EEAG Report

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EEAG Report

Czech Perspective

Vilém Semerák, Ph.D.

CERGE UK & IDEA

vilem.semerak@cerge-ei.cz

March 30

^th

, 2015

捷克，2015年3月30日

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Outline of the Presentation

• Current outlook

– Economic growth – Russian troubles

• Energy policies and energy union

• Regional disparities

– Subnational level

– Visegrad

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Czech Economy in 2015

• Short run perspective

– Economy:

• 2014: return to growth confirmed

– Growth of both final consumption and fixed capital formation – Positive development in the labor market

• Financial stability

– Stable banking sector

– Stabilization of public debt

• Positive outlook: economic growth and stability

– but with risks related to the EMU stability and Ukrainian crisis

• Long run perspective

– Lack of competitiveness?

– Institutional weakness & corruption

– Slow convergence

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CR: Final Consumption v. Exports Y-o-y change, fixed prices (%)

Source of data: ČSÚ -25.0

-20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0 20.0 25.0

2007 Q1

2007 Q3

2008 Q1

2008 Q3

2009 Q1

2009 Q3

2010 Q1

2010 Q3

2011 Q1

2011 Q3

2012 Q1

2012 Q3

2013 Q1

2013 Q3

2014 Q1

2014 Q3

GDP Total Final Dom. Consumption Exports

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CR: Final Dom. Consumption - Components Y-o-y change, fixed prices (%)

Source of data: ČSÚ -6

-4 -2 0 2 4 6 8 10

2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4

GDP Total Final Consumption

Households Government

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Economic Sentiment in International Perspective

LR average = 100, monthly data

50.0 60.0 70.0 80.0 90.0 100.0 110.0 120.0 130.0

2005M01 2005M04 2005M07 2005M10 2006M01 2006M04 2006M07 2006M10 2007M01 2007M04 2007M07 2007M10 2008M01 2008M04 2008M07 2008M10 2009M01 2009M04 2009M07 2009M10 2010M01 2010M04 2010M07 2010M10 2011M01 2011M04 2011M07 2011M10 2012M01 2012M04 2012M07 2012M10 2013M01 2013M04 2013M07 2013M10 2014M01 2014M04 2014M07 2014M10 2015M01

EU28 CZ DE AT PL

Source of data: CSU

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Economic Sentiment: Sectors

-60.0 -40.0 -20.0 0.0 20.0 40.0 60.0

Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15

Industry Construction Trade Selected Services

Source of data: CSU

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Czech R.: Forecasts, GDP (%)

Source

2012 2013 2014* 2015 2016

MFČR (1/2015)

-0.8 -0.7 2.0

2.7

2.5

ČNB (2/2015) 2.6

3.0

EU (2/2015) 2.5

2.6

EEAG 1.8

xxx

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Czech R.: Forecasts, Consumer Prices (%)

Source

2012 2013 2014 2015 2016

MFČR (2/2015)

3.3 1.4 0.4

0.3

1.4

ČNB (2/2015)

Cons. Prices -0.1

1.8

EU (2/2015) 0.8

1.4

EEAG 1.3

xxx

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Czech R.: Forecasts, Unemployment (%)

Source

2012 2013 2014 2015 2016

MFČR (1/2015)

7.0 7.0 6.1

5.7 5.6

ČNB (2/2015)

Cons. Prices

5.7 5.6

EU (2/2015)

6.0 5.9

EEAG

5.4 xxx

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Estimates of Output Shocks related to Russia:

Food (15+16)

Type of Shock Not Compensated Compensated by China

Compensated by the ROW

Only Czech exports -0.03% xxx xxx

All EU exports -0.04% xxx xxx

All EU and US

exports -0.04% -0.04% -0.04%

Overall Comparison: Complete Exports

Type of Shock Not Compensated If Compensated by China

If Compensated by the ROW

Only Czech exports -0.91% xxx xxx

All EU exports -1.14% xxx xxx

All EU and US

exports -1.14% -1.12% -1.09%

Source: own simulations

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Energy Security and Energy Union

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Czech Republic and Energy Policy

• Czech EU Presidency in 2009

– Energy security and policies one of the three priorities:

• Energy security is a basic prerequisite for the functioning of the EU economies. In light of the EU’s increasing dependence on energy imports from the surrounding world, it acquires a special urgency. The EU’s goal in this regard is to achieve a greater territorial diversification of suppliers, a broader range of utilised sources, an enhancement of the range of renewable resources and the creation of a truly unified internal energy market in the EU which would allow for solidarity in crisis situations.

