ECONOMICOUTLOOK FOR THE EUROAREA IN 2014 and 2015 Highlights
• During 2013, the world economy has recovered from a soft spot that had started in summer 2012, and chances are good that the speed of expansion in world production observed in the second half of 2013 will be kept up in 2014. Growth of world trade, however, is markedly lower than it should be if correlations of the past 20 years were still valid. The uncertain prospects for trade are a serious risk factor, in particular for export oriented economies, in 2014 and beyond. • The euroarea economy left the recession behind during 2013. The recovery,
the US is below target, the situation in the labour market has improved significantly. We assume that the Fed will start increasing policy interest rates starting from the second quarter of 2015, as suggested in the statement and minutes of the January FOMC meeting. In Japan, the authorities set out on a course of full-blown QE with the introduction of Abenomics, a combination of fiscal and monetary policy stimulus measures, in early 2013. Until now the impact on the real economy has been insignificant. The Japanese economy grew just 0.1 per cent in 2014, in spite of the Yen having depreciated markedly since the introduction of the program. Inflation has gone up, but the rise appears to have been largely temporary. Dwindling inflation in the EuroArea and generally weak economic conditions led the ECB to go ahead with a bond buying program on January 22 nd , following a positive decision of the European Court of Justice regarding the ECB buying government debt one week earlier. The ECB intends to inject about 1.1 trillion euro into financial markets through a program of asset purchases. It will spend 60 billion euro a month buying public and private sector securities until at least end-September 2016, but might continue bond purchases until there are clear signs of ‘a sustained adjustment in the path of inflation’. The program will encompass existing purchase schemes of asset-backed securities and covered bonds. It will expand the bank’s balance sheet to about 3,000 billion euro.
Though it has still significant impact on economic activity, austerity has been lessened in 2014 and 2015. Two arguments may explain this slowing pace of consolidation. On the one hand, countries have benefited from extended dead- lines in 2013 for correcting the excessive deficit. Spain, France, the Netherlands and Portugal were notably concerned. New headlines deficits targets were set by the European Commission, which also mentioned careful attention would be paid to the reduction of structural deficits. The aim was not to allow countries to reduce their effort of fiscal consolidation, but rather to take into consideration the fact that former targets were not achievable given the deterioration of the economicoutlook. With these new deadlines, excessive deficits should have been corrected in 2014 for the Netherlands, which is the case, in 2015 for France and Portugal and in 2016 for Spain. On the other hand, some countries are already under the 3% threshold and have exited the excessive deficit procedure: Germany, Italy, the Netherlands, Belgium, Austria, Finland, Luxembourg, Slovakia, Lithuania and Latvia. Although Greece is still in the excessive deficit procedure, the headline deficit is expected to be below 3% of GDP in 2014. Given GDP forecasts and voted fiscal impulses for 2014, the situation should not change in 2015, as France, Portugal and Spain will not reach the target, whereas Ireland would exit the EDP (table 6).
84.1 in 2014 and is forecast to rise to 91.2 in 2015. This rise in consumer confidence in the economy should help bolster sales of the broad range of retailers that are included in the retail products & services business line. To date, the increase in consumer confidence spurred by the recovery in the overall economy has not benefited all of these specialty retailers. For example, real consumer spending on clothing and footwear in 2014 only grew by 1.0% in 2013 and 0.8% in 2014. However, 2015 will see the convergence of an improving employment and wages picture combined with lower gas prices. This should fuel consumer demand for retail products. Across the full range of retailers included in this business line, industry-wide sales growth is expected to improve to 5.6% in 2015 compared to 3.7% in 2014.
There is also likely to be a sizable increase in the number of retailers in the city, thanks to the $325 million redevelopment of the Gallery into an outlet mall that will bring about 125 stores to Market Street East. Such a development should keep more shoppers in the city instead of luring them out to the suburbs where there are large malls and outlet stores. Despite ongoing weakness among manufacturers in the area, there has been considerable growth in the industrial and warehouse real estate market. Through the first half of this year, more than 2 million square feet of space had been completed, about a third more than was completed in all of 2014. Dietz and Watson, a food manufacturer, is constructing a 200,000 square foot distribution center and adding 20 acres to its current campus in the area.
