Download EDB region: Current Macroeconomic Challenges Growth: Challenging Transition August 27, 2013

August 27, 2013
EDB region: Current Macroeconomic Challenges
Growth: Challenging Transition
Different start for different countries.
Long and challenging transition period
GDP per Capita (1992=100)
700
600
500
Euro area
400
China
Russia
300
Kazakhstan
Armenia
200
Tajikistan
Kyrgyzstan
100
Performance is strong in most of cases,
relatively high for Armenia and
Kazakhstan
Effects of 2008-2009 is moderate on
growth in Central Asia mostly no more
than a slowdown in 2009
Relatively fast recovery and high rates of
growth in 2010-2012
0
2
Sources of growth: Investments
Investments are often historically
subdued (close to or below
developed-country level) with
exception of Armenia and
Kazakhstan for some periods
Gross Investment, % of GDP
60
50
Euro area
40
China
Russia
30
Kazakhstan
Kyrgyzstan
20
Ups and downs often related to
projects in extractive industries,
construction booms
Tajikistan
Armenia
10
Relative convergence to
Russian level after 2008-2009
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
0
3
Sources of growth: Productivity
TFP growth has been the most
important source of growth
almost everywhere and is mostly
high (China-level)
TFP growth, in % per year
25
20
15
10
United States
5
China
Russia
0
Kazakhstan
-5
Kyrgyzstan
-10
Sometimes related to
expansions in extractive
industries but rather even in
majority of cases
Tajikistan
Armenia
-15
-20
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
-25
No sharp slowdown after 20082009 in Russia (no data for the
others)
4
Sources of growth: Employment
Unemployment rate
16
45
14
40
Rising employment played role
in growth
35
12
10
30
Euro area
25
China
8
20
Russia
Kazakhstan
6
15
4
10
2
5
0
0
Kyrgyzstan
Progress has mostly been
considerable (as far as the data
are available) and continued
after 2008-2009
Armenia
5
Growth: Recoupling or Decoupling?
Effects of 2008-2009 on growth was
strongest for Armenia (construction
boom and bust). 2012 - 2013: mining-led
upturn in Armenia
GDP Growth, y-o-y, in %
25
20
15
10
Eurozone
5
0
China
Russia
Kazakhstan
-5
-10
-20
-25
Tajikistan is almost insulated from
external shocks
Kyrgyzstan
Tajikistan
Armenia
-15
Ups and downs in Kyrgyzstan - effects of
political transition
2012-2013: Russia and Kazakhstan’s
growth is the most in line with global
trends but domestic developments (a
drop in state/SOE-led investments and
monetary tightening in Russia,
processes in oil sector in Kazakhstan)
matter too.
6
External balances: improving?
Current account balance, in % of GDP
25
Negative CA balances have often been
observed, even for oil&gas-rich countries for
some periods
20
15
10
5
Russia
Kazakhstan
0
Kyrgyzstan
-5
Tajikistan
-10
Armenia
-15
CA deficits reflect the role of remittances,
international aid, in some cases financing of
projects in extractive industries
Significant CA deficit remains in Kyrgyzstan
(will probably diminish fast as Kumtor is now
on steam) and Armenia (dependence on
external financing)
2013: moderate decreases in surpluses for
oil&gas exporters, and decreases in deficits for
labor exporters
-20
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
-25
7
Public debt: slowing down
Gross Public Debt, in % of GDP
Gross public debt low in oil&gas-
140
riched countries (actually, the net
120
debt is negative)
100
Russia
80
Kazakhstan
In the others, debt stabilized at 30 –
50% of GDP
Kyrgyzstan
60
Tajikistan
40
Armenia
Kyrgyzstan has the highest debt to
GDP ratio, but will probably reduce
20
it
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
0
8
Inflation: on decline
Really high inflation rates disappear over 2000-
Inflation rate, in %
2010, low-inflation environment has not been
established nonetheless
45
40
Ups and downs in food prices matter,
35
especially in relatively low-income countries
30
Russia
25
20
15
Kazakhstan
In Russia, shifting to inflation targeting is
Kyrgyzstan
behind the steady downward trend in inflation,
Tajikistan
increased short-term ER volatility
Armenia
10
Countries with fixed or nearly fixed ERs:
5
inflation largely determined by capital flows,
0
food and energy prices
9
Structural reforms: whither?
In Armenia gradual improvement in EBRD
Structural reforms & Growth
index is associated with income growth
4.0
But, fast reforms in Kyrgyzstan are
3.5
EBRD indicator
associated with ups and downs, and
eventually no progress in development
3.0
Russia
Kazakhstan
2.5
Armenia
2.0
1.5
In Russia & Kazakhstan, other factors (not
Kyrgyzstan
measured by EBRD index) drove GDP
Tajikistan
growth
Tajikistan: civil war was responsible for
1.0
8
9
10
GDP per capita (in log))
11
deep slump in the economy
10
Challenges and responses: oil & gas exporters
Challenges:
Responses:
Diversification and modernization of the
economy
Improvements in institutional environment privatization,
greater institutional compatibility
Investments: excessively large role of
state and SOEs
Budget policy: compromise between LR and SR goals –
sustainability vs ability to provide stimulus. Greater role for
non-oil deficit as LR target, more flexibility in SR.
Optimisation. Pension reform
Banks: need to keep risks at bay
Budget: elevated pre-crisis expenditures
Need for better quality spending to finance
infrastructure, human capital, healthcare
Debt, unemployment, BoP: not relevant or
not so pressing
Investments financed by the national funds: need for
strong institutional safeguards, integration in the overall
budget framework
Being more conscious about crowding-out effects, limiting
competition with private sector for financing
Proceeding with shift to inflation targeting, bringing inflation
to low levels. Strengthening central banks’ independent
status, and regulative capacity
11
Challenges and responses: labor exporters
Challenges:
Relatively low investments
Persistent external deficit
Large public debts and fiscal
deficits
Unemployment
Exchange rate regime
Responses:
Improvements in institutional environment privatization,
greater institutional compatibility
Strengthening budget policies (tightening over time where
necessary, keeping room for stimulating measures).
Improvements in public education, healthcare, social
security systems.
Making further progress on inflation, strengthening and
empowering central banks
Financial development: local markets, greater access to
international ones
For countries with fixed or nearly fixed ERs: greater
exchange rate flexibility, or search for an appropriate
anchor
12
China’s rebalancing: opportunities for EDB
states
Disposable income per capita in
China's cities
Wages in East coast of China has been
growing fast with inland China lagging behind
20
Zhengzhou
15
10
Chengdu
Recently (effect of 2008 crisis) most countries
Chongqing
started moving inside mainland China
36 Cities Avg
5
0
Shanghai
Out of six EDB members, five – are
Guangzhou
landlocked. Russia (the only coastal member)
Shenzhen
2008
2009
2010
2011
2012
has vast territory with many landlocked regions
Freight turnover (2001=100)
180
Successful start of HP’s experiment – is an
170
opportunity for landlocked Central Asia, Russia
160
and Belarus
150
140
Russia
130
Kazakhstan
120
Belarus
110
100
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
90
13
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Research (CIR)
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14
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