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M. Singer – Recent Developments in the Czech Republic and Outlook 1M. Singer – Macroeconomic developments in the CR and GDP growth comparisons 1M. Singer – Macroeconomic developments, monetary policy and financial sector 1M. Singer – The Czech economy and crisis in Eurozone: CNB view 1M. Singer – Czech economy and development in Europe: Outlook and Challenges 1M. Singer – Czech Republic: Can record low rates be sustained? 1M. Singer – Czech Republic: Future challenges and opportunities 1M. Singer – Present Conditions, Monetary Policy and Outlook in Czech Republic 1M. Singer - Czech Republic: Staying Ahead of the Curve with Regard to Monetary Policy 1M. Singer: The economic and financial crisis from the point of view of the Czech banks 1M. Singer: Financial Crisis: Impacts on the CR and Lessons for the Supervisors 1M. Singer: Financial Crisis: Likely Impacts on the CR and Lessons for the SupervisorsM. Singer: Present Conditions, Monetary Policy and Outlook for CR 1M. Singer: Consumer protection in financial services: CNB approach 1
Recent Macroeconomic and Recent Macroeconomic and Monetary Developments in the Monetary Developments in the
Czech Republic and OutlookCzech Republic and Outlook
FORECASTING DINNER 2012, Czech CFA SocietyPrague, 22 February 2012
MiroslavMiroslav SingerSingerGovernor, Czech National BankGovernor, Czech National Bank
M. Singer – Recent Developments in the Czech Republic and Outlook 2
OverviewOverview
•
Recent macroeconomic and monetary developments
•
CNB forecast (February 2012)
M. Singer – Recent Developments in the Czech Republic and Outlook 3
GDPGDP (annual and quarterly percentage changes at constant
prices; seasonally adjusted data)
Source: CZSO
GDP fell by 0.3% q-o-q in 2011 Q4 (for the second time in a row) and the Czech economy went into a shallow recession; y-o-y growth slowed from 1.2% in 2011 Q3 to 0.5% in 2011 Q4
-6
-4
-2
0
2
4
6
8
I/07 I/08 I/09 I/10 I/11
q-o-q GDP grow th y-o-y GDP grow th
2011 Q4: preliminary
M. Singer – Recent Developments in the Czech Republic and Outlook 4
Output gapOutput gap (in per cent of potential output)
The output gap continued to open into negative values in 2011 Q3
-6-4-202468
I/04 I/05 I/06 I/07 I/08 I/09 I/10 I/11
Range of 3 estimates of production functionAverage of 3 estimates of production functionKalman filterHP filter Source: CNB
M. Singer – Recent Developments in the Czech Republic and Outlook 5
Structure of annual GDP growth Structure of annual GDP growth (contributions in percentage points; seasonally adjusted data)
Source: CZSO
Net exports were the sole contributor to real GDP growth in 2011 Q3
-8-6-4-202468
10
I/07 I/08 I/09 I/10 I/11
Household consumption Net exportsGross f ixed capital formation Government consumptionChange in inventories NPISH expenditure
M. Singer – Recent Developments in the Czech Republic and Outlook 6
Industrial production Industrial production ((yy--oo--yy in %)in %)
Source: CZSO
The seasonally adjusted rate of growth of industrial production slowed from 4.9% in November to 4.5% in December
-25
-20
-15
-10
-5
0
5
10
15
20
1/07 7 1/08 7 1/09 7 1/10 7 1/11 7
Industrial productionSeasonally adjustedHP trend
M. Singer – Recent Developments in the Czech Republic and Outlook 7
Barriers to growth in industry Barriers to growth in industry
Source: CZSOInsufficient demand is still the main barrier to growth in output in industry; its weight started rising recently
0
20
40
60
80
100
1/07 1/08 1/09 1/10 1/11
Insuff icient demand Labour shortagesMaterial and/or equip. short. Financial constraintsOther None
M. Singer – Recent Developments in the Czech Republic and Outlook 8
Retail sales Retail sales (percentages; constant prices)(percentages; constant prices)
