europe by deiney

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									Europe: Overview
• • Euro introduction on January 1, 1999; smooth at the outset after years of preparation. Countries inside the Euro Zone: Germany, France, Spain, Ireland, Italy, Portugal, Luxembourg, The Netherlands, Belgium, Austria, and Finland. Notable countries outside: Sweden, UK, Switzerland, Norway, Greece, and Denmark. One monetary policy. Strong currency would reflect optimism on the region’s prospects. EMU countries are more heterogeneous than are the 50 United States. Maastricht forced fiscal discipline. Will they lurch left? Any real competition?
E11 - Real GDP Growth
Real GDP Year-on-Year Change
Percent Change Percent

•

The Euro Zone now has one monetary policy, but 11 fiscal policies, labor market policies, regulatory regimes, starting points, cultures, preferences for risk or caution, etc. Backgrounds, differences in standard of living, highly varied senses of appropriate fiscal stance, and macro labor issues will continue to dominate. EMU liberalization of travel rules and implicit labor barriers among the members remain. Migration of labor, even within countries, still remains trivial. Cultural, linguistic, parochial, and skills gaps dampen large population shifts within EU countries. Capital and labor mismatch and immobility an issue.
E11 - Interest Rates
Official Discount Rate
16 14 12 10
Austria Belgium Germany Italy Spain

•

• • • •

•

• •

4 3 2 1

8 0 -1 -2 6 4 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Merill Lynch

2

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: IFS; Datastream

E11 - Inflation Rate
All Item CPI
Percent Change, Year Ago

E11 - Industrial Production
Manufacture Index
Percent Change, Year Ago

2.5

10

2.0

5

1.5

0

1.0

-5

0.5

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Bloomberg

-10

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Bloomberg

IV-1

EUROPE March 10, 1999 www.milken-inst.org

Europe: Overview
Market Zones Compared
Euro-zone Total area (1000 Km/sq) Population (millions, average 1998) GDP (1998 Ecu bn at market prices) GDP (annual % change, 98/97) Inflation (annual % change, Nov 98/Nov97) General gov. deficit 1997 (as % of GDP) General gov. debt 1997 (as % of GDP) Exports (1997, Ecu bn) Imports (1997, Ecu bn) Trade balance (1997, Ecu bn) Industrial production growth (97/96, %) Monetary supply (M1, Ecu bn Sep 98) 3-month short-term interest rate (Oct 98, %) 10-year gov. bond yield (Nov 98 nominal, %) Foreign ex. reserves, ex gold (Aug 98 Ecu bn) Stock market capitalization (Oct 98 Ecu bn) (2) Outstanding public debt securities (Dec 97 Ecu bn) Unemployment rate (Oct 98, %) 2,364 292 5,774 3.0 0.9 -2.5 74.5 760.8 671.4 89.4 4.1 1,629.9 3.7 4.3 296.4 (1) 3,190.9 3,272.4 10.8 US 9,373 270 7,592 3.3 1.5 -0.3 61.5 606.3 792.4 -186.1 4.9 911.7 5.2 4.8 56.1 9,679.7 6,706.9 4.5 Japan 378 127 3,327 -2.5 0.8 -3.4 86.7 371.3 298.6

•

United States still leads the E11: with 20 million fewer people but a GDP that is 25% larger than the Euroland countries. Also higher market capitalization, and higher trade volume. Productivity, employment, output also in U.S. favor. Euroland has regional product of about US$6 trillion. Germany and France account for more than half. Are policy votes really equal? Across the EMU, corporate tax rates vary widely. In Germany, the higher rate on the chart below applies to retained profits, the lower to distributed profits. Euroland countries’ spending varies widely on social security. Very different welfare-state perspectives.
Shares of E11 GDP, 1997

• •

•

•

72.7 3.7 1,195.2 0.7 1.1 187.1 3,300.9 2,822.0 4.3 (3)
So urce: Datastream/ICV

Spain 8.5% Ireland 1.2% Italy 18.2% Portugal 1.5% France 22.1%

Netherlands 5.8%

Belgium 3.8% Austria 3.3% Finland 1.9%

Germany 33.5% Luxembourg 0.2%

Notes: (1) Estimated; (2) US (NYSE and Nasdaq), Japan (Tokyo and Osaka); (3) September Source: Eurostat

E11 - Tax Rates
Corporation Tax Rates
Percent Percent

E11 Total Tax Revenue
As Percent of GDP, 1996
60
Total Tax Revenue (excluding SS) Social Security Contributions

60 55 50 45 40 35 30 25
43.6 41.7 41.3 40.2 39.6 37.5 35.0 35.0 34.0 32.0 28.0 France Belgium Luxem. Spain Ireland Germany Italy Portugal Nether. Austria Finland
Source: Financial Times

56.7

50 40 30 20 10 0

Finland France Austria Italy Spain Portugal Belgium Luxem. Nether. Germany Ireland
Source: Financial Times

EUROPE March 10, 1999 www.milken-inst.org

IV-2

Europe: Overview
•
E11 - Unemployment Rate
Unemployment Rate
Percent

Unemployment rates vary widely in Europe. For the EMU as a whole, it averages about 10.7%. But for Ireland, unemployment is under 7%. Germany, Ireland, and Spain represent extremes of performance and circumstances in Euroland at January 1, 1999 euro launch. One of the Euroland challenges – one monetary policy but highly varied economic circumstances. How to decide the right policies? Budget deficits largely brought under control for overall region, but still major variation. The Maastricht debt target of 60%: Belgium at 120% of GDP; Italy at 110%; but Norway just above 30%.
E11 - Government Debt
As Percent of GDP
Percent

12.0

•

11.5

•
11.0

•
10.5

•
10.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Bloomberg

E11 - Unemployment Rate
Germany, Ireland, and Spain
Percent

20 18 16 14 12 10

Germany Ireland Spain

76 74 72 70 68

8 6 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: Bloomberg; WEFA

66

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: The Financial Times; Milken Institute

E11 - Buget Balance
Germany, Ireland, and Spain
US$ Millions Percent

E11 - Budget Balance
Government Surplus/Deficit as Percent of GDP
0

600 400 200 0 -200 -400 -600
Germany Ireland Spain

-1 -2 -3 -4 -5 -6

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: The Financial Times; Milken Institute

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EUROPE March 10, 1999 www.milken-inst.org

Europe: Overview
Europe - Trade Balance

•

EU economic growth helped by stable currencies, constrained price levels, low interest rates, and strong investment. Trade is mostly intraregional, so currency issues likely will not dominate. Lower exposure profile to global markets insulated EU countries from crisis effects. Capital investment increased from 1994-1997. New manufacturing orders declined in 1998; some weakness a concern. Europe wants growth. Massive business consolidation coming, encouraged by Euro launch. Great opportunities for the nimble.

