1. Economic Update Growth Returns, with Questions
Europe and Central Asia Region
The World Bank
Annual Meetings
Washington DC, October 8, 2010

2. Most economies in the region contracted in in 2009
GDP Growth (%), 2009

3. Most countries in the region are expected to grow in 2010
GDP Growth (%), ECA Region forecasts for 2010

4. Economic Update Growth Returns, with Questions
Europe and Central Asia Region
The World Bank
Office of the Chief Economist
Annual Meetings
Washington DC, October 8, 2010

5. Main Points
Growth has returned. Growth rates will average about 4 percent in But Central and Eastern Europe (CEE) will grow less than 2 percent, the former Soviet Union (FSU) will grow at more than 4 percent, and Turkey may grow at 7 percent
Jobs have not returned as quickly. Unemployment rates are stubbornly high in CEE and Turkey and are still rising in the FSU
Prospects remain coupled with the west. The durability of the recovery depends on Western Europe, because ECA’s economies may be even more integrated with EU-15 than before the crisis
9/21/2018

6. A MULTI-SPEED RECOVERY
DEVELOPMENTS
A MULTI-SPEED RECOVERY
9/21/2018

7. Growing again, but gingerly and (mostly) joblessly
GDP growth will be positive in 2010
The region will grow by about 4 percent
Kyrgyz Rep., Romania, Croatia and Latvia exceptions
Recovery led by exports, and fuelled by capital inflows
Prices of manufactured goods, oil, metals and food up
Large official flows and better terms for private flows
But industrial production and employment have lagged
Turkey may be one of the exceptions
9/21/2018

8. ECA’s prospects for 2010 improved, but weakest among emerging economies
Real GDP Growth (%),
9/21/2018

9. Most economies in the region contracted in in 2009
GDP Growth (%), 2009

10. Most countries in the region are expected to grow in 2010
GDP Growth (%), ECA Region forecasts for 2010

11. The recovery in merchandise exports has been as strong as in other regions
Goods Exports, Volume (% change y/y, except Q which is q/q), saar
9/21/2018

12. Oil, Metals, and Food Prices ( Index, 2000=100)
Metal prices close to pre-crisis peak, oil and food prices back to 2007 prices
Oil, Metals, and Food Prices ( Index, 2000=100)
9/21/2018

13. Borrowing costs are down, but still twice the levels before the crisis
Sovereign Bond Interest Rate Spreads, BP over UST (3 mma)
9/21/2018

14. Industrial Production (Index, 2006=100)
Industrial production has increased, but not back to pre-crisis levels in much of ECA
Industrial Production (Index, 2006=100)
9/21/2018

15. Unemployment has stayed high in CEE and continues to rise in CIS
Unemployment Rate (%)
9/21/2018

16. Active labor policies have been ratcheted up in Central Europe
Budgets for ALMPs (% GDP), selected countries
9/21/2018

17. Fiscal Balance (% GDP), 2008-2010
In 2010, the median ECA country will run fiscal deficits of about 5 percent of GDP
Fiscal Balance (% GDP),
9/21/2018

18. Only a quarter of people in ECA feel their lives are getting better
People Reporting Their Lives are Getting Better (%)
9/21/2018
Source: ILO (2010) World of Work.

19. ANALYSIS
A JOBLESS RECOVERY?
9/21/2018

20. Recessions reduce employment, depressions destroy it
Relationship between GDP Growth (2009) and Change in Employment Growth (2008 to 2009)
9/21/2018

21. Contrasting experiences in Poland, Russia and Turkey during the crisis
Together these economies are about 75 percent of ECA’s GDP of $3.5 trillion
Manufacturing, Construction, and Financial Services employment and output were most volatile during crisis
Services overall have served as an anchor for non-farm employment during the recession
Differences in run-up to crisis show up afterwards in trajectory of non-farm employment during recovery
9/21/2018

22. Poland: Employment in construction and industry has been falling during recovery
Unemployment rate has risen despite recovery since April 2009
Employment in construction rose rapidly before crisis and has fallen during recovery
Employment in industry has not risen despite sharp recovery in exports
9/21/2018

23. Russia: Employment in construction and industry has not risen during recovery
Unemployment rate has not fallen despite recovery since February 2009
Employment in Construction fell since early 2008 and has not risen during recovery
Employment in Industry fell a bit despite sharp recovery in Exports
9/21/2018

24. Turkey: Employment is recovering both in construction and industry
Unemployment rate rose since December 2008, but has come down since mid-2009
Employment in Construction was steady before, fell moderately during crisis, and rose sharply during recovery
Employment in Industry has risen with industrial production and Exports
9/21/2018

25. PROSPECTS
A TENTATIVE RECOVERY
9/21/2018

26. By 2008, ECA was the most export-dependent emerging region
Merchandise Exports & Imports (% GDP, PPP),
9/21/2018

27. Exports as a share of total exports to the world (%), 2008
75 percent of Central European exports go to Western and Central Europe
Exports as a share of total exports to the world (%), 2008
9/21/2018

28. CEE growth prospects depend increasingly on Western Europe
Business Cycle Synchronization
(12-month moving correlation of industrial production with EU15)
9/21/2018

29. Russia’s business cycle has been converging to the EU15’s
Business Cycle Synchronization between EU15 and Russia
(12-month moving correlation of industrial production)
9/21/2018

30. Euro-zone growth has gone from highest in 2007 to lowest in 2010
Real GDP Growth (%),
9/21/2018

31. Some currencies are almost back to their values at the end of 2008
Nominal Exchange Rates, Euro per Local Currency (Jan 2007=100)
9/21/2018

32. Both public and private debt are high in western Europe
Gross Private and Public Debt (% GDP), 2008
9/21/2018
Source: Bruegel & WIIW (forthcoming) Whither Growth in Central and Eastern Europe?

33. Summary
A multi-speed recovery. Regional forecast for 2010 of 4 percent growth masks big differences—from contractions for Kyrgyz Republic and Croatia to strong growth for Turkey and Turkmenistan
A jobless recovery. With current trends and policies, the employment losses may take much longer to recover than output losses
A tentative recovery. It is now impossible to assess economic prospects in Central, Eastern and Southern Europe without looking at growth in Western Europe