potentially insolvent bank (Montenegro)
that had to be rescued
4
Crisis main
features (2)
6.
7.
8.
Credit growth cut down.
But… - no financial meltdown
- no « sudden stop » in capital
inflows
Fiscal shock, fiscal revenue sharply
affected, need for budget rebalancing in
most countries. Rising deficits.
5
Growth –
Candidates
Candidate Countries - Gross Domestic Product
(constant prices, annual percent change)
10
Turkey
8
6
fYRoM
4
2
Croatia
0
-2
-4
-6
-8
2005
2006
Source: IMF's WEO database
2007
2008
2009f
2010f
6
Growth –
Potential candidates
Potential Candidate Countries - Gross Domestic Product
(constant prices, annual percent change)
10
8
Bosnia Hz.
6
Serbia
4
Kosovo*
Albania
2
0
-2
Montenegro
-4
2005
Source: IMF's WEO datab ase
* as defined b y UNSCR 1244
2006
2007
2008
2009f
2010f
7
FDI
Candidates
Candidate Countries - CAD and FDI (percent GDP)
10
5
FDI
0
-5
CAD
-10
-15
2008
2009H1
Croatia
Source: Thomson Reuters
2008
2009H1
fYRoM
2008
2009H1
Turkey
8
FDI
Potential candidates
Potential Candidate Countries - CAD and FDI (percent GDP)
20
10
n.a.
0
-10
-20
-30
2008 2009H1 2008 2009H1 2008 2009H1 2008 2009H1 2008 2009H1
Albania
Source: Thomson Reuters
* as defined by UNSCR 1244
Bosnia Hz.
Montenegro
Serbia
Kosovo*
9
Budget deficit
Candidates
Candidate Countries - GG balance (percent GDP)
2
Turkey
1
0
Croatia
-1
-2
fYRoM
-3
-4
-5
2004
2005
2006
2007
2008
2009f
2010f
Source: Thomson Reuters
10
Budget deficit
Potential candidates
Potential Candidate Countries - GG balance (percent GDP)
8
6
4
2
Bosnia Hz.
0
-2
-4
Montenegro
Serbia
Kosovo*
Albania
-6
2004
2005
2006
2007
2008
2009H1
Source: Thomson Reuters
* as defined b y UNSCR 1244
11
Bank deposits
Growth
Total Deposits (annual percent change)
94%
45
2007
2008
2009H1
30
15
0
M
ov
o*
bi
a
Se
r
K
os
on
t
en
e
ni
a
gr
o
H
z.
a
an
i
A
lb
B
os
National sources
* as defined b y UNSCR 1244
Tu
rk
ey
fY
R
oM
C
ro
at
ia
-15
12
Bank credits
Growth
Credit growth (annual percent change)
60
2007
2008
165%
2009H1
50
40
30
20
10
0
*
vo
os
o
K
rb
ia
Se
eg
ro
M
on
te
n
Hz
.
ia
os
n
lb
a
A
rk
e
y
ni
a
B
National sources
* as defined b y UNSCR 1244
Tu
oM
fY
R
C
ro
at
ia
-10
13
Banks well
capitalised
Capital Adequacy Ratio (CAR)
25
20
15
10
5
os
ov
o*
K
Se
rb
ia
on
te
ne
gr
o
z.
Source: IMF's Glob al Financial Stab ility Report, Oct. 2009
* as defined b y UNSCR 1244
M
H
B
os
ni
a
lb
an
ia
A
ey
Tu
rk
oM
R
fY
C
ro
at
ia
0
14
Unemployment
Candidates
Candidate Countries - Unemployment rate
40
35
fYRoM
30
25
20
Croatia
15
10
5
Turkey
0
2004
2005
2006
2007
2008
2009f
2010f
Source: Thomson Reuters
15
Unemployment
Potential candidates
Potential Candidate Countries - Unemployment rate
40
Bosnia Hz.
Kosovo*
30
20
10
Serbia
Albania
Montenegro
0
2004
2005
2006
2007
2008
2009H1
Source: Thomson Reuters
* as defined b y UNSCR 1244
16
Risks
Feedback loop from the real to the
financial sector.
 Difficult containment of fiscal shock.
IMF programmes in Serbia – Bosnia +
EU and WB assistance to help address
this.
 Lower capital inflows leading to lower
investment and lower growth

17
Increasing
banking risks
Non-performing Loans (in % of total assets)
12
2008
10
2009H1
8
6
4
2
0
C
tia
a
ro
R
fY
oM
T
ke
r
u
y
A
lb
ia
n
a
B
National sources
* as defined b y UNSCR 1244
ia
n
os
.
Hz
o
M
en
t
n
ro
eg
S
a
bi
r
e
K
os
o
ov
*
18
Challenges
Adjusting the growth model, adopting
a more sustainable and balanced
growth (including by developing
manufacturing and exports)
 Financing external imbalances
 Attracting investment
 Lowering unemployment

19
Policy priorities
Two main policy areas where sustained
action crucial :
- Ensuring fiscal sustainability
- Deepening structural reforms
20
thank you 
[email protected]
21