november, 2015. contents macroeconomic projections for the period 2015 - 2017 key exogenous...
TRANSCRIPT
Revision of the macroeconomic projections
- October 2015 -
November, 2015
Anita Angelovska BezoskaVice Governor
CONTENTS
Macroeconomic projections for the period 2015 - 2017
• Key exogenous assumptions for the projections
• Baseline macroeconomic scenario for the period 2015 – 2017
External environment
Slower global growth than expected due to slow-down in the economic activity in the emerging countries and slower than expected recovery in advanced countries.
Downward risks to the projected growth more pronounced compared to April projection, mainly related to:
• Higher risk aversion and increased volatility in the global financial markets • Sharp and unexpected changes in primary commodities prices • The risks for stagnation and persistent low inflation in advanced countries still present
-0.3
-0.2
-0.1
0
0.1
0.2
0.3
-6
-4
-2
0
2
4
6
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Global growth and growth in the euro zone (annual changes in %)
World changes in p.p. (right scale) EA changes in p.p. (right scale)
World October 2015 EA April 2015
World April 2015 EA October 2015
Foreign demand
Foreign effective demand growth rate in 2015 unchanged compared to April
Slight downward revision for 2016, on the backdrop of the weaker prospects for the Greek economy
The expectations for gradual recovery of the foreign demand unchanged
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2013 2014 2015 2016 2017
Decomposition of foreign effective demand growth(weighted contributions to annual foreign effective demand growth rates)
Slovenia
Croatia
Bulgaria
Serbia
Netherlands
Italy
Spain
Greece
Germany
Belgium
-0.2
0.8
1.31.8
-0.1
0.8
1.31.4 1.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
2013 2014 2015 2016 2017
Foreign effective demand(annual growth rates, in %)
April 2015 October 2015
Foreign effective inflation
Foreign effective inflation forecast – minor downward correction relative to the April forecast
Lower pressures on domestic prices than previously expected
1.9
0.0 0.0
1.51.9
0.0-0.1
1.4
1.7
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2013 2014 2015 2016 2017
Foreign effective inflation(annual rates, in %)
April 2015 October 2015 -1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2013 2014 2015 2016 2017
Decomposition of foreign effective inflation(contributions to annual foreign effective inflation rates)
Bulgaria
Austria
Slovenia
Serbia
Italy
Croatia
Greece
Germany
France
World prices of primary products
The environment of low commodity prices persists further, with prices of primary commodities lower than expected in April
Lower import pressures on domestic prices in 2015-2016 compared to the previous forecast
Terms of trade picture more mixed: lower energy and food prices –favorable change; lower metal prices – adverse shock for the terms of trade
-40
-30
-20
-10
0
10
20
30
40
2010
2011
2012
2013
2014
2015
2016
Price of Brent Crude Oil, in EUR(annual growth rates, %)
October 2015
April 2015
-30
-10
10
30
50
70
2010
2011
2012
2013
2014
2015
2016
Wheat price, in EUR
(annual growth rates, %)
October 2015
April 2015
-60
-40
-20
0
20
40
60
80
100
2010
2011
2012
2013
2014
2015
2016
Corn price, in EUR(annual growth rates, %)
October 2015
April 2015
-20
-10
0
10
20
30
40
50
60
2010
2011
2012
2013
2014
2015
2016
Copper prices, in EUR(annual growth rates, %)
October 2015
April 2015
-20
-10
0
10
20
30
40
50
60
2010
2011
2012
2013
2014
2015
2016
Nickel prices, in EUR(annual growth rates, %)
October 2015
April 2015
GDP
The assumptions on the fundamentals in the growth forecast unchanged: continuation of the strong government
investment incentive positive effects of the existing and
expected FDI-based facilities continuation of the positive trends in the
labor market solid credit support
Moderate acceleration of growth over the forecasting period (2015-2017) More growth conducive external
environment Further positive effects of the structural
changes on the export sector More stable domestic environment
4.14.5
3.23.5
4.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
2010 2011 2012 2013 2014 2015 2016 2017
GDP(annual growth rates, in %)
April 2015 October 2015
Economic growth for 2015-2016 has been revised downwards due to the worsen global prospects and higher uncertainty in the domestic economy connected with the political instability…
…yet, we expect solid growth over the forecasting period ranging from 3.2% in 2015 to 4% in 2017
GDP expenditure components
GDP growth driven mainly by export and investments, and private consumption in addition
Moderate growth in public consumption in 2016-2017, in accordance with the medium term fiscal strategy
Higher exports and domestic demand will result in increase in imports over the projection period leading to negative contribution of net exports in 2016-2017.