The inflation dynamics have been volatile in many parts of the world including the EU, the US and Japan, and is expected to be worse than in case of Georgia for many countries of the world for the coming month and possibly years. Japan has been in deflation even though currently the country appears to be exiting it; inflation has also been very low in both European Union and the US. In the EU the inflation is expected to be around the 1 percent mark and is expected to stay around that area through 2015, which can be attributed to the weak demand within the union, given the fact that the economic recovery has only begun 11 . In some of the EU
V tabeli 15 so v obliki spodnje trikotne matrike podani rezultati izračunov Pearsonovega koeficienta korelacije za vse pare držav. Izračuni kažejo visoko povezavo med gibanjem zadolženosti gospodinjstev v Sloveniji in Španiji (0,70), na Irskem (0,74) in Portugalskem (0,82) ter zelo visoko povezavo v primeru Grčije (0,96), torej v državah, ki so jih krize najbolj prizadele, s čimer lahko potrdimo hipotezo H3. Povezava z nekaterimi državami, ki jih kriza ni bistveno prizadela, ni tako očitna, saj obstaja negativna povezanost z gibanjem zadolženosti gospodinjstev v Sloveniji in Nemčiji (-0,91), zmerna povezanost z gibanjem v Avstriji (0,55) in zelo visoka povezanost z gibanjem na Nizozemskem (0,91). Pravzaprav lahko ugotovimo, da med vsemi državami obstaja vsaj zmerna povezanost, z izjemo Nemčije, ki izkazuje negativno povezanost gibanja zadolženosti do vseh držav. V povprečju držav evroobmočja kot tudi v izbranih državah je namreč dolg gospodinjstev na začetku opazovanega obdobja naraščal in dosegel vrh okoli leta 2010, nato pa pričel upadati. To ne velja za Nemčijo, kjer se zadolženost gospodinjstev skoraj vsa leta znižuje. Podobno kažejo tudi druge raziskave. Drometer in Oesingmann (2015, 63-66) ugotavljata, da je v obdobju 2000-2008 zadolženost gospodinjstev v vseh državah z izjemo Nemčije naraščala, v obdobju 2008-2013 pa se je zadolženost gospodinjstev v številnih državah zmanjšala, med drugim na Irskem in v Španiji. Podobno navaja tudi Mattich (2014), ki ugotavlja, da se je od preloma stoletja dolg povečal v vseh večjih gospodarstvih, razen v Nemčiji, kjer se zmanjšuje. Rakau (2013) pa ugotavlja, da so nemška gospodinjstva manj zadolžena kot v povprečju evroobmočja, njihova zadolženost pa se še zmanjšuje, medtem ko so precej nad povprečjem evroobmočja Portugalska, Španija in Irska, pa tudi Nizozemska. Torej predvsem države, ki so doživele velik nepremičninski balon pred izbruhom finančne krize.
More rapid growth rates, exceeding 7%, are expected to be found in CLM countries (Cambodia, Lao PDR and Myanmar) in 2015 and 2016. Myanmar will experience the highest growth in the region (7.9% in both years), buoyed by foreign direct investment. Recent structural reforms are improving the business environment in Myanmar and its integration with neighbouring economies is progressing, supporting this growth. Further reforms and investment in human capital and agriculture will be particularly important in promoting continued growth, however. Rapid growth is also forecast for Lao PDR, at 7.4% in 2015 and 7.5% in 2016. Despite falling external demand for mineral exports, Lao PDR’s economy should continue to grow due to the expansion of tourism and the services sector more broadly, along with numerous planned hydropower investments. Cambodia is expected to see strong growth of 7.2% in both 2015 and 2016, driven by improved performance and rising demand from Cambodia’s trade partners, along with an anticipated decline in the domestic tensions that dampened investment and output in 2014. Despite these favourable expectations, diversification will remain important to sustained development over the medium to long term.
Overall, the current market sentiment on the Kenyan economy remains upbeat. It is widely expected that the GDP growth rate may even hit the 7% mark later in the year. A World Bank press release dated 5 March 2015 stated that Kenya’s growth is projected to rise from 5.4% in the same period in 2014 to 6-7% over the next three years (2015-2017), making it one of the fastest growing economies in Sub – Saharan Africa. The Kenya Economic Update (KEU), a publication of the World Bank, noted that external and internal balances are expected to improve significantly due to falling oil prices. In addition, public investment in infrastructure (energy and the Standard Gauge Railway) will likely strengthen this trajectory.
US economy in 2014 is likely to expand by 2.0 percent, comparing with 1.9 percent in 2013. This projection was revised down from 2.8 percent in the previous forecast due to the higher- than-expected contraction in the first quarter, which was a result of the temporary factors, namely the inventory rundown during the harsh winter period and the slowdown in net export. However, the economy in the second quarter rebounded to 4.0 percent growth (%QoQ saar) compared with 2.1 percent contraction in the first quarter. Consequently, in the second half the US economy tends to recover stronger than the first half of the year, as indicated by the economic indicators in July that show the ongoing recovery in private consumption and investment thanks to the improvement in employment, as well as rising consumer confidence index to reach the highest point since 2007. Moreover, expansionary monetary policy also supports the recovery as the interest rates were maintained at low level at 0 – 0.25 percent further for a period of time at least until the first half of 2015. Furthermore, in the second half of the year, the export sector is likely to improve in line with a pickup in the world economy. Eurozone economy in 2014 is forecasted to grow by 1.0 percent, unchanged from the previous
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20142015 2016 Longer run
Each shaded circle indicates the value (rounded to nearest ¼ percentage point) of an individual participant’s judgment of the appropriate level of the target federal funds rate at the end of the specified calendar year and over the longer run.