EU Trade Balance
US$ Billions Percent Change, Year Ago

15 10 5 0 -5

• • • • •

EU Trade Balance - L EU Exports - R EU Imports - R

10 8 6 4 2 0 -2

-10

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

-4

Europe - Capital Investment
EU Gross Fixed Investment Formation
Percent Change, Year Ago Percent

Europe - Capacity Utilization
EU Capacity Utilization
86 84 82

4 2 0 -2

80 -4 -6 -8 78 76

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

Europe - New Orders
In Manufacturing
Months

Europe - Consumer Confidence
EU Consumer Confidence on Business Climate
Balance of Opinion

25 20 15 10 5 0 -5 -10 -15 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

0 -5 -10 -15 -20 -25 -30

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

EUROPE March 10, 1999 www.milken-inst.org

IV-4

Europe: Per Capita Real Income
Austria - Per Capita Real Income
1990 Prices
US$ Thousands 35

• • •

Norway has the highest reported per capita income in the Euro Zone. Switzerland has exceeded US$30,000 per capita for the past 14 years. Despite Switzerland’s consistently high income level, over the past decade it ranks last in the Euro Zone for growth. Although Ireland has relatively low per capita real income, its growth in the past decade is unmatched. Euroland opportunities perhaps best in the world. Consolidation, costcutting, restructuring likely to accelerate with common currency. Many hurdles and difficulties, but lesson being taught by the UK to the continent on economic reform and innovation. May become a real competition on the continent.

30

•
25

•
20

15

• •
80 82 84 86 88 90 92 94 96 98
Source: WEFA

10

Belgium - Per Capita Real Income
1990 Prices
US$ Thousands 35

Denmark - Per Capita Real Income
1990 Prices
US$ Thousands 35

Finland - Per Capita Real Income
1990 Prices
US$ Thousands 35

30

30

30

25

25

25

20

20

20

15

15

15

10 80 82 84 86 88 90 92 94 96 98
Source: WEFA

10 80 82 84 86 88 90 92 94 96 98
Source: WEFA

10 80 82 84 86 88 90 92 94 96 98
Source: WEFA

France - Per Capita Real Income
1990 Prices
US$ Thousands 35

Germany - Per Capita Real Income
1990 Prices
US$ Thousands 35

Ireland - Per Capita Real Income
1990 Prices
US$ Thousands 35

30

30

30

25

25

25

20

20

20
1980=9.4 1981=9.6 1982=9.7 1983=9.6 1984=9.9

15

15

15

10 80 82 84 86 88 90 92 94 96 98
Source: WEFA

10 80 82 84 86 88 90 92 94 96 98
Source: WEFA

10 80 82 84 86 88 90 92 94 96 98
Source: WEFA

IV-5

EUROPE March 10, 1999 www.milken-inst.org

Europe: Per Capita Real Income
Italy - Per Capita Real Income
1990 Prices
US$ Thousands 35

•

Greece and Portugal have been excluded from this comparison because neither country’s per capita real income exceeded US$10,000 between 1980 and 1998. Portugal ranks last in the Euro Zone with a per capita income of just US$8,400 in 1998.

30

•

25

20

15

10 80 82 84 86 88 90 92 94 96 98
Source: WEFA

Netherlands - Per Capita Real Income
1990 Prices
US$ Thousands 35

Norway - Per Capita Real Income
1990 Prices
US$ Thousands 35

Spain - Per Capita Real Income
1990 Prices
US$ Thousands 35

30

30

30

25

25

25

20

20

20
1980=9.8 1981=9.7 1982=9.8 1983=10.0 1984=10.0

15

15

15

10 80 82 84 86 88 90 92 94 96 98
Source: WEFA

10 80 82 84 86 88 90 92 94 96 98
Source: WEFA

10 80 82 84 86 88 90 92 94 96 98
Source: WEFA

Sweden - Per Capita Real Income
1990 Prices
US$ Thousands 35

Switzerland - Per Capita Real Income
1990 Prices
US$ Thousands 35

UK - Per Capita Real Income
1990 Prices
US$ Thousands 35

30

30

30

25

25

25

20

20

20

15

15

15

10 80 82 84 86 88 90 92 94 96 98
Source: WEFA

10 80 82 84 86 88 90 92 94 96 98
Source: WEFA

10 80 82 84 86 88 90 92 94 96 98
Source: WEFA

EUROPE March 10, 1999 www.milken-inst.org

IV-6

Europe: Equity Markets
Austria - Equity Index
ATX Index
Index January 1998=100 200 180 160 140 120 100 80 60 JAN MAR MAY JUL 1998
Source: Bloomberg

Belgium - Equity Index
BEL 20 Index
Index January 1998=100 200 180 160 140 120 100 80 60

•

The US market decline experienced August through September 1998 also visible in European equities. Greece made the most significant recovery, bouncing back over 90% since the second week of October. Greece equities lead the region with market growth over 125% since the beginning of 1998. Also one of the least developed equities markets.