FORECAST COMPARISONCONTRIBUTIONS TO ANNUAL GROWTH
Oct.15 Apr.15 Oct.15 Apr.15 Oct.15 Apr.15 Oct.15 Apr.15 Oct.15 Apr.15 Oct.15 Apr.15 Oct.15 Apr.15 Oct.15 Apr.15
2015 1.4 2.2 0.7 2.7 1.6 2.7 -1.1 -3.7 0.6 0.2 2.7 5.1 0.5 -1.0 3.2 4.12016 1.6 2.2 2.8 2.9 2.9 3.1 -4.0 -3.8 0.2 0.2 4.6 5.3 -1.1 -0.7 3.5 4.52017 2.2 2.1 2.0 -2.5 0.2 4.5 -0.5 4.0
CONSUMPTION GDPINVESTMENTS EXPORTS IMPORTSGOVERNMENT CONSUMPTION
Domestic demand
Net export
Consolidated Budget of Central Government and Funds
-4.2 -3.6 -3.3 -3.0
-10.0
-5.0
0.0
5.0
10.0
2014 act. 2015 proj. 2016 proj. 2017 proj.
Budget deficit financing (in % of GDP)
domestic debt principal repayment external debt principal repaymentgovernment securities government depositsforeign loans privatization receiptsbudget balance
14.9 16.3 15.9 15.6 14.6 14.1 13.7 13.5 13.4 14.0 13.2
13.4 11.6 10.3 9.4 9.4 9.3 9.2 10.3 10.6 9.9 10.1
55.6 60.7 60.9 60.8 61.3 63.2 63.5 61.3 60.7 63.7 60.9
1.91.8 2.2 2.3 2.7 2.9 3.0 3.3 3.5
3.83.0
14.3 9.6 10.7 11.9 12.0 10.4 10.5 11.7 11.9 8.6 12.8
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Budget expenditures structure (in %)
Capitalexpenditures
Interestpayments
Transfers
Goods andservices
Wages andsalaries
Macroeconomic projectionsStructural changes
79.4 77.1 77.471.7 72.8 72.4 71.3 70.5
69.6
69.1
16.5 16.515.4 15.3 15.7 15.7 14.9 15.0 14.7
14.4
25.4 25.8 23.827.7
30.025.1 27.3 27.1 29.0
29.8
35.831.0
36.842.0 43.0
40.746.0
46.1 47.347.4
57.0950.36
53.48 56.68 61.5253.94
59.50 58.75 60.6460.76
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Shares of real GDP components (in %)
Private cons. Government cons. Investment
Export Import
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
2007 2008 2009 2010 2011 2012* 2013* 2014*
2024 26
3429 28 25 27
80 76 74 66 71 72 75 73
Gross fixed capital formation structure by type of ownership
(in current prices, in %)
state private
*Data prepared according to ESA 2010. Source: SSO.
Labour market
14.7
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
employed
Contributions of individual sectors of activities to the total number of employees change in the period 2015-H1/ 2008 (in p.p)
other sectors of activities*
financial intermediation
transport and communications
hotels and restaurants
trade
construction
industry
agriculture
total economy (in %)
*Оther sectors of activities include: public administration and defence, compulsory social security, education, health and social work activities, activities of households as employers, as well as activities of extraterritorial organisations and bodies.
26.8
25
26
27
28
29
30
31
32
33
34
35
Q12008
Q3 Q12009
Q3 Q12010
Q3 Q12011
Q3 Q12012
Q3 Q12013
Q3 Q12014
Q3 Q12015
Unemployment rate (in %)
Source: State Statistical Office, Labor Force Survey
-2.0-1.5-1.0-0.50.00.51.01.52.02.53.0
2010 2011 2012 2013 2014 2015 2016 2017
Productivity and ULC(annual growth rates, in %)
Productivity ULC
Source: State Statistical Office and NBRM calculations
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2010 2011 2012 2013 2014 2015 2016 2017
Gross-wages and number of employees(annual growth rates, in %)
Nominal wages Employees
Source: State Statistical Office and NBRM projections
Inflation
Inflation forecast for 2015 and 2016 has been revised downward to around 0% and 1,5%...