Source: CZSOThe y-o-y rate of growth of retail sales has been oscillating above zero in recent months due to a prevailing low number of vacancies, persistently high unemployment and modest wage growth
-10
-5
0
5
10
15
20
1/07 7 1/08 7 1/09 7 1/10 7 1/11 7
Retail sales incl. carsSeasonally adjustedHP trend
M. Singer – Recent Developments in the Czech Republic and Outlook 9
State budget current performanceState budget current performance (in CZK (in CZK bnbn –– GFS 1986 methodology)GFS 1986 methodology)
The state budget recorded a lower deficit in 2011 than in 2010; in January 2012 the surplus was higher than in 2010 and 2011
-156,4
-96,7
-140,8
13,1
-91,5
-142,5-125,9
10,6
21,0
-200
-150
-100
-50
0
50
1 2 3 4 5 6 7 8 9 10 11 12
2010 2011 2012
Source: Ministry of Finance
M. Singer – Recent Developments in the Czech Republic and Outlook 10
Output gap and impact of fiscal Output gap and impact of fiscal discretion on GDP discretion on GDP (% of real GDP) (% of real GDP)
Fiscal policy was procyclical in 2002, 2004-2006, 2008 and 2010-2011
Note: Impacts of bottom-up discretion: P are impacts of revenue measures using IMF fiscal multipliers (Klyuev and Snudden, 2011); V1 and V2 are impacts of expenditure discretion using CNB multiplier of 0.6; V1 is deviation from trend of adjusted total expenditure; V2 is deviation from trend of ratio of adjusted total expenditure to GDP; TD is average impact of discretions identified by top-down method using multiplier of 0.6. Positive value indicates fiscal restriction, negative value fiscal expansion. Output gap: PF – using production function, KF – using Kalman filter.
-6
-4
-2
0
2
4
6
2001 2003 2005 2007 2009 2011
Av. discretion P – V1 and TD Av. discretion P – V2 and TDOutput gap PF Output gap KF Source: CNB
M. Singer – Recent Developments in the Czech Republic and Outlook 11
Trade balance Trade balance –– annual accumulationannual accumulation (in CZK (in CZK bnbn; national concept); national concept)
The cumulative trade surplus in 2011 was higher than in previous years
Source: CZSONote: National concept is based on change in ownership principle
0
10
20
30
40
50
60
70
80
90
100
110
120
1 2 3 4 5 6 7 8 9 10 11 12
bn C
ZK2007 2008 2009
2010 2011
M. Singer – Recent Developments in the Czech Republic and Outlook 12
CZK/EURCZK/EUR (3 Jan 2000 (3 Jan 2000 –– 14 Feb 2012)14 Feb 2012)
Source: Eurostat
Despite positive foreign trade, current account and government budget developments, and irrespective of the high degree of financial stability, the koruna has recently been deviating to the depreciation side of its long-run trend
22
24
26
28
30
32
34
36
38
2000
M01
D03
2000
M04
D24
2000
M08
D14
2000
M12
D04
2001
M03
D26
2001
M07
D16
2001
M11
D05
2002
M02
D25
2002
M06
D17
2002
M10
D07
2003
M01
D27
2003
M05
D19
2003
M09
D08
2003
M12
D29
2004
M04
D19
2004
M08
D09
2004
M11
D29
2005
M03
D21
2005
M07
D11
2005
M10
D31
2006
M02
D20
2006
M06
D13
2006
M10
D03
2007
M01
D24
2007
M05
D21
2007
M09
D10
2007
M12
D31
2008
M04
D22
2008
M08
D13
2008
M12
D03
2009
M03
D26
2009
M07
D17
2009
M11
D06
2010
M03
D01
2010
M06
D23
2010
M10
D13
2011
M02
D02
2011
M05
D27
2011
M09
D16
2012
M01
D06
M. Singer – Recent Developments in the Czech Republic and Outlook 13
InflationInflation (annual percentage changes)(annual percentage changes)
Source: CZSO
Annual CPI inflation jumped from 2.4% in December to 3.5% in January; 1.1 p.p. of the total inflation is due to the first-round effects of the tax change on administered and non-administered prices
-10
123
456
78
1/07 1/08 1/09 1/10 1/11 1/12
Monetary-policy relevant inflation Consumer price inf lation
M. Singer – Recent Developments in the Czech Republic and Outlook 14
Industrial producer pricesIndustrial producer prices (annual percentage changes; contributions in p.p.)(annual percentage changes; contributions in p.p.)
