Transcript CAPITAL MOVEMENTS TO EMERGING EUROPE AND EU …

CAPITAL MOVEMENTS TO
EMERGING EUROPE AND EU
CONVERGENCE:
RECENT DEVELOPMENTS AND
PROSPECTS
ISTANBUL
DECEMBER 2, 2005
Carlo Cottarelli, IMF
90
Figure 1. Emerging Markets' Gross and Net Issuance (in billions of U.S. dollars)
80
Europe
Middle East and Africa
Latin America
Asia
Total Net Issuance
70
60
50
40
30
20
10
0
Carlo Cottarelli
2005-Q1
2004-Q3
2004-Q1
2003-Q3
2003-Q1
2002-Q3
2002-Q1
2001-Q3
2001-Q1
2000-Q3
2000-Q1
1999-Q3
1999-Q1
1998-Q3
1998-Q1
1997-Q3
1997-Q1
-10
Carlo Cottarelli
9/30/2005
6/30/2005
US Stock
Market
3/31/2005
1600
12/31/2004
Argentina
9/30/2004
10-year UST
6/30/2004
1000
3/31/2004
12/31/2003
9/30/2003
6/30/2003
3/31/2003
12/31/2002
9/30/2002
6/30/2002
3/31/2002
12/31/2001
9/30/2001
6/30/2001
1400
3/31/2001
12/31/2000
Russia
9/30/2000
6/30/2000
3/31/2000
12/31/1999
200
9/30/1999
6/30/1999
3/31/1999
12/31/1998
9/30/1998
6/30/1998
3/31/1998
12/31/1997
Figure 2. EMBIG Spreads and UST Yields
1800
7
Fed Starts
raising rates
Brazil/ENRON
6.5
Katrina
6
1200
5.5
Ford/GM
5
800
4.5
600
EMBIG Spread
400
4
Brazil
3.5
0
3
50
Figure 3. Evolution of Regional Shares in Gross Issuance
45
Latin America
Asia
40
35
30
Europe
25
20
15
Middle East and Africa
10
5
0
1997
1998
1999
2000
2001
Carlo Cottarelli
2002
2003
2004
2005H1
Carlo Cottarelli
Jul-05
Apr-05
Jan-05
Nov-04
Aug-04
Jun-04
Mar-04
Jan-04
Oct-03
Jul-03
May-03
Feb-03
Dec-02
1600
Sep-02
Jul-02
Apr-02
Jan-02
Nov-01
Aug-01
Jun-01
Mar-01
Jan-01
Oct-00
Jul-00
May-00
Feb-00
Dec-99
Sep-99
Jul-99
Apr-99
Jan-99
Nov-98
Aug-98
Jun-98
Mar-98
Dec-97
Figure 4. Emerging Market Spreads (bps)
2600
Europe
2100
Latin America
Asia
EMBI Plus/Global
1100
600
100
Figure 5. Consolidated Claims of BIS Reporting Banks on Banking Sector
14000
12000
Millions of US dollars
10000
8000
6000
4000
2000
0
Q2
Q2
Q2
Q2
Q2
Q2
Q2
Q2
Q2
Q2
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005
Bulgaria
Croatia
Czech Republic
Estonia
Hungary
Lithuania
Poland
Romania
Slovakia
Slovenia
Carlo Cottarelli
Latvia
60
Figure 6. BIS claims on banks in developing countries, by region
(in percent of total BIS claims on banks in developing countries)
50
40
Asia & Pacific
Europe
30
Africa & Middle East
20
Latin
America/Caribbean
10
Carlo Cottarelli
Q1 2005
Q3 2004
Q1 2004
Q3 2003
Q1 2003
Q3 2002
Q1 2002
Q3 2001
Q1 2001
Q3 2000
Q1 2000
Q2 1999
Q2 1998
Q2 1997
Q2 1996
Q2 1995
Q2 1994
Q2 1993
Q2 1992
Q2 1991
Q2 1990
0
80
Figure 7. GDP per Capita ( PPP), as a share of euro area
Slovenia
70
Czech Republic
60
Hungary
Slovak Republic
2004
Estonia
Regional
Average
50
Lithuania
Poland
Latvia
Croatia
40
Bulgaria
30
Romania
20
20
30
40
50
1995
Carlo Cottarelli
60
70
80
2
Figure 8. Emerging Europe. Deterioration in Average Current Account Positions
1
CA adjusted for FDI
