European Economic Outlook: Is Sustainable Recovery Possible? Dr. PETR ZEMCIK, DIRECTOR TOMAS HOLINKA, ECONOMIST Webinar Prague, September 24,2013
May 06, 2015
European Economic Outlook:Is Sustainable Recovery Possible?Dr. PETR ZEMCIK, DIRECTORTOMAS HOLINKA, ECONOMIST
WebinarPrague, September 24,2013
2
Independent provider of credit rating opinions and related information for nearly 100 years
Research, data, software, and related professional services for financial risk management
2
MA extends Moody’s brand beyond credit ratings
Moody's Analytics operates independently of the credit ratings activities of Moody's Investors Service. We do not comment on credit ratings or potential rating changes, and no opinion or analysis you hear during this presentation can be assumed to reflect those of the ratings agency.
Leading global provider of credit rating opinions, insight, and tools for credit risk measurement and management
3
Access essential expertise on the economic and consumer credit trends that impact your business and investments
Economic & Consumer Credit Analytics
Economic, Consumer Credit, and Financial Data
Forecasts with Alternative Scenarios
Economic Research
Consumer Credit Analytics
Risk Management, Strategic Planning, Business and Investment Decisions
4
Outline
• Business cycle status• Expenditures shift across Europe• Governments are not overly protective• Labour markets evolve• Long-term outlook
5
Business Cycle Status 1
6
Spain Italy Euro zone
Hungary Poland Czech Rep.
Ger-many
0.0
0.5
1.0
1.5
2.0
0
5
10
15
20
25
30CPI, % change yr ago (L)Unemployment rate, % (R)
51.451.3 51.7
52.6
53.9
51.8
Inflation Falling on Record Job Losses
Sources: Eurostat, Markit, Moody’s Analytics
CPI, unemployment and PMI for manufacturing, Aug 2013
51.1 PMI
7
Expenditures Shift Across Europe 2
8
Recession Triggers Reform Efforts
Sources: Eurostat, Moody’s Analytics
Real GDP, % change yr ago
08Q1
08Q2
08Q3
08Q4
09Q1
09Q2
09Q3
09Q4
10Q1
10Q2
10Q3
11Q1
11Q3
12Q1
12Q3
13Q1
-8
-6
-4
-2
0
2
4
6
8
Germany Czech Rep.Poland HungarySpain U.K.
9
Hungary
Czech Rep.
Germany
Greece
Poland
Spain
Italy
U.K.
-10 0 10 20 30
Investments
Government
Households
Imports
Exports
Europe’s Rebalancing
Sources: Eurostat, Moody’s Analytics
Ppt of GDP, difference between 2009 and 2013
10
U.S. China
Russia Switzerland
Norway Japan
Turkey Others
Europe’s Exports to China Are Growing
Sources: Eurostat, Moody’s Analytics
EU-27 exports, % of total, 2012
11
07 08 09 10 11 121
3
5
7
9
11
13
15
17
19
21U.K. Spain Italy Germany Hungary
Household Savings Fall After Rising in 2009Household savings rate, %
Sources: Eurostat, Moody’s Analytics
12
France Germany Greece Ireland Italy Portugal Spain U.K. Hungary Poland RussiaWage freeze X X X X X X X X X
Public sector job losses X X X X X X X X X X
Pension spending cuts X X X X X X X X XHealth care cuts X X X X X X X XWelfare spending cuts X X X X X X X X XPublic investment cuts X X X X X X XOther cuts X X X X X X X XIncome tax increase X X X X X X X X
Corporate tax increase X X X X X
Capital gains tax hike X X X X X X
Social security tax hike X X X X X X X X
VAT increase X X X X X X X X X
Excise tax increase X X X X X X X X X X
Property tax increase X X X X X
Tax evasion measures X X X X X X X X
Fiscal Austerity Measures since 2009
Sources: IMF, Moody's Analytics
13
GreecePoland
SlovakiaItaly
HungarySpain
PortugalNetherlandsCzech Rep.
U.K.IrelandFrance
GermanyDenmarkSwedenFinland
0.0 0.5 1.0 1.5 2.0 2.5 3.0
R&D Expenditures Boost Growth
Sources: OECD, Moody’s Analytics
% of GDP, 2010
14
Governments Are Not Overly Protective3
15
U.K.
Ire-land
Spain
Hungary
Germany
Italy
Czech Rep.
Poland
Greece
0 1 2 3
2008
2003
Recession Eases Product Market Regulation
Sources: OECD, Moody’s Analytics
Index scale of 0-6 from least to most restrictive
16
U.K.
Germany
Spain
Hungary
Italy
Czech Rep.