Source: CZSO
Industrial producer price inflation fell from 5.6% in October to 5.5% in November and 4.6% in December
-4
-2
0
2
4
6
8
1/10 3 5 7 9 11 1/11 3 5 7 9 11
Manufacture of coke and refined petroleum productsManufacture of basic metals and fabricated metal productsMining and quarrying and pow er generationManufacture of food, beverages and tobacco Other branches of manufacturing Total PPI (annual percentage changes)
M. Singer – Recent Developments in the Czech Republic and Outlook 15
Agriculture producer pricesAgriculture producer prices (annual percentage changes)(annual percentage changes)
Source: CZSO
Agricultural producer price inflation fell further in December
-50-40-30-20-10
0102030405060
1/07 1/08 1/09 1/10 1/11
Agricultural producer prices Crop product pricesLivestock product prices
M. Singer – Recent Developments in the Czech Republic and Outlook 16
Key CNB ratesKey CNB rates (in %)(in %)
Source: CNB
The CNB has left its key rates unchanged since May 2010
0
1
2
3
4
5
1/07 1/08 1/09 1/10 1/11 1/12
Lombard rate 2W repo rate Discount rate
M. Singer – Recent Developments in the Czech Republic and Outlook 17
Loans to corporations and householdsLoans to corporations and households (annual percentage changes)(annual percentage changes)
Growth in loans to the private sector remains subdued
-10
0
10
20
30
40
1/07 1/08 1/09 1/10 1/11
Loans, total Loans to non-financial corporationsLoans to households Source: CNB
M. Singer – Recent Developments in the Czech Republic and Outlook 18
Client and market interest rate spreadsClient and market interest rate spreads (percentage points)(percentage points)
Banks reduced slightly further the spreads between client and market rates on house purchase loans and on large corporate loans
0
1
2
3
4
5
1/07 1/08 1/09 1/10 1/11
Corporations (small loans – up to CZK 30m) 1Y – 3M PRIBORHouse purchase – 10Y government bondsHouse purchase 1Y – 3M PRIBORCorporations (large loans – over CZK 30m) 1Y – 3M PRIBOR
Source: CNB
M. Singer – Recent Developments in the Czech Republic and Outlook 19
Czech economy: main features Czech economy: main features 1/21/2
•
High openness sensitivity to external developments•
Persisting fundamental macroeconomic balances and emergence of only minor imbalances:
2011 H2: shallow recession
Output gap opening up •
Exchange rate of koruna:
Temporary interruption of (sustainable) appreciation trend
Exchange rate acted as buffer against shocks•
Inflation:
Very weak demand pressures
Cost shocks subsiding
Transient rise in inflation due to VAT hike in 2012
M. Singer – Recent Developments in the Czech Republic and Outlook 20
Czech economy: main features Czech economy: main features 2/22/2
•
Domestic fiscal policy:
Fiscal consolidation + low level of government debt mitigating risk of contagion from euro area
Was procyclical
in 2010-2011
Will have stagflation effects on economy in 2012 (lower domestic demand + higher inflation due to higher VAT)
•
Banking sector is in good shape: high capital adequacy ratio, profitability, resilience to shocks (in CNB stress tests)
The main drivers of the Czech economy are external developments and domestic fiscal policy
M. Singer – Recent Developments in the Czech Republic and Outlook 21
GDP in CZ, Germany and EUGDP in CZ, Germany and EU--27 27 (quarterly percentage changes at constant prices; seasonally
and working day adjusted data; 1998 Q1–2011 Q3)
Source: Eurostat
During the crisis the business cycle in the Czech Republic converged to that in Germany and the EU-27
-8
-6
-4
-2
0
2
4
6
8
10
1998
Q119
98Q3
1999
Q119
99Q3
2000
Q120
00Q3
2001
Q120
01Q3
2002
Q120
02Q3
2003
Q120
03Q3
2004
Q120
04Q3
2005
Q120
05Q3
2006
Q120
06Q3
2007
Q120
07Q3
2008
