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Global Economic Environment: Prospects for the Baltics

Global Economic Environment: Prospects for the Baltics. Jekaterina Rojaka DnB NORD Chief Economist October 14 th , 201 1 Riga, Latvia. Rise in global exports proved to be short-lived. Source: WTO. The global recession is back?.

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Global Economic Environment: Prospects for the Baltics

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  1. Global Economic Environment: Prospects for the Baltics Jekaterina Rojaka DnB NORD Chief Economist October 14th, 2011 Riga, Latvia

  2. Rise in global exports proved to be short-lived Source:WTO

  3. The global recession is back? • In Sept., sentiments dropped in most of regions, especially in Europe • Number of new manufacturing orders stagnate Source: Capital Economics

  4. IH 2011: Monetary policy restrictions FORECAST Source: Reuters Ecowin, DnB NOR

  5. 2011 IIH: Turnaround in monetary policy Forecast 2011 Sept. Source: Reuters Ecowin, DnB NOR

  6. 2011 2nd half: growth slows down in EU Source: Eurostat

  7. Euro zone industy is out of steam Source: Eurostat. Capital economics

  8. Most EU countries fail to balance foreign trade Source: Eurostat

  9. In recent year most EU countries went deep in debt Source: Eurostat

  10. In the Baltics fiscal deficit was moderate, compared to the EU Source: Eurostat, European Commission

  11. Investors’ concern over Portugal and Greece is soaring Sovereign debt servicing costs, 2011 Rise of debt servicing costs in 2011, p.p. of GDP Sovereign debt, % of GDP, 2011 Source: Reuters Ecowin, European commission

  12. Decisions within eurozone stem fromits structure Source: Eurostat

  13. Solutionsof euro crisis to influence Baltics’ economic development

  14. Capital outflow from Russia during the first nine months of 2011 was larger than one during entire 2010 • Despite solid economic growth, stimulated by budget funds, domestic and foreign investors lack faith in countries future. • One time political events (election, reforms, interest rates’ changes) • Investment environment • Asymmetric migration • Russia’s direct investment to foreign countries • What happens if oil price falls below $60 / barrel? Source:Central Bank of Russia

  15. Ruble depends on oil price and political stability • If the euro-zone debt crisis takes a turns into a banking crisis, it may wellbecome problematic for Emerging European economies to roll over their maturing external debt. • SEE risks are rising - be careful Source: Capital economics, IMF

  16. Emerging Europe is vulnerable • If the euro-zone debt crisis turns into a banking crisis, Emerging European economies will face difficulities to roll over their maturing external debt. • SEE risks are rising … Source: Capital economics, IMF

  17. Focus on the Baltics

  18. The Baltics grew at fast pace over last decade Source: Eurostat

  19. Baltic countries are among the EU leaders according to GDP growth rates this year Source: Eurostat, national statistics offices

  20. Situation in labour markets is improving *Youth unemployment rate – in the age group ≤ 24 years; Source: Eurostat

  21. Labour costs start rising, the Baltics yet sustained their competitiveness Source:Eurostat, *DnB NORD Research calculations 21|

  22. The Baltics are leading EU in terms of manufacturing growth

  23. Exports – the main source of a rapid recovery Source: Eurostat 23|

  24. Productive investments, after being put on halt, start rising * 2010 structure Source:Eurostat 24|

  25. Foreign investment flows grew to almost pre-crisis level 25| Source: national central banks, Eurostat, national statistics offices

  26. Competitive position in the Baltics improved 47th +3 70th +6 33rd = 83rd -7 Source:WEF

  27. Business and consumers’ sentiments improve, although at a slower pace Source: European Commission

  28. The Baltics undergo deleveraging process Source:national central banks

  29. RE market activity has already recorded the lows and starts moving slowly up Source: Centre of Registers, Statistics Estonia, Zemesgrāmata, national statistics offices

  30. Global economic outlook: uncertain future • EU problems are growing, decisions are being postponed, patience of financial markets participants may soon evaporate. • US will have to face tough reforms, that may drastically reduce rate of its economic growth. • Russia’s main problem – lack of efficiency. If commodities’ prices fall, country will have to deal with tremendous challenges. • Global economy may still surprise in an unpleasant way – the Baltics should get ready in advance. Inkcinct

  31. Thank you for your attention! DnB NORD analytical publications are available at: www.dnbnord.lt/publications 31|

  32. Foreign investment flows grew to almost pre-crisis level 32| Source: national central banks, Eurostat, national statistics offices

  33. Pernai emigracijos statistiką kilstelėjo privalomos įmokos į PSDF, bet ir 2011 m. rodiklis bus įspūdingas 33| Šaltinis: Statistikos departamentas

  34. Lietuva: verslo įmonių atsigavimas akivaizdus Šaltinis: Statistikos departamentas

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