…amid lower initial conditions and downward adjustments in the key exogenous assumptions Inflation is expected to gradually pick-up in 2016 and 2017. The point
forecast for the 2016 and 2017 stands at around 1.5% and 1.6%, respectively…
…driven by the import prices and the recovery in aggregate demand
-4
-3
-2
-1
0
1
2
3
4
5
6
2011 2012 2013 2014 2015 2016 2017
Output gap and inflation(in %)
Output gap (October 2015)
Inflation (October 2015) -4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2011 2012 2013 2014 2015 2016
Inflation rate(in %)
revisions (in p.p.)
Inflation (October 2015)
Inflation (April 2015)
Balance of payments - current account
Lower current account deficit, compared to the previous forecast, being a result of all of its components
Moderate current account deficit in the following three year period of bellow 2% of GDP on average
Decline in 2015, amidst lower energy deficit, positive impact of the new facilities, while the traditional segments were worse off
Mild widening of the current account within the next two years
Reduction of the relative share of private transfers in GDP Larger primary income deficit No major changes in the trade deficit
-3.9
-7.9
-2.4-0.4
-6.9
-12.7
-6.8
-2.0 -2.5 -3.2-1.7 -0.8 -0.5
-1.9 -2.4
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Current account of the balance of payments(% of GDP)
Trade balance of goods and services Primary income Secondary income Current account deficit
October 2015
-1.6-3.1
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
2015 2016
April 2015
Balance of payments – trade balance
Relatively stable trade deficit, with… …larger import pressures, driven by investments mainly and export-related imports, but
also… …diverse performances of the traditional export sector, but general recovery expected - positive impact of structural changes to be kept and strengthen further - more conducive global environment
-12.7 -18.0 -18.6 -15.0 -14.3 -14.1 -12.6 -12.2 -12.6 -12.7 -12.7
-9.6
-11.0 -6.5
-7.5 -10.0 -11.6-9.0 -8.5 -6.6 -6.7 -6.5
-22.3
-29.0
-25.1
-22.5
-24.4-25.7
-21.5-20.6
-19.2 -19.3 -19.2
-35.0
-30.0
-25.0
-20.0
-15.0
-10.0
-5.0
0.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Trade balance*(% of GDP)
Non-energy trade balance Energy trade balance Trade balance
October 2015
* According to foreign trade statistics
-12.5
-13.1
-6.6
-6.9
-19.1
-20.0
-35.0
-30.0
-25.0
-20.0
-15.0
-10.0
-5.0
0.0
2015 2016
April 2015
Balance of payments - current account
Export diversification by products and trading partners
0,0
5,0
10,0
15,0
20,0
25,0
30,0
35,0
40,0
45,0
Q1
2010 Q2
Q3
Q4
Q1
2011 Q2
Q3
Q4
Q1
2012 Q2
Q3
Q4
Q1
2013 Q2
Q3
Q4
Q1
2014 Q2
Q3
Q4
Q1
2015 Q2
VII
+VII
I
Export by the new companies in the technological industrial development zones
(share of total export, in %)
0,0
5,0
10,0
15,0
20,0
25,0
30,0
35,0
40,0
45,0
Bul
garia
Ger
man
y
Gre
ece
Ital
y
Cro
atia
Oth
er E
U c
ount
ries
Kos
ovo
Bos
nia
and
Her
zego
vina
Serb
ia
Oth
er c
ount
ries
Share of export by trading partners in total export (in percent)
2009 2010 20112012 2013 2014I-VIII 2015
* Starting from 2013 Croatia is included in the EU countries.