•

•

SEP NOV JAN MAR 1999

JAN MAR MAY JUL 1998
Source: Bloomberg

SEP NOV JAN MAR 1999

•

Denmark - Equity Index
Copenhagen Index
Index January 1998=100 200 180 160 140 120 100 80 60 JAN MAR MAY JUL 1998
Source: Bloomberg

Finland - Equity Index
Helsinki General Index
Index January 1998=100 200 180 160 140 120 100 80 60

France - Equity Index
CAC 40 Index
Index January 1998=100 200 180 160 140 120 100 80 60

SEP NOV JAN MAR 1999

JAN MAR MAY JUL 1998
Source: Bloomberg

SEP NOV JAN MAR 1999

JAN MAR MAY JUL 1998
Source: Bloomberg

SEP NOV JAN MAR 1999

Germany - Equity Index
DAX Index
Index January 1998=100 200 180 160 140 120 100 80 60 JAN MAR MAY JUL 1998
Source: Bloomberg

Greece - Equity Index
ASE Composite Index
Index January 1998=100 200 180 160 140 120 100 80 60
Note: Feb. 12, 1999=228.87

Ireland - Equity Index
ISEQ Index
Index January 1998=100 200 180 160 140 120 100 80 60

SEP NOV JAN MAR 1999

JAN MAR MAY JUL 1998
Source: Bloomberg

SEP NOV JAN MAR 1999

JAN MAR MAY JUL 1998
Source: Bloomberg

SEP NOV JAN MAR 1999

IV-7

EUROPE March 10, 1999 www.milken-inst.org

Europe: Equity Markets
Italy - Equity Index
MIB 30 Index
Index January 1998=100 200 180 160 140 120 100 80 60 JAN MAR MAY JUL 1998
Source: Bloomberg

Netherlands - Equity Index
CBS General Index
Index January 1998=100 200 180 160 140 120 100 80 60

•

Most European equity markets have expanded since January 1998. Despite growing economies and wealthy population, Norway’s and Denmark’s equity markets weak performers in 1998. 1999 not inspiring for most markets. Highly different perspectives and degrees of acceptance of equities in Europe. Will this change with euro?

•

• •
JAN MAR MAY JUL 1998
Source: Bloomberg

SEP NOV JAN MAR 1999

SEP NOV JAN MAR 1999

•

Norway - Equity Index
OBX Index
Index January 1998=100 200 180 160 140 120 100 80
Note: Oct. 9, 1998=58.32

Portugal - Equity Index
Lisbon General Index
Index January 1998=100 200 180 160 140 120 100 80 60

Spain - Equity Index
Madrid General Index
Index January 1998=100 200 180 160 140 120 100 80 60

60 JAN MAR MAY JUL 1998
Source: Bloomberg

SEP NOV JAN MAR 1999

JAN MAR MAY JUL 1998
Source: Bloomberg

SEP NOV JAN MAR 1999

JAN MAR MAY JUL 1998
Source: Bloomberg

SEP NOV JAN MAR 1999

Sweden - Equity Index
Affarsvarlden General Index
Index January 1998=100 200 180 160 140 120 100 80 60 JAN MAR MAY JUL 1998
Source: Bloomberg

Switzerland - Equity Index
Swiss Market Index
Index January 1998=100 200 180 160 140 120 100 80 60

United Kingdom - Equity Index
100 Index
Index January 1998=100 200 180 160 140 120 100 80 60

SEP NOV JAN MAR 1999

JAN MAR MAY JUL 1998
Source: Bloomberg

SEP NOV JAN MAR 1999

JAN MAR MAY JUL 1998
Source: Bloomberg

SEP NOV JAN MAR 1999

EUROPE March 10, 1999 www.milken-inst.org

IV-8

Europe: Real GDP Comparisons
Austria - Real GDP
1990 Prices
Percent Change, Year Ago 10

Belgium - Real GDP
1990 Prices
Percent Change, Year Ago 10

•

Ireland leading the resurgence in region in growth -- three of the last four years over 8%. Finland recovered from negative growth in 1991 through 1993; now expanding strongly. Germany and France are the two largest economies in the region. Switzerland the weakest performer in recent years. Will a real competition develop within Euroland? Among the others?

8

8

•

6

6

4

4

• • •
80 82 84 86 88 90 92 94 96 98
Source: WEFA

2

2

0

0

-2

-2

-4 80 82 84 86 88 90 92 94 96 98
Source: WEFA

-4

Denmark - Real GDP
1990 Prices
Percent Change, Year Ago 10

Finland - Real GDP
1990 Prices
Percent Change, Year Ago 10

France - Real GDP
1990 Prices
Percent Change, Year Ago 10

8

8

8

6

6

6

4

4

4

2

2

2

0

0

0

-2

-2
Note: -7.07% growth in 1991

-2

-4 80 82 84 86 88 90 92 94 96 98
Source: WEFA

-4 80 82 84 86 88 90 92 94 96 98
Source: WEFA

-4 80 82 84 86 88 90 92 94 96 98
Source: WEFA

Greece - Real GDP
1990 Prices
Percent Change, Year Ago 10

Germany - Real GDP
1990 Prices
Percent Change, Year Ago 10

Ireland - Real GDP
1990 Prices
Percent Change, Year Ago 10
Note: 11.12% growth in 1995

8

8

8

6

6

6

4

4

4

2

2

2

0

0

0

-2

-2

-2

-4 80 82 84 86 88 90 92 94 96 98
Source: WEFA

-4 80 82 84 86 88 90 92 94 96 98
Sources: IFS; Milken Institute

-4 80 82 84 86 88 90 92 94 96 98
Source: WEFA

IV-9

EUROPE March 10, 1999 www.milken-inst.org

Europe: Real GDP Comparisons
Italy - Real GDP
1990 Prices
Percent Change, Year Ago 10

Netherlands - Real GDP
1990 Prices
Percent Change, Year Ago 10

• •

Switzerland doing somewhat better last two years. Still fundamental problems of noncompetitiveness, growth in industries that Switzerland does not dominate. 1993 down year for almost all of Europe. Relative positions of European countries changes much recent years. Part of Euroland fallout; efforts to alter policy; take on old constituencies.

