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Overview

Overview. What we have seen: achievements Crisis less bad than feared What we can expect: challenges Fragile, slow and varied recovery What should be done: policies for sustained recovery Exit strategies and structural reforms. What we have seen: achievements. Downturn moderated.

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Overview

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  1. Overview What we have seen: achievements Crisis less bad than feared What we can expect: challenges Fragile, slow and varied recovery What should be done: policies for sustained recovery Exit strategies and structural reforms

  2. What we have seen: achievements

  3. Downturn moderated Forecasted versus actual GDP growth in 2009 in EU10, EU15 and Poland, percent Source: European Commission, Eurostat, Central Statistical Offices, World Bank staff calculations

  4. Poland: leading the recovery GDP growth in EU10 countries, year-on-year, percent Source: European Commission, Eurostat, Central Statistical Offices, World Bank staff calculations

  5. Poland: sentiment back to long-term average Economic sentiment indicator for EU10 countries (long term average = 100) Source: European Commission, World Bank staff calculations

  6. External imbalances declined Current account balance as percent of GDP in 2008 and 2009 Source: Central Banks, Convergence and Stability Program Updates from January/February 2010, World Bank staff calculations

  7. Risk appetite returned Asset class performance, percent change -400 Source: Reuters, Bloomberg, World Bank staff calculations Notes: *CDS spreads are reversed; ** for real effective exchange rates minus denotes depreciation

  8. Poland: risk appetite returned Asset class performance, percent change Source: Reuters, Bloomberg, World Bank staff calculations Notes: *CDS spreads are reversed; ** for real effective exchange rates minus denotes depreciation

  9. Capital inflows rebounded Capital inflows to EU10, USD billions Source: World Bank staff calculations

  10. Poland: capital inflows rebounded Capital inflows to Poland, USD billions Source: World Bank staff calculations

  11. Poland: yield curve normalized Change in yield curve over time, percent Source: Bloomberg, World Bank staff calculations

  12. Rise in unemployment moderated Forecasted versus actual unemployment rates in 2009 in EU10, EU15, and Poland, percent Source: European Commission, Eurostat, Central Statistical Offices, World Bank staff calculations

  13. Lower drop in employment than in output Output vs. employment decline, percent Source: Eurostat, Central Statistical Offices, World Bank staff calculations

  14. What we can expect: challenges

  15. Slow recovery GDP growth in EU10 and EU15 countries pre- and post crisis Source: Eurostat, Convergence and Stability Program Updates from January/February 2010, IMF WEO April 2010, World Bank staff calculations

  16. Varied recovery Forecasted GDP growth in EU10 countries Source: Convergence and Stability Program Updates from January/February 2010, IMF WEO April 2010

  17. Domestic-based recovery Contribution to GDP growth in EU10 in 2009 and 2010 Source: Convergence and Stability Program Updates from January/February 2010

  18. Poland: public investment driven recovery… Gross fixed capital formation, percent change, year-on-year Source: Convergence and Stability Program Updates from January/February 2010

  19. …supported by EU funds… Distribution of EU funds across the EU10 countries, 2007-13 Source: European Commission, OECD Economic Survey for Poland 2010, World Bank staff

  20. …although absorption challenges remain Absorption rates of EU structural and cohesion funds across the EU10 countries, 2007-13 Source: European Commission, World Bank staff

  21. Credit-less recovery Credit growth to non-financial corporations, percent, year-on-year Source: ECB, World Bank staff calculations

  22. Jobless recovery Forecasted harmonized unemployment rates in EU10 countries Source: Convergence and Stability Program Updates from January/February 2010, World Bank staff calculations

  23. Jobless recovery – especially for the young… Change in unemployment rate from June 2008 to January 2010 by age (%) Source: Eurostat, World Bank staff calculations

  24. Jobless recovery – … and less educated Change in unemployment rate from 2Q 2008 to 3Q 2009 by education (%) Source: Eurostat, World Bank staff calculations

  25. What should be done: policies for sustained recovery

  26. Financial policy: stabilizing banking system in Western Europe and maintaining exposure to EU10 region European Banks’ 5-year CDS (bps) Source: Bloomberg, Datastream, World Bank staff calculations

  27. Monetary policy: supportive of recovery… Policy interest rates (percent) Source: Central Banks, World Bank staff calculations

  28. Monetary policy: … also to reduce appreciation pressures … Nominal exchange rates to EUR (Aug 2008=100) Source: Reuters, World Bank staff calculations

  29. Monetary policy: … as long as inflation remains low Overall HICP (percent) Source: Eurostat, World Bank staff calculations

  30. Fiscal policy: gradual unwinding … Forecasted general government deficit in EU10 countries and EU15* Source: Convergence and Stability Program Updates from January/February 2010, World Bank staff calculations

  31. Fiscal policy: … to keep public debt sustainable … Forecasted general government debt in EU10 countries and EU15* Source: Convergence and Stability Program Updates from January/February 2010, World Bank staff calculations

  32. Fiscal policy: … through both expenditure and revenue-based consolidation … Composition of fiscal deficit reduction from 2009 to 2012, percent of GDP Source: Convergence and Stability Program Updates from January/February 2010, World Bank staff calculations

  33. Fiscal policy: … and structural adjustment … Composition of primary deficit reduction from 2009 to 2012, percent of GDP Source: Convergence and Stability Program Updates from January/February 2010, World Bank staff calculations

  34. Fiscal policy: …moving from relaxation to tightening in spite of actual output remaining below potential… Cyclicality of fiscal policy, number of EU10 countries, 2008-12 Source: World Bank staff based on CP updates

  35. Fiscal policy: … to meet Maastricht 3% deficit target Source: European Commission

  36. Fiscal policy: … and join the Euro Area Source: World Bank staff

  37. Structural policy: answering the 1.5% question … Potential growth in 2004-07 and 2012 by EU10 member country Source: Convergence Program Updates January/February 2010, European Commission , World Bank staff calculations.

  38. Structural policy: … requires more people in productive work and working longer … Long-term unemployed (12 months of more) as percent of active population Source: Eurostat, World Bank staff calculations.

  39. Structural policy: … also to boost competitiveness… CAB in Poland and EU10, 2009-2012, percent of GDP Source: Convergence Program Updates 2010, IMF WEO April 2010, staff calculations.

  40. Structural policy: … to close gap to EU average living standards GDP per capita in purchasing power standards, EU27=100 Source: Eurostat, World Bank staff calculations.

  41. For more information visit: www.worldbank.org/eca/eu10rer krichter@worldbank.org

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