France
Greece
Poland
Ire-land
0 1 2 3 4
2008
2003
Electricity Sector Liberalized In Europe
Sources: OECD, Moody’s Analytics
Index scale of 0-6 from least to most restrictive
17
Germany
Spain
Ire-land
Italy
Greece
Hungary
Czech Rep.
U.K.
Poland
0.0 0.1 0.2 0.3 0.4 0.5
2012
2006
Barriers to Foreign Direct Investments Ease
Sources: OECD, Moody’s Analytics
Index scale of 0-6 from least to most restrictive
18
Sources: Coface, Banque de France, Moody’s Analytics
Creative Destruction in Progress
France Italy Spain Germany-10
-5
0
5
10
15
20
25
30
35
2011 2012
Change in number of liquidations, % change yr ago
19
Hungary Poland Czech Republic0
5
10
15
20
25
30
Insolvencies in CEE Rising
Sources: Coface, Moody’s Analytics
Change in number of insolvencies, % change yr ago, 2012
20
Labour Markets Evolve4
21
Q Q Q Q Q Q Q Q Q Q Q95
100
105
110
115
120
125Hungary Germany
Labor Costs Rising in CEE CountriesUnit labor costs, 2005=100
Sources: EU Commission, Moody’s Analytics
22
0 5 10 15 20 25 300
5
10
15
20
25
30
f(x) = 0.40793954298847 x + 8.67545555439288R² = 0.144667005533073
Unemployment rate in 2013Q2, %
Shar
e of
em
-pl
oyee
s on
fi
xed-
term
co
n-
trac
t in
tota
l em
-pl
oy-
men
t, 20
11
GreeceGer-many
Poland
Portugal
Spain
HungaryCzech
Slovak Republic
Unemployment Creates Labor Market Dualism…
Sources: Eurostat, Moody’s Analytics
Austria
23
Germany
Czech Rep.
Poland
Hungary*
France
Italy
Portugal
Spain
0 10 20 30 40 50 60
Youth unemployment
Jobless rate
… Which Needs to Be Reduced
Sources: Eurostat, Moody’s Analytics
Unemployment rate in July, %
* as of June 2013
24
-5 0 5 10 15 20
-4
-2
0
2
4
f(x) = 0.147058177928297 x − 0.534806061105136R² = 0.183650568776464
Percentage difference between unem-ployment rate in 07Q4 and 12Q2
Per-
cent
age
diff
er-
ence
in
labo
ur
prod
uc-
tivity
be
-tw
een
pre-
cri-
sis
and
cris
is
peri
odGer-many
PolandIreland
Spain
Hungary
Czech Slovakia
Slovenia
Lower Employment Raises Productivity
Sources: OECD, Moody’s Analytics
Portugal
25
Spain
Ireland
Portugal
Hungary
U.K.
Italy
Czech Rep.
Poland
Germany
-1 0 1 2 3 4
Average pre-crisis productivity growth
Structural unem-ployment rate
Productivity Reduces Structural Unemployment
Sources: OECD, Moody’s Analytics
Change in ppt between 07Q4 and 12Q2
26
Long-Term Outlook6
27
Lower-Debt Countries Will Grow First
Sources: IMF, Moody’s Analytics
Total debt/GDP2011, % 2012 2013 2014
Spain 273 -1.4 -1.3 0.3Italy 251 -2.4 -1.7 0.6France 225 0 0.3 1.3Germany 192 0.9 0.6 1.8Hungary 144 -1.6 0.2 1.2Poland 95 1.9 1.3 2.6Czech Rep. 85 -1.2 -0.9 1.7
Annual growth, %
28
08
08Q2
08Q3
08Q4
09
09Q2
09Q3
09Q4
10
10Q2
10Q3
10Q4
11
11Q2
11Q3
11Q4
12
12Q2
12Q3
12Q4
13E
13Q2
13Q3
13Q4
14F
2014Q2
2014Q3
2014Q4
15F
2015Q2
2015Q3
2015Q4
16F
2016Q2
2016Q3
2016Q4
95
100
105
110
115
120
125
130
135Eastern EuropeU.S.WorldEuro zone
Euro Zone Will Grow ModestlyReal GDP, 2008Q1=100
Sources: National statistical offices, Moody’s Analytics
www.economy.com
Petr ZemcikDirector, European Chief EconomistMoody’s Analytics, Inc.E: [email protected]: +44 (0) 20 7772 1942
Tomas HolinkaEconomistMoody’s Analytics, Inc.E: [email protected]: +420 221 666 384
30
© 2013 Moody’s Analytics, Inc. and/or its licensors and affiliates (collectively, “MOODY’S”). All rights reserved. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. Under no circumstances shall MOODY’S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY’S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY’S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER. Each rating or other opinion must be weighed solely as one factor in any investment decision made by or on behalf of any user of the information contained herein, and each such user must accordingly make its own study and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for, each security that it may consider purchasing, holding, or selling.
30