• Czech Republic and Poland warned about political

risks of e.g. Nord Stream project

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Specific Features of Czech Position

• Economy with still relative high consumption of energy and CO

₂

emissions

– High share of industry in GDP, lower productivity

• Importer of gas, exporter of electric energy

• Usefulness of alternative & renewable resources constrained by geographical conditions and relatively small territory

• Concerns about vulnerability of Eastern Europe (further development of Putin’s regime)

• Public support for renewable resources rather discouraged by the fiasco of support for solar power (too high feed-in tariffs)

• The most logical solution (further development of nuclear energy and reduction of the sector’s

dependence on Russia) under pressure from

neighboring countries

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Czech Convergence: CR v. Germany

Germany = 100 in every year

0 10 20 30 40 50 60 70 80

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

GDP per capita (current US$)

GDP per person employed (constant 1990 PPP $)

GDP per unit of energy use (PPP $ per kg of oil equivalent)

GDP per capita, PPP (current international $)

GNI per capita, PPP (current international $)

Zdroj dat: WDI 15

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Energy Policy: 4 Different Perception of Risks (EEAG Report)

1. Risks caused by CO

₂

emissions

2. Environmental risks of nuclear energy

– German phase-out of nuclear energy

3. Geopolitical blackmail - risks related to

dependence on imported energy, particularly on gas from the Russian Federation.

4. Vulnerability of electricity supply networks to systemic breakdowns

– Overloads, which in many cases can caused by random development of output of some types of sources

• E.g. Problems caused to Czech network by German wind energy

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Regional Disparities

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CR and Regional Disparities

• Two levels of concern:

– Convergence of the whole CR to the EU levels – Intra-country divergence/convergence patterns

• Empirical aspects:

– Some new member countries (incl. the Czech

Republic) seem to be converging relatively slowly

• Theoretical aspects:

– New economic geography perspective: is

convergence the most likely scenario?

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Dispersion of Regional GDP p.c. and Unemployment

Coef. of variation based on nom. data

0 10 20 30 40 50 60

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 GDP NUTS2 GDP NUTS3 Unemployment NUTS32

Source of data: CSU

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Regional Differences: NUTS3

EU28 = 100, PPP adjusted data

0 20 40 60 80 100 120 140 160 180 200

2011 2013

Source of data: CSU

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Visegrad: Catching up with the Eurozone 1995-2013

GNI p.c. PPP, Euro = 100

0 10 20 30 40 50 60 70 80

Czech R. Hungary Poland Slovakia

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Catching up with Austria?

Convergence extrapolations based on GNI p.c., PPP

Period Initial level (Austria = 100)

Level at the end of the period

(Austria = 100)

How many years

(relative to 2013) needed to catch up with Austria?

1992 - 2013 55.2 56.8 174

2002 – 2007 56.2 63.8 19

2007 – 2013 62.8 58.8 

Own calculations from the WDI data.

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Czech Convergence: CR v. Austria

Austria = 100 in every year

0 10 20 30 40 50 60 70 80

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

GDP per capita (current US$)

GDP per person employed (constant 1990 PPP $)

GDP per capita, PPP (current international $)

GNI per capita, PPP (current international $)

Source of data: WDI

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Catching up with the Eurozone - Visegrad

Based on GNI p.c. in PPP

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Notes:

Simple extrapolations based on WDI data.

The number shows how many extra years (since 2013) would be needed for the country to fully converge to the GNI p.c. (PPP) of the Eurozone

1995-2013 2002-2007 2007-2013

Czech Republic 187 17 xxx

Hungary 30 3082 xxx

Poland 19 27 14

Slovakia 14 9 19

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