8

8

6

6

4

4

• •

2

2

0

0

-2

-2

-4 80 82 84 86 88 90 92 94 96 98
Source: WEFA

-4 80 82 84 86 88 90 92 94 96 98
Source: WEFA

Norway - Real GDP
1990 Prices
Percent Change, Year Ago 10

Portugal - Real GDP
1990 Prices
Percent Change, Year Ago 10

Spain - Real GDP
1990 Prices
Percent Change, Year Ago 10

8

8

8

6

6

6

4

4

4

2

2

2

0

0

0

-2

-2

-2

-4 80 82 84 86 88 90 92 94 96 98
Source: WEFA

-4 80 82 84 86 88 90 92 94 96 98
Source: WEFA

-4 80 82 84 86 88 90 92 94 96 98
Source: WEFA

Sweden - Real GDP
1990 Prices
Percent Change, Year Ago 10

Switzerland - Real GDP
1990 Prices
Percent Change, Year Ago 10

United Kingdom - Real GDP
1990 Prices
Percent Change, Year Ago 10

8

8

8

6

6

6

4

4

4

2

2

2

0

0

0

-2

-2

-2

-4 80 82 84 86 88 90 92 94 96 98
Source: WEFA

-4 80 82 84 86 88 90 92 94 96 98
Source: WEFA

-4 80 82 84 86 88 90 92 94 96 98
Source: WEFA

EUROPE March 10, 1999 www.milken-inst.org

IV-10

Europe: Inflation
Austria - Inflation Rate
Consumer Price Index
Percent 25 Percent 25

Belgium - Inflation Rate
Consumer Price Index

• •

Inflation convergence to about 1.5-2.0%, part of euro launch. So-called Maastricht convergence criteria allowed countries to adopt policies with this as political cover. Greece currently highest inflation in Europe, about 5%. Progress is stunning. Inflation differentials in early 1980s huge compared to early 1990s, and now nearly nonexistent.
France - Inflation Rate
Consumer Price Index
Percent 25

20

20

15

15

10

10

• • •
80 82 84 86 Source: WEFA 88 90 92 94 96 98

5

5

0

0

-5 80 82 84 86 Source: WEFA 88 90 92 94 96 98

-5

Denmark - Inflation Rate
Consumer Price Index
Percent 25 Percent 25

Finland - Inflation Rate
Consumer Price Index

20

20

20

15

15

15

10

10

10

5

5

5

0

0

0

-5 80 82 84 86 Source: WEFA 88 90 92 94 96 98

-5 80 82 84 86 Source: WEFA 88 90 92 94 96 98

-5 80 82 84 86 Source: WEFA 88 90 92 94 96 98

Germany - Inflation Rate
Consumer Price Index
Percent 25 Percent 25

Greece - Inflation Rate
Consumer Price Index
Percent 25

Ireland - Inflation Rate
Consumer Price Index

20

20

20

15

15
Note: June 1980=27.0

15

10

10

10

5

5

5

0

0

0

-5 80 82 84 86 Source: WEFA 88 90 92 94 96 98

-5 80 82 84 Source: IFS 86 88 90 92 94 96 98

-5 80 82 84 86 88 Source: Datastream 90 92 94 96 98

IV-11

EUROPE March 10, 1999 www.milken-inst.org

Europe: Inflation
Italy - Inflation Rate
Consumer Price Index
Percent 25 Percent 25

Netherlands - Inflation Rate
Consumer Price Index

•

Most progress in the southern countries – without inflation stability history or commitment. Portugal, Spain, Italy improvement. Key to new capital, to better prospects, to acceptance. Germany and Netherlands history of stable prices in postwar era. Will high unemployment on continent and lurch to left in policy trigger another inflation runup?

20

20

•

15

15

10

10

•
5 5

0

0

•
80 82 84 Source: IFS 86 88 90 92 94 96 98

-5 80 82 84 86 Source: WEFA 88 90 92 94 96 98

-5

Norway - Inflation Rate
Consumer Price Index
Percent 25 Percent 25

Portugal - Inflation Rate
Consumer Price Index
Percent 25
Note: March 1982=27.3 December 1983=33.9

Spain - Inflation Rate
Consumer Price Index

20

20

20

15

15

15

10

10

10

5

5

5

0

0

0

-5 80 82 84 86 Source: WEFA 88 90 92 94 96 98

-5 80 82 84 Source: IFS 86 88 90 92 94 96 98

-5 80 82 84 86 Source: WEFA 88 90 92 94 96 98

Sweden - Inflation Rate
Consumer Price Index
Percent 25

Switzerland - Inflation Rate
Consumer Price Index
Percent 25

United Kingdom - Inflation Rate
Consumer Price Index
Percent 25

20

20

20

15

15

15

10

10

10

5

5

5

0

0

0

-5 80 82 84 86 Source: WEFA 88 90 92 94 96 98

-5 80 82 84 86 Source: WEFA 88 90 92 94 96 98

-5 80 82 84 86 Source: WEFA 88 90 92 94 96 98

EUROPE March 10, 1999 www.milken-inst.org

IV-12

Austria: Current Economic Conditions
Austria - Real GDP Growth
1990 Prices
Percent Change, Year Ago

• • • • •

GDP is projected to rise 2.9% in 1998. CPI fell below 1% from declining rental costs. Short-term interest rates are stable. Equity market dropped 30% from Jul-Dec 1998. Schilling stability in 1998 – a must for euro conversion.

5 4 3 2 1 0 -1

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Austria - Inflation Rate
Consumer Price Index
Percent Change, Year Ago Percent

Austria - Interest Rates
Short-Term and Long-Term
10
3 Month Interbank 10 Year Government Bond

5 4 3

8

6 2 1 0 4

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

2

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: WEFA; Bloomberg

Austria - Exchange Rate
Schillings Per US Dollar
AS/US$ Index

Austria - Equity Index
Austrian Traded Index
1800 1600 1400 1200

9.5 10.0 10.5 11.0 11.5 12.0 12.5 13.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: IFS; Bloomberg

1000 800 600

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Bloomberg

IV-13

EUROPE March 10, 1999 www.milken-inst.org

Austria: Current Economic Conditions
Austria - Official Reserves
Total Reserves Minus Gold and as Percent of GDP
US$ Billions Percent

• • • • •

25
Reserves Minus Gold - L Reserves as % of GDP - R

11 10 9

Unemployment continues to edge up. Jobless rate is at an eight-year high. Current account balance as a percent of GDP has declined since 1995. Reserves building up. Industrial production dropped sharply in 1998. Maastricht-induced fiscal restraint puts deficit at half of 1995.