Q120
08Q3
2009
Q120
09Q3
2010
Q120
10Q3
2011
Q120
11Q3
y-o-
y ch
ange
in %
EU-27
Czech Republic
Germany
M. Singer – Recent Developments in the Czech Republic and Outlook 22
GDP in 2011 Q3 GDP in 2011 Q3 (index; GDP in 2008 Q3 = 100; seasonally and working (index; GDP in 2008 Q3 = 100; seasonally and working
day adjusted data)day adjusted data)
Source: Eurostat, own computation
In 2011 Q3, Czech GDP almost reached the pre-crisis level and is comparable with the EU-27 average
Note: Greece: 2011 Q1
110,1
104,6
102,4102,1101,4101,3101,2
100,499,5 99,4 99,3 98,9 98,8
97,7 97,3 97,1 97,0 97,096,3 96,3 96,0 95,7
93,5 93,1 92,4 92,1
90,189,3
80
85
90
95
100
105
110
115
Poland
Sweden
Austria
Slovakia
German
yMalt
aBelg
iumFranc
e UKEU-27
Netherl
ands
Cyprus CR Lu
xFinl
and
Spain
Portug
alIta
lyHun
garyDen
markBulg
aria
Roman
iaEsto
niaLit
huania
Irelan
dSlove
niaGree
ceLa
tvia
2008
Q3
= 10
0
M. Singer – Recent Developments in the Czech Republic and Outlook 23
CNB Forecast CNB Forecast (February 2012)
M. Singer – Recent Developments in the Czech Republic and Outlook 24
GDP forecastGDP forecast (annual percentage changes; seasonally adjusted)(annual percentage changes; seasonally adjusted)
Source: CNB
GDP will stagnate overall this year
-4
-2
0
2
4
6
8
10
I/10 II III IV I/11 II III IV I/12 II III IV I/13 II III
90% 70% 50% 30% confidence interval
M. Singer – Recent Developments in the Czech Republic and Outlook 25
Headline inflation forecastHeadline inflation forecast (annual percentage changes)(annual percentage changes)
Headline inflation will rise temporarily to just above 3% in 2012 owing to the VAT increase
-1
0
1
2
3
4
5
6
7
I/10 II III IV I/11 II III IV I/12 II III IV I/13 II III
90% 70% 50% 30% confidence interval
Inflation target
Monetary policyhorizon
Source: CNB
M. Singer – Recent Developments in the Czech Republic and Outlook 26
MonetaryMonetary--policy relevant inflation policy relevant inflation forecast forecast (annual percentage changes)(annual percentage changes)
Monetary-policy relevant inflation will be close to the target over the entire forecast horizon
-1
0
1
2
3
4
5
6
7
I/10 II III IV I/11 II III IV I/12 II III IV I/13 II III
90% 70% 50% 30% confidence interval
Inflation target
Monetary policyhorizon
Source: CNB
M. Singer – Recent Developments in the Czech Republic and Outlook 27
Interest rate forecastInterest rate forecast (3M PRIBOR in %)(3M PRIBOR in %)
Consistent with the forecast is stability of market interest rates in the near future and a modest decline thereafter
Source: CNB
0
1
2
3
4
I/10 II III IV I/11 II III IV I/12 II III IV I/13 II III
90% 70% 50% 30% confidence interval
M. Singer – Recent Developments in the Czech Republic and Outlook 28
Exchange rate forecast Exchange rate forecast (CZK/EUR)(CZK/EUR)
The nominal exchange rate will gradually appreciate from its currently weakened level
20
22
24
26
28
I/10 II III IV I/11 II III IV I/12 II III IV I/13 II III
90% 70% 50% 30% confidence interval Source: CNB
M. Singer – Recent Developments in the Czech Republic and Outlook 29
•
External risks:
Escalation of debt crisis in euro area and risks of contagion
Abrupt negative shift in foreign demand (especially for Czech automotive output and export-intensive industries)
Gradual transfer of regulatory and supervisory powers to European level
•
Domestic risks:
Sudden depreciation of koruna
Worsening of budget balance
Risks aheadRisks ahead
Foreign risks clearly dominate
M. Singer – Recent Developments in the Czech Republic and Outlook 30
Thank youThank you
Miroslav
SingerMiroslav.Singer@cnb.czTel: +421 224 412 000
Česká
národní
banka Na Příkopě
28
115 03 Praha
1
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