export reduction by 30 percent of 0.26 percent for Slovenia and to 30 percent of 1.7 percent for Serbia, respectively, in the Greek exit scenario. The total export share of all giips countries, i. e. Greece, Ireland, Italy, Portugal and Spain equals 13.6 percent both for Slovenia and for Serbia. Accordingly, the direct effect is set to an export reduction of 30 percent of 13.6 percent for both countries in the more extreme scenario of a euroarea exit of the giips countries. For the scenario of a euroarea break-up, it is assumed that the direct impacts on exports are three times as large as in the giips exit scenario. As other trading partners of the countries leaving the euroarea would also experience a decline in economic activ- ity, they would need less imports as well, which also affects Slovenia’s and Serbia’s exports. This additional indirect effect is assumed at 50 percent of the direct effects. It might be however objected that the assumption that the indirect effects make up half of the direct effect, is rather arbitrary. Of course any larger or smaller indirect effect would also be conceivable. However, a larger effect seems less likely since more distant regions of the world economy like the us or Asia would probably be affected only to a lesser extent, and hence exports to this regions would only decline slightly. It is furthermore assumed that the largest negative effect of a euroarea exit of one or more countries would last for two years. For the third year of the simulation period, 75 percent of the original effect is assumed. For the fourth year, a further reduction to 50 percent of the original impact is taken, and for the final year a return to the baseline path is assumed. The final exogenous reduction of exports (as compared to the baseline simulation) in the three euroarea scenarios can be summarised as follows. 2013 and 2014: Greece exit: Slovenia (slo) 0.12, Serbia (srb) 0.77. giips exit: slo and srb 6.1. Euroarea break-up: slo and srb 18.4. 2015: Greece exit: slo 0.09, srb 0.57. giips exit: slo and srb 4.6. Euroarea break-up: slo and srb 13.8. 2016: Greece exit: slo 0.06, srb 0.38. giips exit: slo and srb 3.1. Euroarea break- up: slo and srb 9.2. Finally, it is expected that in 2017 exports return to their baseline path, implying that their level is permanently lower as compared to the baseline.
The net flow of financing directed at households continued to increase in 2016 in a sustained fashion, but the pace of the increase in credit was relatively moderate compared with the expansion in nominal GDP (see Chart 2.1). The firming of the economic recovery and low interest rates (see Chart 2.2) continued to boost the demand for credit, in a setting of few changes in bank lending standards. Specifically, bank loans to households grew by close to 2% at end-2016, against 1.4% in 2015, an acceleration that has continued to date in 2017. Underpinning this improvement were loans earmarked for house purchase, which grew by 2.7% in the year as a whole, although the dynamism of loans for consumption was also high (4%). Among the bigger economies, the rate of increase in bank loans to households was higher in Belgium and in France (above 4%), while in the economies undergoing debt adjustment – such as Spain, Greece, Portugal, Ireland and Cyprus – the bank loan portfolio continued to contract, albeit at an increasingly lower pace.
At this point, we can conclude that it is producing a constant translation towards more liquid assets, regardless of the evolution of variables that explain the behavior of money demand and tenure liquidity against holding less liquid earning assets. The search for the causes of this behavior trend increase in liquidity within a monetary ag- gregate, intended as a leading indicator for the stability-oriented monetary policy strat- egy of the Eurosystem, should be the goal of future research. If there is a change in the behavior of agents in this direction, the implementation of monetary policy should be taken into account, since the effects on macroeconomic variables will be modified. Ac- cording to the ECB itself, the financial turbulence has increased uncertainty about fu- ture economic and financial developments. The increase in the most liquid assets can rest upon the uncertainty and mistrust due to the precaution reason.
contracted production effect forms part of what are known as ‘national accounts adjustments’ to the trade-based series.
Figure 1 (a) shows national accounts- and trade-based measures of goods exports in current prices on a quarterly basis. The national accounts measure is usually greater than the trade-based measures of exports. However, the divergence widened in the first and second quarters of this year. An equivalent adjustment is made to national accounts measures of imports (not shown), and the national accounts-based measure is also usually higher too. The difference between the import and export national accounts adjustments are shown in Figure 1 (b). These effects have broadly offset each other in recent years, meaning no impact on net exports. However this relationship appears to have broken down in the first half of 2014. The export adjustment has increased considerably more than the import adjustment and is believed to be associated with a sharp increase in contracted production, adding significantly to the contribution of net exports to GDP growth.
