Crisis Management in the EU and Hungary: Insights from GKI Conference
Gain valuable insights from the GKI Conference featuring Alex Lehmann, Lead Economist at EBRD, on crisis management in the EU and Hungary. Explore key points on funding challenges, economic outlook, structural reforms, and more. Learn about the impact of FDI, Eurozone growth, and the need for comprehensive structural reforms for crisis management.
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Presentation Transcript
Crisis Management in the EU and in Hungary GKI Conference 26 March 2013 Alex Lehmann, Lead Economist, EBRD
Key points Funding environment will remain challenging, not just from foreign banks but also in terms of FDI Eurozone growth environment of course as well. Cyclical recovery in CEE economies the weakest in transition history. Depressed investment volumes the key worry for trend growth medium term. Shift to domestic demand, and scaling up in technology content of exports Fiscal policy not an option; monetary easing now exhausted, greater exposure to international bond markets a much greater vulnerability Structural reforms hence the key tool for crisis management: credible, comprehensive and designed to illicit the investment response.
The short term outlook: a series of downward revisions
The pre-crisis boom: in good measure fuelled by domestic investment
Now: the weakest component in the recovery
Considerable variation between countries
FDI inflows sharply reduced compared to before the crisis
The pace of European bank deleveraging
External funding outflows only partially compensated by local deposit growth
Funding conditions improved, though credit standards continue to tighten
Structural reform priorities in the CEE: choice picks of OECD and EBRD Slovak Republic: OECD Poland: OECD Education system Public ownership, product market competition Labour force mobility and participation rates Labour taxes and overly generous social support schemes Reduce barriers to competition and entrepreneurship Transport, communication and energy infrastructure Innovation support framework Education system and EBRD and EBRD Education system: skills shortages PPPs Regulation to sustain banking sector integration Private pension funds Private infrastructure funding/PPPs Local capital market development Source: Going for Growth , OECD, 2013, and EBRD Transition Report, 2012.
and in Hungary OECD Reduce taxes on labour Labour force participation, esp. at old age Education system, esp. tertiary Business regulation and competition, esp. network industries Public sector efficiency and EBRD Stable regulation and tax regime for banking sector Labour force participation Credible macroeconomic policies and outlook Source: Going for Growth , OECD, 2013, and EBRD Transition Report, 2012.
Launching structural reforms in the midst of a recession? Involve all stakeholders Get buy in from financial sector to stimulate investment response Medium term programme and credible communications Design package to off-set individual elements: e.g. product market competition and labour market liberalisation
