The structure of the euro area recovery

Transcription

1 The structure of the euro area recovery Rolf Strauch, Chief Economist JPMorgan Investor Seminar, IMF Annual Meetings Washington, October 2017

2 The euro area: a systemic player in global trade Trade openness (exports plus imports of goods and services) % of GDP Euro area China UK US Japan Source: ESM Based on national sources Note: Extra-Euro area trade openness 51% in

3 Euro area economies lead the recovery of global activity Purchasing managers index: Manufacturing India China Japan US Spain France Italy UK Germany Euro area NL Q Q2 Source: Thomson Reuters Datastream based on IHS Markit Economics 2

4 A stronger euro area: improved competitiveness % 0 Reduction in regulation and barriers ( ) US UK Euro area Change in product market regulation indicator Change in barriers to entrepreneurship indicator Change in barriers to trade and investment indicator Notes: Due to data availability, the euro area is comprised of Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Portugal and Spain Source: ESM based on OECD 3

5 A stronger euro area: improved competitiveness Number of euro area countries within top 25 best performers (2016) Global competitiveness index (WEF) Ease of doing business - resolving insolvency (WB) Ease of doing business - enforcing contracts (WB) Ease of doing business - trading across borders (WB) Ease of doing business (WB) Corruption perception index (TI) Source: ESM based on World Economic Forum (WEF), World Bank (WB) and Transparency International (TI) 4

6 Improved price competitiveness after the crisis despite recent appreciation Real effective exchange rate (ULCT-based, 2008Q1=100) China US Euro area Source: ESM based on EC, Eurostat 5

7 A stronger euro area: the robust recovery % 4 GDP per capita growth US Euro area Average GDP growth per capita, Euro area 1.6% US 1.6% Source: EC European Economic Forecast Spring 2017, AMECO 6

8 A stronger euro area: the robust recovery Employment rate in euro area and US since 2000 (Cumulative change in percentage point) 6 Euro area US Source: Eurostat and BLS 7

9 A stronger euro area: the robust recovery Gini coefficient (0 = perfect equality; 100 = maximal inequality) US Italy Germany France Source: Eurostat, World Bank 8

10 Investment is weak globally Investment to GDP ratio in the euro area and the US (nominal, % of GDP) Euro area US Source: ESM based on EC, Eurostat Note: Euro area excl. Ireland 9

11 Business investment in the euro area recovered 5 Investment weakness comes from households and government (real change since Q1/2008 in %, contributions in pp) Business Government Residential Total Source: ESM based on EC, Eurostat 10

12 Productivity falling behind as a driver of growth 6 Sources of GDP Growth in the euro area (in %) TFP Labour quantity Labour quality ICT capital Non-ICT capital GDP growth Source: ESM based on The Conference Board Total Economy Database (Adjusted version), May

13 Monetary policy relevant gaps are closing 1.0 Euro area: Monetary policy-relevant gaps (in standard deviations) Credit gap Unemployment gap (neg) Output gap Inflation gap Source: ESM based on EC, Eurostat, BIS Notes: data normalised relative to historic EA19+US sample of countries, NFC credit % GDP relative to historic trend, unemployment gap is relative to EC NAIRU estimate quarterly interpolation, output gap is relative to EC potential estimate quarterly interpolation, inflation gap is relative to 2%. 12

14 Change in the output gap from 2013 to 2017 Faster recovery of countries most hit by the crisis Convergence of Output Gaps since 2013 (in percentage points) 12 ES CY GR SI IE PT LU IT NL SK FI MT LT 2 LV BE DE FR 0 AT Output gap in Source: ESM based on EC, Eurostat 13

15 Convergence of HICP across the Euro area Convergence of HICP (2015=100%; standard deviation) Euro area excl. LU and Baltic Euro area Source: ESM based on EC, Eurostat 14

16 Next steps for the euro area: Policy proposals No full Fiscal Union needed No full Political Union needed Complete Banking Union European Deposit Insurance Backstop for the SRF Capital Markets Union To facilitate private sector efforts for financial integration More capital flows, more risk sharing Address taxation, insolvency and company law issues Fiscal Union Limited fiscal capacity for the euro area 15

17 Next steps for the euro area: Risk sharing needs Economic risk sharing in the euro area is lagging behind the US Percentage of shock smoothed by different channels EU EMU Canada US Germany Credit market Capital market Fiscal policy Source: Bruegel and IMF 16