20

15 8 10 7 5 6 5

0

80

82

84

86

88

90

92

94

96

98

Source: IFS

Austria - Current Account Balance
As Percent of GDP
Percent

Austria - Industrial Production
Industrial Production Index
Percent Change, Year Ago

2

10

0

5

-2

0

-4

-5

-6

80

82

84

86

88

90

92

94

96

98

-10

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Source: IFS

Austria - Unemployment
Unemployment Rate
Percent Percent

Austria - Budget Balance
Government Surplus/Deficit as Percent of GDP
0 -1 -2 -3 -4 -5 -6

7.5 7.0 6.5 6.0 5.5 5.0 4.5

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

EUROPE March 10, 1999 www.milken-inst.org

IV-14

Austria: International Trade
Austria - Composition of Exports 1997
Raw materials 4% Other Food, drink & 2% tobacco 4% Chemical products 10% Consumer manufact. 14% Intermediate manufact. 26%
So urce: Eco no mist Intelligence Unit

• • •

Trade deficit remains less than US$2 billion in the last eight years. Imports and exports are mostly machinery and transport equipment. Germany – Austria’s biggest trade partner.

Machinery & transport equip. 40%

Austria - Composition of Imports 1997
Food, drink & tobacco 6% Chemical products 11% Consumer manufactures 18% Intermediate manufactures 19%
So urce: Eco no mist Intelligence Unit

Austria - Trade Balance
Merchandise Exports, Imports, and Balance
US$ Billions

8

Fuels 6% Machinery & transport equip. 40%

6 4 2 0 -2

Exports Imports Trade Balance

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Austria - Destination of Exports 1996

Austria - Origin of Imports 1996

Other 38%

Germany 36%

Other 33% Germany 42% Netherlands 3% Switzerland 3%

France 4%

Italy 8% UK Hungary 4%Switzerland 5% 5%

France 5%

US 5%

Italy 9%

So urce: Eco no mist Intelligence Unit

So urce: Eco no mist Intelligence Unit

IV-15

EUROPE March 10, 1999 www.milken-inst.org

Austria: Finance
Austria - Foreign Direct Investment
Foreign Investment Flows
US$ Billions

• • • •

Foreign investment flows – up since 1992 – peaked at $4.5 billion in 1996. Portfolio investment outflows less than -$2 billion until late 1996. Consumer confidence remains weak. Government debt as percent of GDP now exceeds 70%.

5 4 3 2 1 0

80

82

84

86

88

90

92

94

96

98

Source: IFS

Austria - Portfolio Investment
Inflows and Outflows
US$ Billions Percent

Austria - Foreign Liabilities
As Percent of GDP
50

6 4 2 0 -2

Inflows into Austria Outflows from Austria

45

40

35 -4 -6 30

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

80

82

84

86

88

90

92

94

96

98

Source: IFS

Austria - Consumer Opinion
Consumer Confidence Survey
Percent Improving Minus Percent Declining Percent

Austria - Government Debt
As Percent of GDP
80 70 60 50 40 30

20 10 0 -10 -20 -30

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Bloomberg

80

82

84

86

88

90

92

94

96

98

Source: WEFA

EUROPE March 10, 1999 www.milken-inst.org

IV-16

Belgium: Current Economic Conditions
Belgium - Real GDP Growth
1990 Prices
Percent Change, Year Ago

• • • • •

Real GDP is predicted to rise about 2.7% in 1998. Inflation remains subdued – CPI less than 1% yearover-year. Payroll tax cut in July 1999 should keep government deficit as a percent of GDP low. Interest rates have declined steadily in the 1990s. The Belgian franc is strengthening.

5 4 3 2 1 0 -1 -2 -3 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

Belgium - Inflation Rate
Consumer Price Index
Percent Change, Year Ago Percent

Belgium - Interest Rates
Short-Term and Long-Term
14 12 10
3 Month Interbank 10 Year Government Bond

5 4 3

8 2 6 1 0 4 2

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: IFS; Datastream

Belgium - Exchange Rate
Francs Per US Dollar
BF/US$ Index

Belgium - Equity Index
Brussels Stock Exchange BEL 20 Index
4000 3500 3000 2500 2000 1500 1000

28 30 32 34 36 38 40

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Bloomberg

IV-17

EUROPE March 10, 1999 www.milken-inst.org

Belgium: Current Economic Conditions
Belgium - Official Reserves
Total Reserves Minus Gold and as Percent of GDP
US$ Billions Percent

20
Reserves Minus Gold - L Reserves as % of GDP - R

7.5 7.0 6.5 6.0

• Sluggish industrial production points to a negative economic outlook. • • • • Official reserves continue to improve. Unemployment has trended lower since mid-1996. Retail sales strengthened in 1998 underscored by surging new car registrations. Current account balance is positive and trending up.

15

10 5.5 5 5.0 4.5 0 80 82 84 86 88 90 92 94 96 98 4.0

Source: IFS

Belgium - Current Account Balance
As Percent of GDP
Percent

Belgium - Industrial Production
Industrial Production Index
Percent Change, Year Ago

6 4 2 0 -2 -4

15 10 5 0 -5 -10

80

82

84

86

88

90

92

94

96

98

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Sources: IFS; Datastream

Belgium - Unemployment
Unemployment Rate
Percent Percent

Belgium - Budget Balance
Government Surplus/Deficit as Percent of GDP
0

15 14

-2 13 12 11 -6 10 9 -8 -4

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

EUROPE March 10, 1999 www.milken-inst.org

IV-18

Belgium: International Trade
Belgium - Composition of Exports 1997
Transport vehicles 16% Chemicals & allied products 13% Machinery & electrical goods 13% Metals & metal products 9%

• • • • •

Trade balance remains positive. Exports have declined with the European and global slowdown. Transport vehicles, chemicals and machinery, and electrical goods are leading exports. About half of total exports are to Germany, France, and Netherlands. Important market for EU production.