Good resilience, but economic slowdown also likely in 2013
The Swedish economy is resisting the euro zone crisis relatively well but a weak inter- national development is putting production and exports under pressure. Due to the very strong preliminary GDP figure for the second quarter, SEB:s growth forecast has been revised upward to 1.3 per cent for 2012. Since other and more recent indicators do not fully support such a strong development, the forecast takes into account a partial reversal during the second half of 2012. The overall Deloitte/SEB index supports the view of a weakening economy with a drop to 48.3 in September compared to 50.5 in February. The ever-widening economic downturn in Europe and the deceleration in emerging market countries contribute to only a slight improvement to 1.5 per cent GDP-growth in 2013. During 2014 growth will be somewhat faster and we expect GDP to grow by 2.5 per cent.
debt should be sources of concern when they are high and register an upward trend. This paper aimed to fill the existing gap in the literature by assessing the effect of all forms of nonfinancial debt (households, nonfinancial corporations and governments) on economic growth in euro-area countries. To do so, we used a methodology that explicitly takes into account the possible heterogeneity (see, e.g., Erberhart and Presbitero, 2015 or Chudick et al., 2017) in the relationship between each source of nonfinancial debt and growth across euro-area countries. In particular, our analytical strategy has rested on the estimation of an equation based on the empirical growth literature augmented by debt to assess whether the latter has an impact on growth over and above other determinants. So, after ensuring that all the variables in the model have the same order of integration, and to provide a broad view of the debt-growth nexus, we successively estimated three models (a baseline, an asymmetric and a threshold model) for each of the ten countries in our sample and, following Cecchetti et al. (2011), we treated the different types of borrowers – households, corporations and governments – separately.
In Europe, by the 2009 year’s end the Central and Eastern Europe region showed cleared signs of having weathered the economic storm. Regional stock and bond markets staged a slow recovery from the losses of 2008-2009. Interbank lending rates fell and long-term yields rose in most Central and Eastern Europe countries, signaling a stabilization of the region’s fragile financial systems. Central and Eastern Europe exports, which had plummeted in response to falling demand in Western Europe, began a gradual rebound. The contraction of regional GDP (Gross Domestic Product) had bottomed out, setting the stage for the resumption of economic growth in 2010.
The outlook for the national economy is strong, with key improvements including job growth, ending of QE by the federal government, signs of housing market beginning to improve, well capitalized banks with more free flowing credit, and cheaper oil prices. The U.S. gross domestic product (GDP) will likely be around 3% in 2015, compared to 2.4% in 2014. Slower GDP in Q1 is anticipated to be replaced by a more productive Q2 2015. National unemployment remains stable at 5.5%, with upward trends in professional and business services, health care, and retail, while mining jobs declined. With increasing demand for workers, employers are likely to begin increasing wages.
After last year’s abrupt slowdown, there has been no quick rebound in the Japanese economy. Fourth quarter growth was unexpectedly weak, partly due to inventory adjustment. Early 2015 offered new disappointments. Household demand remains depressed after last year’s consumption tax hike. Major industrial firms have become somewhat less optimistic, according to the Tankan survey from the Bank of Japan (BoJ). Despite a weak start to 2015, we expect the recovery to gain new traction this year and next. GDP will increase by 1.1 per cent in 2015, followed by 1.3 per cent in 2016: well above the long-term trend of 0.5-0.75 per cent and a slight upward revision for 2016. The drivers are expansionary monetary policy, gradually improving international demand, a strong labour market and lower energy prices. OECD rules of thumb suggest that the oil price decline since last summer may boost growth by ½ percentage point. A temporary upswing in private consumption before the next planned tax hike in the spring of 2017 will benefit growth in 2016. Foreign trade is a growth engine once again. Exports bounced back during the second half of 2014. The upward trend will continue, sustained by improved competitiveness due to the weak yen and increased demand from the US, the EU and various Asian countries. Unclear data around the Chinese New Year make it difficult to interpret Japanese exports to Asia in early 2015; our main scenario is that the region will be resilient to somewhat lower Chinese growth. Household demand also looks a bit more promising. Inflation is decelerating as the effects of last spring’s tax hike fade. This strengthens purchasing power. The tight labour market will also open the way for slightly higher pay increases. The companies in the Tankan survey indicate that they are facing the tightest labour market since early 2008; small and medium-sized businesses have not seen anything like this since the early 1990s. The ratio of jobs per job seeker is continuing to climb, after a temporary pause in 2014. The government is pressuring large export firms let their gains from the yen depreciation spill over into higher collective wage and salary agreements. These efforts look set to bear fruit; this spring’s centralised negotiations in 62 of Japan’s biggest companies will lead to the highest pay increases since before the financial crisis, although the changes will still be small. Above all, companies have shown greater willingness to boost