70,4
51,6
7,1
4,1
10,9
34,7
11,5
9,6
0,0 20,0 40,0 60,0 80,0 100,0
2004
2005
2006
2007
2008
2009
2010
Average 2004-2010
2011
2012
2013
2014
I-VIII 2015
Average 2011-2015
Export structure(share in total export, %)
Traditional export products Energy High value added export products Other
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2008 2009 2010 2011 2012 2013 2014 I-VII I2015
7,4 7,8 10,5 9,8 8,3 8,521,1 15,8 10,2
5,0 6,8
6,47,7
6,4 6,6
6,55,4
5,3
4,87,8
7,5 7,78,7 6,4
2,5
1,81,2
3,94,6
6,3 11,4 16,7 16,9 19,521,4
22,7
44,640,0
28,529,6 27,5 25,9 24,0
19,318,8
4,4 4,75,7
5,9 7,9 9,913,3
21,2 24,2
23,5 22,5 27,6 21,4
18,7 19,4 19,218,2 17,1
Share of export by categories in total export (in percent)
Miscellaneous manufactured articlesother transport equipmentRoad vehiclesElectrical machinery, apparatus and appliances, n.e.s., and electrical parts thereof
Chemical products
Balance of payments - financial account
The structure of capital inflows in the 2015-2017 period, mainly a combination of foreign investment and borrowing of the public sector
After the growth of the gross external debt in 2014, a stabilization expected in the period ahead
Expected increase in foreign reserves in the next three years with adequacy ratios remaining in the safe zone
5.1
7.6
9.4
6.0
9.7
11.9
6.4
2.8
6.8
4.7
0.8
5.2
-0.6
1.8
4.1
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Financial account, net flows(% of GDP)
Direct investment Financial account
October 2015
-0.3
4.3
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
2015 2016
April 2015
Foreign reserves
Foreign reserves adequacy indicators remain in the safe zone
25,022,1 23,6 24,1
27,4 28,9
24,628,6
26,5 25,1 25,5
4,0
4,94,6
4,1
4,95,2
4,3
5,1
4,74,4 4,3
1,1 0,9 0,9 1,01,2
1,0 1,1 1,1 1,3 1,3 1,3
,00
1,00
2,00
3,00
4,00
5,00
6,00
,00
5,00
10,00
15,00
20,00
25,00
30,00
35,00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Foreign reserves adequacy indicators
Stock of foreign reserves (% of GDP)
Monthly coverage of following year's imports of goods and services
Foreign reserves/ short-term debt, with residual maturity
October 2015
Gross external debt
External debt ratios expected to stabilize in the forthcoming period
45,450,2
45,7 46,6 48,855,9 57,8
61,266,1 64,3
70,2 69,0 68,9 69,8
0,0
20,0
40,0
60,0
80,0
100,0
120,0
140,0
160,0
180,0
200,0
0,0
10,0
20,0
30,0
40,0
50,0
60,0
70,0
80,0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Gross external debt indicators
Gross external debt/ GDP (left scale) Gross external debt / Export of goods and services (right scale)
October 2015
Credit growth Credit support to the private sector proceeded in 2015, albeit at a slightly
slower pace compared to the forecast Slower than expected growth in deposits, amidst heightened foreign and domestic
risks The downsize of the sources of financing, and the unfavorable balance of risks resulted
in lower credit forecast compared to April Yet, the new forecast still envisages solid credit growth of 7.7% and 7.3% in 2015 and
2016 respectively and acceleration 8.3% in 2017 Further increase in financial intermediation: loans/GDP in 2017 around 52.4% (an
increase of around 11 percentage points in the crisis period after 2008) The banking system remains stable, with high capital adequacy ratio (16.2% as of
June 2015), high liquidity and relatively stable share of non-performing loans (11.5% as of June 2015)
*Negative net-percentage is presenting easing of the credit conditions and decreasing credit demand. Positive net-percentage is presenting tightening of the credit conditions and increasing credit demand.
Monetary policy and macro-prudential measures during 2015
– Preventive measures towards Greece:
• In June 2015, NBRM introduced measures for prevention of capital outflows to Greece, that are time-bound (valid for 6 months) and with the role to counter possible contagion risks from Greece.
– Reserve requirements:
• In August 2015, NBRM has modified the reserve requirements setup by decreasing the reserve ratio on households deposits in Denar with contractual maturity over one year from 8% to 0%.
Monetary policy implications
Latest macroeconomic scenario for 2015-2017 does not change fundamentally the monetary policy environment:
Lower, but still solid economic growth supported by domestic banks’ credit activity
Inflation to remain low and stable
“Benign” external position assuming moderate increase in CA deficit and adequate level of gross foreign reserves, enabling sufficient buffers against potential unforeseen shocks
Risks remain skewed to the downside related to rising global risks and domestic political uncertainties
Further monetary adjustments contingent on the external sector developments and the gross foreign reserves dynamics
Summary
Expected growth for 2015-2016 has been revised downwards due to worsen global prospects and higher uncertainty in the domestic economy connected with the political instability
Yet the new forecast continues to envisage strong growth rates, driven by exports and investment
Downward adjustment of the inflation projection, due to supply side factors
Smaller current account deficit compared to the April projections. After the narrowing in 2015, we retain the assessments for a moderate widening in the next two years (2016-2017)
Gross foreign reserves are expected to mildly increase over the 2015-2017 period, and remain at an adequate level
Sensitivity of the scenario to possible changes in the global economic environment and potentially rising political instability at home