Other 28% Agricultural products 6% Gems, jewels & precious metals 7% Rubber & plastic products 8%
So urce: Eco no mic Intelligence Unit

Belgium - Origin of Imports 1997
Transport vehicles 16% Chemicals & allied products 13%

Belgium - Trade Balance
Merchandise Exports, Imports, and Balance
US$ Billions

20 15 10 5 0 -5
Exports Imports Trade Balance

Other 34%

Gems, jewels & precious metals 7% Machinery & Rubber & electrical plastic products Metals & metal products 8% 13% products So urce: Eco no mic Intelligence Unit 9%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: Datastream; IFS

Belgium - Destination of Exports 1997

Belgium - Origin of Imports 1997

Other 36%

Germany 19%

Other 31%

Germany 19%

France 17% US 5% US 8% UK 9%
So urce: Eco no mic Intelligence Unit

Netherlands 18%

UK 10%

Netherlands 13%

France 15%

So urce: Eco no mic Intelligence Unit

IV-19

EUROPE March 10, 1999 www.milken-inst.org

Belgium: Finance
Belgium-Luxembourg - Foreign Direct Investment
Foreign Investment Flows
US$ Billions

• • •

Foreign direct investment inflows are climbing up. Government debt as share of GDP has improved significantly in the past four years. But at 120% of GDP, debt to GDP is twice the Maastricht target.

14 12 10 8 6 4 2 0 80 82 84 86 88 90 92 94 96 98

Source: IFS

Belgium - Portfolio Investment
Portfolio Investm ent Liabilities
US$ Billions Percent

Belgium - Foreign Liabilities
As Percent of GDP
130 120 110 100

120 100 80 60

90

40 20 0

80 70

80

82

84

86

88

90

92

94

96

98

60

80

82

84

86

88

90

92

94

96

98

Source: Datastream

Source: IFS

Belgium - Private Banks
Reserves
US$ Billions Percent

Belgium - Government Debt
As Percent of GDP
140 135 130 125 120 115

10 8 6 4 2 0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: Datastream; IFS

80

82

84

86

88

90

92

94

96

98

Source: WEFA

EUROPE March 10, 1999 www.milken-inst.org

IV-20

Czech Republic: Current Economic Conditions
Czech Republic - Real GDP Growth
1990 Prices
Percent Change, Year Ago

• • • •

Real GDP growth negative in 1998, pulled down by weak consumer spending. Inflation is down from high of 13% in May. The Czech crown declined versus the dollar in 1998 after gaining in 1997. Interest rates continue to come down. The Czech National Bank cut the repo rate to 10.5% at the end of 1998 – the sixth cut in five months. The stock market fell dramatically in the middle of 1998 following the emerging market crises and remains relatively depressed.

30 25 20 15 10 5 0 -5 1993
Source: IFS

•

1994

1995

1996

1997

1998

1999

Czech Republic - Inflation Rate
Consumer Price Index
Percent Change, Year Ago

Czech Republic - Interest Rates
Short-Term and Long-Term
Percent

14

25
3 Month Interbank 7 Year Government Bond

12

20

10

15

8

10

6

1993
Source: IFS

1994

1995

1996

1997

1998

1999

5

1993

1994

1995

1996

1997

1998

1999

Sources: Datastream; Bloomberg

Czech Republic - Exchange Rate
Crown per US Dollar
CK/US$
Index

Czech Republic - Equity Index
HN-Wood Index
4000 3500 3000 2500 2000 1500 1000

0.028 0.030 0.032 0.034 0.036 0.038 0.040

1993

1994

1995

1996

1997

1998

1999

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Bloomberg

Source: WEFA

IV-21

EUROPE March 10, 1999 www.milken-inst.org

Czech Republic: Current Economic Conditions
Czech Republic - Official Reserves
Total Reserves Minus Gold and as Percent of GDP
US$ Billions Percent

•

14 12

Reserves Minus Gold - L Reserves as % of GDP - R

30

Signs of a recession: more unemployed...budget deficit larger...industrial production falling... construction output down...some service sectors down. Current account deficit continues to decline from its 1996 high.

25 10 8 6 15 4 2 10 20

•

1993

1994

1995

1996

1997

1998

1999

Sources: IFS; Datastream

Czech Republic - Current Account Balance
As Percent of GDP
Percent

Czech Republic - Industrial Production
Industrial Production Index
Percent Change, Year Ago

2 0

30

20

-2 -4 -6
0 10

-8 -10
-10

1993
Source: IFS

1994

1995

1996

1997

1998

1999

1993
Source: IFS

1994

1995

1996

1997

1998

1999

Czech Republic - Unemployment Rate
3 Month Moving Average
Percent Percent

Czech Republic - Budget Balance
Government Surplus/Deficit as Percent of GDP
1.0

7 6 5

0.5

0.0 4 3 2 -0.5

1993

1994

1995

1996

1997

1998

1999

-1.0

1993

1994

1995

1996

1997

1998

1999

Source: Datastream

Source: Datastream

EUROPE March 10, 1999 www.milken-inst.org

IV-22

Czech Republic: International Trade
Czech Republic - Composition of Exports 1997
Raw materials Other & fuels 5% 8% Chemicals 9%

• •

Exports strong in first half of 1998...reduction in trade deficit last year, but EU demand is slowing. Trade is with a small number of neighbors: Slovakia, Austria, Poland, and Germany account for 60% of exports. Germany is largest trading partner. Exports to Germany were up 40% in first half of 1998. Relatively high interest rates combined with low inflation have pushed up the value of the koruna. Machinery exports up 43% in first half of 1998. Earlier inward investment may be paying off.

