Grim Outlook for CEE from Lombard Street Research

In its daily note of January 16, Lombard Street Reseach writes via its analyst Maya Bhandari:

"The unwinding Eurasian savings glut will dominate 2009 economic outcomes. Emerging Europe faces the heaviest adjustment. The CEE-4 are amongst the biggest "borrow and spend" economies in Europe, with large external financing needs. But they also share the Asian Tigers' dependence on foreign demand for domestic growth, with two nasty twists – many banking systems are directly tied to the global crunch, and scope for policy action, both monetary and fiscal, is restricted."

TREND Watch Monthly on Slovakia's Economy

Is available at the Ministry of Foreign Affairs' website (in English). Soon with the December issue. Note: Author of this blog is also the author and project manager of the above-mentioned product.

Hagara the New Chief Analyst of ING Slovakia

Since January 1, the new chief analyst of ING Slovakia is Eduard Hagara, aged 29. Hagara, born in Kežmarok, replaced Ján Tóth, the chairman of the Club of Economic Analysts, after almost ten years in this position. In 2003, Hagara co-authored a paper (in Slovak) on the similarity of demand and supply shocks in European countries with Jarko Fidrmuc. The study was published in Politická ekonomie in 2004. He obtained a degree in economic and financial mathematics from Comenius University in Bratislava, and worked for ING for almost five years. He is a four-time Slovak chess champion. E. Hagara this way joined the ranks of young economists in senior analyst positions in Slovakia, following Vladimír Vaňo (30), who became the chief analyst of Volksbank Slovakia in fall 2007.

Lipták on Sustainable Use of Natural Resources

An essay of one of our contributors, František Lipták, with which the author participated in the International Year of Planet Earth in Paris. The essay was presented at the National and Regional Economics conference in Herľany, Slovakia, held on October 1-3, 2008.
Abstract:

"In our paper, we analyze issues concerning sustainability of natural resource consumption involving contemporary problems emerging from their increasing scarcity. After brief historical outline, we discuss issue of natural resource use according to various policy approaches dealing with tax policy, externalities, institutions and technological progress."

Working on Paper Bringing More Science to Politics

Here's an excerpt:

"Whenever a quarrel in the legislative debate or its part can be reduced to solving an empirical question (of factual nature), scientific method is the one to be followed. For example, a tentative debate over an introduction of a protective tariff could use an argument that “cheap imports from abroad cause higher domestic unemployment.” This argument for a tariff is scientifically verifiable within the realm of economic reserach. This way, the counter-arguments such as “cheaper imports leave more resources in domestic wallets, supporting the local economy in creation of new jobs” or “more import puts pressure on local currency to depreciate, which stimulates exports” or “free labor from uncompetitive industries can move to branches with higher value-added, increasing total income” shall be also given a proper consideration. In the end, thus, a policy decision may not depend on economic misinterpretation of the happenings, but rather on the time preference (that is, short-term- or longer-term-orientedness) of the administration in power."

Any comments on the topic are warmly welcome!

Czech GDP/head higher than New Zealand's or South Korea's

In PPP dollars, according to The Economist (World In 2009).

Average Wages in Visegrád Four Countries

Note: Bloomberg served as the source of data.

The chart above graphs the development of average monthly wages in V4 countries. Inter-country comparisons are difficult however, mainly due to various definitions of gross wage across the region. Comparing total labor costs or net wages instead might make more sense. Due to higher employer contributions in Slovakia, for exmple, the average gross wage is lower than that in Hungary. When comparing net wages, however, Hungarian salaries have been lower than Slovak ones for the last four quarters.

A Narrowing Gap in Europe

This is a re-post of my original blog at etrend.sk (in Slovak), which has been visited by more than nine thousand internet users by now. I am attaching the graph from there to CEEW as well.The chart above shows the development of GDP per head relative to the EU average in three major Eurozone economies as well as several CEE countries. The curves incorporate price levels in various countries through purchasing parity standards (PPS). Thickness of a curve represents roughly the size of a country's population.
One can observe a significant downward movement in case of Italy - by about 20 perc. points within fifteen years. "A lost decade" is currently being felt in Hungary, where GDP per person compared to the EU average is stagnating. Other countries of the region however experience a considerable convergence towards the income levels of the EU average. Slovenia, one of the most succesful countries, will most probably in the medium term overtake its neighbor Italy in GDP per person. This would be the first case of a former Eastern Bloc country to reach higher incomes than a major Western European power.

Top 10 Czech Companies

According to sales in 2007:

1. Škoda Auto, automotive, € 8.00 billion
2. ČEZ, energy, € 6.29 billion
3. Foxconn, engineering, € 3.23 billion
4. Unipetrol, oil transmission, € 3.20 billion
5. Agrofert, foodstuff & retail, € 3.00 billion
6. RWE Transgas, gas transmission, € 2.83 billion
7. Siemens, engineering, € 2.55 billion
8. Telefonica O2, communication, €2.27 billion
9. Moravia Steel, metallurgy retail, € 2.23 billion
10. Toyota Peugeot-Citroen, automotive, € 1.85 billion

Note: RWE Energy is missing in the list, although its should be in the top 5.

Top 5 Exporters:
1. Škoda
2. Foxconn
3. ČEZ
4. Panasonic
5. Unipetrol

Sources:
http://www.feedit.cz/a.asp?a=2002938
http://ekonomika.idnes.cz/skoda-vyvezla-zbozi-za-195-miliard-patri-ji-tak-prvni-misto-mezi-exportery-1le-/ekoakcie.asp?c=A080611_160547_ekoakcie_pin

For top Slovak companies in 2007, visit our earlier post.

Slovak Public Finance Not Consolidating Anymore

General government deficit in Slovakia should reach 2.2% of GDP this year according to the latest estimate of the Ministry of Finance. Vis-a-vis the 2008 budget, this is a small improvement of 0.1 percentage point. With respect to the last year's result (a 2.2% deficit), however, it is a stagnation in the process of public finance consolidation. The stagnation comes even after the private pension pillar was open for half a year in 2008 and thousands left for the state pay-as-you-go system, bringing their savings into the state Social Insurance Company. According to earlier statements of Prime Minister Robert Fico, this year's public finance deficit should have narrowed to below 2.0% of GDP.

In addition, for the first time in years, the actual collected end-year tax revenues might be smaller than projected. After seven months of the year, state budget revenues of SKK 186.6 billion have been collected, which is only 53.6% of projected end-year total. Last year at the end of July, the number stood at 59.7%, which is slightly more than 7/12 of the total. Cumulatively, as a result, the state budget ended up in a minute deficit of SKK 614 million (€ 20 mil), which is the worst result in four years, despite still booming economy. Last year at this time, the state budget recorded a surplus of almost SKK 4 billion.

Major factor to blame is the collection of VAT, the dominant source of public finance, which is frozen at last year’s levels, even though retail sales grew by an average of 14% in current prices during the first six months of the year. The fiscal trend, representing a negative change from previous years, should theoretically limit the government in its proposals for generous spending policies. As of now, the restricting effect cannot be observed however.