(in percent of GDP)
0
-1
-2
-3
-4
-5
Current Account Balance
(in percent of GDP)
-6
-7
2000
2001
2002
Carlo Cottarelli
2003
2004
7.5
Figure 9. Nominal Interest Rate Convergence: Yields on 10 year government bonds
(differentials with Germany)
Czech Republic
Latvia
Lithuania
6.5
Hungary
Poland
Slovenia
5.5
Slovak Republic
Estonia
4.5
3.5
2.5
1.5
0.5
Carlo Cottarelli
Sep-05
Jul-05
May-05
Mar-05
Jan-05
Nov-04
Sep-04
Jul-04
May-04
Mar-04
Jan-04
Nov-03
Sep-03
Jul-03
May-03
Mar-03
Jan-03
Nov-02
Sep-02
Jul-02
May-02
Mar-02
Jan-02
Nov-01
Sep-01
Jul-01
May-01
Mar-01
Jan-01
-0.5
Table 1 – Exchange rate regimes in Emerging Europe
Bulgaria
Currency Board
Croatia
Quasi-peg
Czech Republic
Float (limited intervention)
Estonia
Currency board and ERM II
Hungary
Managed float within large band
Latvia
Peg and ERMII
Lithuania
Currency board and ERMII
Poland
Managed Float
Romania
Managed Float
Slovakia
Managed float with sizable intervention and stability
Slovenia
De facto peg and ERM II
Carlo Cottarelli
1
Figure 10. Rolling Correlations of Local with German Yields
0.8
0.6
0.4
0.2
0
-0.2
Czech Republic
Hungary
Poland
-0.4
Slovak Republic
Carlo Cottarelli
Sep-05
Jul-05
May-05
Mar-05
Jan-05
Nov-04
Sep-04
Jul-04
May-04
Mar-04
Jan-04
Nov-03
Sep-03
Jul-03
May-03
Mar-03
Jan-03
Nov-02
Sep-02
Jul-02
May-02
Mar-02
Jan-02
-0.6
60
Figure 11. Bank Credit to the Private Sector Ratios
Relative to Euro Area Levels (Euro Area =100)
1999
2004
50
40
30
20
10
0
Bulgaria
Croatia
Czech
Republic
Estonia
Hungary
Latvia
Lithuania
Carlo Cottarelli
Poland
Romania
Slovak
Republic
Slovenia
25
LAT
Figure 12. Credit Growth and Current Account Deficits
BGR
20
EST
Change in Credit to GDP ratio
HRV
15
LIT
HUN
10
SVN
5
ROM
0
POL
-5
SVK
CZE
-10
0
2
4
6
8
Current Account Deficit (in percent of GDP)
Carlo Cottarelli
10
12
Table 2. Vulnerability Indicators: Number of Emerging European Countries per Quartile
2005
1st quartile 2nd quartile
2001
1st quartile 2nd quartile
External sector 1/
Current account balance
Current account minus FDI
External financing requirement
External financing from private sector
GIR/short-term debt
Gross external debt
Short-term debt
7
5
8
7
3
6
8
10
8
10
9
9
8
10
8
5
6
3
3
3
7
10
8
10
7
6
6
10
Fiscal sector 1/
Fiscal balance
Primary balance
Amortization of debt
Gross public debt
External public debt
5
6
2
0
0
5
10
6
2
2
3
4
...
0
1
4
8
...
3
1
Banking sector
NPL ratio
CAR
ROA
Change in credit/GDP
1
2
3
5
3
5
8
8
0
0
1
2
4
2
3
6
1/ In percent of GDP unless otherwise indicated.
Carlo Cottarelli
90
Figure 13. Actual vs Predicted Bank Credit to the Private Sector (in percent of GDP)
Actual, 2004
80
Predicted Value
70
60
50
40
30
20
10
0
Bulgaria
Croatia
Czech
Estonia
Republic
Hungary
Latvia
Lithuania
Carlo Cottarelli
Poland
Romania
Slovak
Republic
Slovenia