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Warsaw, Ministry of Finance October 28, 2009

Warsaw, Ministry of Finance October 28, 2009. EU10 Regular Economic Report October 200 9. Overview. What we have seen Stabilization Why Poland is different Initial conditions, depreciation, market size What we can expect Slow recovery What should be done

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Warsaw, Ministry of Finance October 28, 2009

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  1. Warsaw, Ministry of Finance October 28, 2009 EU10 Regular Economic Report October 2009

  2. Overview • What we have seen • Stabilization • Why Poland is different • Initial conditions, depreciation, market size • What we can expect • Slow recovery • What should be done • Exit strategies and structural reform

  3. What we have seen

  4. What we have seenEconomy – stabilization % change, yoy, nsa Source: Eurostat, World Bank Staff calculations.

  5. What we have seenExports – stabilization 3mma, %change, yoy Source: Eurostatand World Bank.

  6. What we have seenImports – stabilization 3mma, %change, yoy Source: Eurostatand World Bank.

  7. What we have seenIndustrial production – modest rebound 3mma, wda, %change, yoy Source: Eurostatand World Bank.

  8. What we have seenRetail sales – stabilization 3mma, wda, %change, yoy Source: Eurostatand World Bank.

  9. What we have seenInflation – stabilization HICP overall index for EU10 and EU15, annual rate of change, % Source: Eurostatand World Bank.

  10. What we have seenCapital flows – strong bond issuance Gross capital inflows to emerging EU10 (US$ billion) Source: World Bank Global Prospect Group, World Bank Staff calculations.

  11. What we have seenStock market – recovery Stock Market Indices (January 2008=100) Source: Reuters, World Bank Staff Calculations

  12. What we have seenSovereign bonds – easing of CDS 5-Year Credit Default Swaps (%) Source: JP Morgan. World Bank Global Prospect Group, World Bank Staff calculations. Source: World Bank Global Prospect Group, World Bank Staff calculations.

  13. What we have seenBanks – interbank rates down, spreads persistent Interbank rates (3 months) Interbank rate spreads over Libor Source: World Bank Global Prospect Group, World Bank Staff calculations.

  14. What we have seenParent banks – easing of CDS European Banks’ 5-year CDS (bps) Source: Bloomberg, Datastream, World Bank Staff calculations.

  15. What we have seenCredit growth – turning negative Credit growth to non-financial enterprises (%, y-o-y) Source: World Bank Global Prospect Group, World Bank Staff calculations.

  16. What we have seenCredit growth – turning negative Non-performing loans in the EU10 in 2009 and Historical Data for Banking and Currency Crisis Countries (in percent of bank loans) Source: IMF, World Bank.

  17. What we have seenLabor – wage growth slowing Real wage growth (% change, yoy) Source: Statistical Offices, World Bank Staff calculations

  18. What we have seenLabor – unemployment rising slowly only Harmonized unemployment rate (%) Source: Eurostat, Statistical Offices, World Bank Staff calculations

  19. What we have seenLabor – … but faster for the young Change in unemployment rate from June 2008 to June 2009 by age (%) Source: Eurostat, World Bank Staff calculations

  20. Why Poland is different

  21. Why Poland is different Downturn increases with initial macro imbalances GDP growth in 1H 2009 vs. bank-related capital inflows in 2Q 07-1Q 08 Source: IMF, World Bank, DEC PG, World Bank Staff calculations

  22. Why Poland is different Large domestic market Exports as % of GDP in 2008 Source: World Bank

  23. Why Poland is different Monetary policy – depreciation, modest appreciation Exchange Rates vs. Euro (Aug08 = 100) Real Effective Exchange Rates (Aug08 = 100) Source: ECB. World Bank Staff Calculations

  24. What we can expect

  25. What we can expectEconomy – sentiment improving Economic Sentiment Indicator (long-term mean = 100) Source: European Commission, World Bank Staff Calculations

  26. What we can expectGrowth – slow recovery EU10, EU15, & Poland - Real Growth 2008 - 2010, (% change, yoy) Source: IIMF WEO, Government Budget 2010, World Bank

  27. What should be done

  28. What should be doneEconomic policy – Address the urgent Stabilize Financial Sector Protect People Preserve Jobs Avoid Backsliding Continue with coordinated solutions: crisis requires concerted action

  29. What should be doneMonetary policy – cautious easing to support demand Policy interest rates (percent) Source: Central Banks

  30. What should be doneFiscal policy – stimulus spending not an option Source: EU10 Governments.

  31. What should be doneEconomic policy – … without losing sight of the longer-term agenda Declining Population Increasing Population GOVERNANCE CLIMATE CHANGE DEMOGRAPHY ENERGY SECURITY AND EFFICIENCY 31 31

  32. THANK YOU!

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