Growth Potential of the Balkans

Transcription

1 Growth Potential of the Balkans Bostjan Jazbec Albulene Kastrati Central Bank of the Republic of Kosovo Vienna November 15, 2010

2 Disclaimer Views presented are not necessarily those of the International Monetary Fund or the Central Bank of the Republic of Kosovo.

3 Content Macroeconomics of transition What have we learnt in the last 20 years? Macroeconomic developments in the Balkans Financial Sector Integration and Development Unlocking Growth Potentials Conclusions

4 Transition

5 Transition Process by the Book Macroeconomic stabilization Price liberalization Trade liberalization and current account convertibility Privatization Development of the institutional and legal framework for a market economy

6 Should it be the other way around? Remember? Shock Therapy vs. Gradual Approach Importance of Foreign Direct Investments Puzzles about the exchange rate regime With few exceptions the institutional setting was greatly overlooked

7 Few Years into Transition: The 90 s EU guidelines to design economic policy Maastricht criteria for a fully-fledged EU membership and EURO adoption Not many transition economies were successful in EURO adoption as the ultimate goal of the transition process Have something gone wrong? Latest financial crisis singled out the Baltics and Slovenia: two extremes in the transition process

8 The Balkans

9 General Characteristics Politically turbulent area Less favorable economic initial conditions Geographically remote from core EU countries Macedonia, Albania, Bulgaria, Serbia, Kosovo, and Montenegro Greece is the only EMU country in the region

10 GDP Growth, in percent GDP p.c. in USD 2009 Albania Bulgaria Kosovo Macedonia Montenegro Serbia Source: World Bank, 2010

11 Similarities in the Balkans: Recent Years Twin deficits: current account and budget imbalance CA up to 20%, budget deficit around 5 % Inflation contained Less than 5 percent on average: except Serbia Sluggish growth Effect of financial crisis: except Kosovo High interest rates Lending up to 14 percent, deposit up to 6 percent

12 Different Exchange Rate Regimes Macedonia Albania Bulgaria Serbia Kosovo Montenegro Strictly Managed Float Float with interventions Currency Board Float with interventions EURO EURO

13 Financial Sector

14 Financial Sector Structure Ownership of the banking sector, 2009 Macedonia Albania Bulgaria Serbia Kosovo Montenegro Foreign 93.1 % 93.6 % 83.9 % 75.3 % 91.5 % 84.5 % Domestic 6.9 % 6.4 % 16.1 % 24.7 % 8.5 % 15.5 %

15 Origin of Banks in Neighbourhood Greek Italian Bulgarian Albanian Serbian Kosovo BKT Komercijalna banka Macedonia Albania Bulgaria Serbia Stopanska banka Alpha Bank Alpha Bank Piraeus Bank National Bank of Greece Emporiki Tirana Bank United Bulgarian Bank Eurobank Piraeus Alpha Bank Emporiki Alpha Bank Piraeus Eurobank Vojvodjanska banka Marfin Bank Banca Intesa Veneto Bank UniCredit Banca Intesa Findomestic Banca Kapital Banka CKB Stater Banka Fibank

16 Lending and Deposit Interest Rates

17 Paradox Kosovo flooded with liquidity Estimate of over 500 mio EURO extra liquidity CAR around 18 % % of households deposits Mostly trade loans Loans to deposit ratio of 80 %