Machinery & equipment 38%

• • •

Manufactured goods 40%
So urce: Eco no mist Intelligence Unit

Czech Republic - Composition of Imports 1997
Food & live Other 13% animals 5% Chemicals 12% Machinery & equipment 39%

Czech Republic - Trade Balance
Merchandise Exports, Imports, and Balance
US$ Billions

4 3 2 1 0

Exports Imports Trade Balance

Raw materials and fuels 12%

Manufactured goods 19%

-1

1993
Source: IFS

1994

1995

1996

1997

1998

1999

So urce: Eco no mist Intelligence Unit

Czech Republic - Destination of Exports 1997

Czech Republic - Origin of Imports 1997

Other 34%

Germany 35%

Germany 28% Other 46% Slovakia 8% Italy 5% Austria UK Poland 4% 3% 3%

France 3% Italy 3% Poland 6% Slovakia Austria 13% 6% Former Soviet Union 3%

So urce: Eco no mist Intelligence Unit So urce: Eco no mist Intelligence Unit

IV-23

EUROPE March 10, 1999 www.milken-inst.org

Czech Republic: Finance and Demographics
Czech Republic - Foreign Direct Investment
Foreign Investment Flows
US$ Billions

• • • •

Foreign direct investment down since 1995 high. Foreign debt is 40% of GDP, well within Maastricht targets. In purchasing power parity terms, per capita GDP continues climb up. Life expectancy improved in last 20 years, but still lags much of the developed world.

1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 1993
Source: IFS

1994

1995

1996

1997

1998

1999

Czech Republic - Portfolio Investment
Inflows and Outflows
US$ Billions Percent

Czech Republic - Foreign Debt
As Percent Of GDP
45

1.5

Inflows into Czech Republic Outflows from Czech Republic

1.0

40

0.5

35

0.0

30

-0.5

Note: Outflow data not available for 1995Q4, 1996Q1-2

1993
Source: IFS

1994

1995

1996

1997

1998

1999

25

1993

1994

1995

1996

1997

1998

1999

Source: Datastream

Czech Republic - GDP Per Capita
Purchasing Power Parity GDP Per Capita
US$ Thousands Years

Czech Republic - Life Expectancy at Birth
Total Years
78 76 74 72 70 68 66
Males Females Total

11.0 10.5 10.0 9.5 9.0 8.5 8.0

1993

1994

1995

1996

1997

1998

1999

1975
Source: World Bank

1996

Source: Datastream

EUROPE March 10, 1999 www.milken-inst.org

IV-24

Denmark: Current Economic Conditions
Denmark - Real GDP Growth
1990 Prices
Percent Change, Year Ago

• • • •

Real GDP growth is predicted to be above 3% for 1998. Inflation remains subdued – CPI under 2%. Denmark opts out of EMU. Why? Concern over strong business cycle movements and incompatibilities with Euroland monetary policy.

5 4 3 2 1 0 -1

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Denmark - Inflation Rate
Consumer Price Index
Percent Change, Year Ago Percent

Denmark - Interest Rates
Short-Term and Long-Term
20
3 Month Interbank 10 Year Government Bond

4

3

15

2

10

1

5

0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

Denmark - Exchange Rate
Krone Per US Dollar
DK/US$

• • • •

Yield curve flat but interest rates increased sharply in fall 1998 to defend krone. Financial and currency markets felt turmoil from Russian collapse. Krone not stabilized by euro participation. Krone in new exchange rate mechanism (ERM2) for non-EU members. Central bank policy will allow krone to fluctuate in 2.25% band relative to euro.

5.0 5.5 6.0 6.5 7.0 7.5

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

IV-25

EUROPE March 10, 1999 www.milken-inst.org

Denmark: Current Economic Conditions
Denmark - Official Reserves
Total Reserves Minus Gold and as Percent of GDP
US$ Billions Percent

• •

20
Reserves Minus Gold - L Reserves as % of GDP - R

12

Unemployment has declined sharply since 1994 and at record lows. Manufacturing sector hit with general labor strife in spring 1998. Government expects labor tightening by paring back early retirement. Household savings rates low at 4.3% of household disposable income. Current account balance slipped into deficit in mid1998. Threat to government’s foreign debt repayment program. Industrial production picking up.

15

10

•
8

10 6 5

• •

4

0

80

82

84

86

88

90

92

94

96

98

2

Source: IFS

•

Denmark - Current Account Balance
As Percent of GDP
Percent

Denmark - Industrial Production
Industrial Production Index
Percent Change, Year Ago

4 2 0 -2 -4 -6

15 10 5 0 -5 -10

80

82

84

86

88

90

92

94

96

98

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Source: IFS

Denmark - Unemployment Rate
3 Month Moving Average
Percent Percent

Denmark - Budget Balance
Government Surplus/Deficit as Percent of GDP
0.5 0.0

14 12

-0.5 10 8 6 -2.5 4 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

-1.0 -1.5 -2.0

-3.0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

EUROPE March 10, 1999 www.milken-inst.org

IV-26

Denmark: International Trade
Denmark - Composition of Exports 1997
Ships 2% Fuels 4% Agricultural products 13% Other 7%

• • • •

Exports are 36% of GDP. Manufactured goods represent 74% of all exports. Exports hit hard by Asian and Russian crises. But global slowdown and weak European demand will hit exports harder.

Manufactured goods 74%
So urce: Eco no mist Intelligence Unit

Denmark - Composition of Imports 1997
Transport equipment 7% Capital goods 13% Fuels 5%

Denmark - Trade Balance
Merchandise Exports, Imports, and Balance
US$ Billions

6 5 4 3

Exports Imports Trade Balance

Intermediate goods 47%

2 1 0

Consumer goods 28%
So urce: Eco no mist Intelligence Unit

-1

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Denmark - Destination of Exports 1997

Denmark - Origin of Imports 1997

Germany 21% Other 41% Other 38%

Germany 22%

Sweden 12% UK 10% France 5% Norway 6%

Sweden 13% Norway 5% Netherlands 8%

US 5%

France 6%

UK 8%

So urce: Eco no mist Intelligence Unit

So urce: Eco no mist Intelligence Unit

IV-27

EUROPE March 10, 1999 www.milken-inst.org

Denmark: Finance
Denmark - Foreign Direct Investment
Foreign Investment Flows
US$ Billions

• • • • •

Government debt at 63.3% of GDP – just outside Maastricht target. Government hopes to reduce debt to 40% of GDP. Current trend is downward. Equity market capitalization 58% of GDP. Plus – concentration ratio low at 39% for top 10 firms. Banking sector assets at 77.6% of GDP while banking concentration at 1.1% of GDP. Market adjusted debt ratio high at 0.74.