18 Regional Trade and Openess

19 Trade Matrix in the Balkans, 2009 Kosovo Macedonia Albania Bulgaria Serbia Montenegro Kosovo Exports=4.6% of GDP Imports=47.6% of GDP Exp (KS MKD)=9.6% Imp(KS MKD)=15% Exp (KS Al)=13.5% Imp(KS Mac)=3.2% Exp (KS Blg)=2% Imp(KS Blg)=2% Exp (KS SR)=1.6% Imp(KS SR)=11.1% Exp (KS MNG)=1.5% Imp(KS MNG)=0.6% Macedonia Exp (MKD KS)=7.5% Imp(MKD KS)=0.2% Exports=37.1% of GDP Imports=59.7% of GDP Exp (MKD AL)=2.9% Imp(MKD AL)=0.5% Exp (MKD BLG)=8.8% Imp(MKD BLG)=4.8% Exp (MKD SR)=18% Imp(MKD SR)=7.8% Exp (MKD MNG)=1% Imp(MKD MNG)=0.03% Albania Exp (AL KS)=6.7% Imp(AL KS)=0.6% Exp (AL MKD)=2.8% Imp(KS MKD)=2.0% Exports=9.5% of GDP Imports=35.8% of GDP Exp (AL Blg)=0.7% Imp(AL Blg)=1.4% Exp (AL SR)=3.0% Imp(KS SR)=3.5% Exp (AL MNG)=3.4% Imp(KS MNG)=0.3% Bulgaria Exp (BLG KS)=n/a Imp(BLG KS)=n/a Exp (BLG MKD)=2.1% Imp(BLG MKD)=3.2% Exp (BLG AL)=0.5% Imp(BLG AL)=0.05% Exports=45.8% of GDP Imports=59.2% of GDP Exp (BLG SR)=2.1% Imp(BLG SR)=3.2% Exp (BLG MNG)=2.1% Imp(BLG MNG)=3.2% Serbia Exp (SR KS)=3.5% Imp(SR KS)=0.03% Exp (SR MKD)=4.6% Imp(SR MKD)=2.2% Exp (SR AL)=1.4% Imp(SR AL)=0.1% Exp (SR BLG)=2.5% Imp(SR BLG)=2.1% Exports=20.9% of GDP Imports=40.2% of GDP Exp (SR MNG)=4.6% Imp(SR MNG)=2.2% Montenegro Exp (MNG KS)=7.4% Imp(KS KS)=0.1% Exp (MNG MKD)=0.5% Imp(KS MKD)=1.4% Exp (MNG AL)=0.5% Imp(KS AL)=1.4% Exp (MNG BLG)=2.8% Imp(KS BLG)=0.0% Exp (MNG BLG)=24.9% Imp(KS BLG)=41.2% Exports=17.3% of GDP Imports=67.6% of GDP

20 Structure of Exports and Imports, 2009 Kosovo Macedonia Albania Bulgaria Serbia Montenegro Mostly exports: Mostly exports: Mostly exports: Mostly exports: Mostly exports: Mostly exports: Base metals (50%) Iron and Steel (26%) Textiles (35%) Non-ferrous metals (37%) Manufactured goods (33%) Aluminium (41%) Mineral products (15%) Clothing (20%) Minerals (30%) Clothing (36%) Food (16%) Iron and steel (13%) Vegetables (6%) Food and Beverages (14%) Construction and Metals (19%) Energy resources (5%) Machinery (15%) Beverages, alcohol, vinegar (6%) Mostly imports: Mostly imports: Mostly imports: Mostly imports: Mostly imports: Mostly imports: Mineral products (17%) Machinery and Tools (24%) Machinery (20%) Machines and Tools (43%) Machinery (25%) Machinery and Tools (12%) Machinery (14%) Mineral fuels (16%) Food and Beverages (18%) Food (32%) Manufactured goods (20%) Mineral fuels (8%) Food and Beverages (13%) Food (11%) Construction and Metals (15%) Textiles (27%) Mineral fuels (18%) Iron and steel products(5%)

21 Unlocking Growth Potentials

22 Growth Recovery or Revival? Who should finance economic growth? Private sector, government or foreigners? Is there enough money? Are interest rates too high? Is there enough investment demand?

23 Doing Business in the Region, 2010 Ease of doing business rank Starting business Construction permits Employing workers Registering property Getting credit Protecting investors Paying taxes Trading across borders Enforcing contracts Closing business Macedonia Bulgaria Montenegro Albania Serbia Kosovo Source: World Bank, Doing Business countries in Eastern Europe and Central Asia

24 Institutional Setting Poorly defined property rights Rule of Law Inefficient jurisdiction system Wobbly legal framework Perceived risk by foreign owners of financial system

25 Strategy Education Strategic infrastructure investment Learning by doing rather than dependence on international aid and investment Role of EU institutional framework

26 Conclusions

27 Takes time to build market system institutions Everything seems to be in place, but it is not Transport network Regional trade Sustainable financing framework Remittances Problem with Crowding Out Foreign Direct Investments?