6 5 4 3 2 1 0 -1 80 82 84 86 88 90 92 94 96 98

Source: IFS

Denmark - Portfolio Investment
Inflows and Outflows
US$ Billions Percent

Denmark - Role of Trade
As Percent of GDP
40 38 36 34
Exports Imports

15 10 5 0

Inflows into Denmark Outflows from Denmark

32 -5 -10 -15 30 28 80 82 84 86 88 90 92 94 96 98 26 80 82 84 86 88 90 92 94 96 98

Source: IFS

Source: IFS

Denmark - Equity Index
Copenhagen Stock Exchange General Index
Index Percent

Denmark - Government Debt
As Percent of GDP
80 70 60

800 700 600 500

50 400 300 200 40 30

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Bloomberg

80

82

84

86

88

90

92

94

96

98

Source: WEFA

EUROPE March 10, 1999 www.milken-inst.org

IV-28

Finland: Current Economic Conditions
Finland - Real GDP Growth
1990 Prices
Percent Change, Year Ago

• • • •

GDP growth in 1998 is expected to rise about 4.2%, dipping below the 5% average since 1994. Inflation remains low – under 2% – from incomes policy pact and subdued import prices. Inflationary pressures may be held in check as long as labor market is slack. Structural problems due mostly to rigid labor markets.

10

5

0

-5

-10

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

Finland - Inflation Rate
Consumer Price Index
Percent Change, Year Ago Percent

Finland - Interest Rates
Short-Term and Long-Term
18 16
3 Month Interbank 10 Year Government Bond

8

6

14 12

4

10 8

2

6 4

0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

2

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: WEFA; IFS

Finland - Exchange Rate
Markkaa Per US Dollar
M/US$

• • • •

Finland joins Euroland. Euro conversion rate was 5.94573 markkaa. Value of markkaa has been volatile in 1990s. Will be stabilized by euro. Short- and long-term interest rates higher than Euroland rates. Macroeconomic policy calls for tightness and euro unification constrains monetary policy.

3.5 4.0 4.5 5.0 5.5 6.0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

IV-29

EUROPE March 10, 1999 www.milken-inst.org

Finland: Current Economic Conditions
Finland - Official Reserves
Total Reserves Minus Gold and as Percent of GDP
US$ Billions Percent

• •

12 10 8 6 4
Reserves Minus Gold - L Reserves as % of GDP - R

10

Current account balance moved strongly into surplus after 1994. Industrial activity picking up full steam. Overall tax burden high at 47% of GDP. But high tax rates on labor jeopardize job creation. Income transfers increased in mid-1990s with 25% of labor force receiving income support. Unemployment is trending lower. Jobless rate peaked in 1994.

8

• • • •

6

4 2 0 2

80

82

84

86

88

90

92

94

96

98

Source: IFS

Finland - Current Account Balance
As Percent of GDP
Percent

Finland - Industrial Production
Industrial Production Index
Percent Change, Year Ago

8 6 4 2

15 10 5 0

0 -2 -4 -6 80 82 84 86 88 90 92 94 96 98 -5 -10 -15

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Source: IFS

Finland - Unemployment Rate
3 Month Moving Average
Percent Percent

Finland - Government Deficit
As Percent of GDP
5 0 -5

20

15

10 -10 5 -15 -20

0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

EUROPE March 10, 1999 www.milken-inst.org

IV-30

Finland: International Trade
Finland - Composition of Exports 1997

• • • • •

Strong trade surplus due mostly to costcompetitiveness of Finnish manufactures. Exports 32% of GDP. Major exports – metals, paper, wood, and chemicals. Major imports are raw material inputs and consumer goods and services. Exports not hurt by Asian crisis because primary ÿÿÿ ÿÿ

Other 17% Wood products 7% Chemical products 10% Paper products 23%
So urce: Eco no mist Intelligence Unit

Metal & engineering products 43%

Finland - Composition of Imports 1997
Crude oil & fuels 8% Investment goods 15% Raw materials 55% Consumer goods 22%
So urce: Eco no mist Intelligence Unit

Finland - Trade Balance
Merchandise Exports, Imports, and Balance
US$ Billions

5 4 3 2 1 0 -1

Exports Imports Trade Balance

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Finland - Destination of Exports 1997
Germany 11% UK 10% Other 51% Sweden 10% Russia 7%

Finland - Origin of Imports 1997

Gemany 15% Sweden 12% Russia 8% Japan 5%
So urce: Eco no mist Intelligence Unit

Other 45%

France 4%
So urce: Eco no mist Intelligence Unit

US 7%

US 7%

UK 8%

IV-31

EUROPE March 10, 1999 www.milken-inst.org

Finland: Finance
Finland - Foreign Direct Investment
Foreign Investment Flows
US$ Billions

• • • •

Foreign direct investment flows strong but portfolio investment shows net outflow. Manufactured goods represent majority of exports. Government debt ballooned in early 1990s but leveled off at 56% of GDP by 1998. Government expenditures high at 43% of GDP. Such spending requires high tax rates.

2.5 2.0 1.5 1.0 0.5 0.0 -0.5

•

80

82

84

86

88

90

92

94

96

98

Source: IFS

Finland - Portfolio Investment
Inflows and Outflows
US$ Billions Percent

Finland - Manufactured Goods
As Percent of Exports
90

5 4 3 2 1 0 -1 -2 -3

Inflows into Finland Outflows from Finland

85

80

75

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

70

80

82

84

86

88

90

92

94

96

98

Source: WEFA

• • •

Finland - Government Debt

Equity market capitalization 62% of GDP.
Percent

As Percent of GDP
70 60 50 40 30 20 10

High concentration – top 10 firms equal 56% of equity capitalization. Banking sector assets equal 76% of GDP. Low compared to EU average of 106%. Banking concentration ratio low. Corporate bond market small relative to other European economies. Market-adjusted debt ratio 43% of GDP. But household savings rates low at 2.8%.

• • •

80

82

84

86

88

90

92

94

96

98

Source: WEFA

EUROPE March 10, 1999 www.milken-inst.org

IV-32

France: Current Economic Conditions
France - Real GDP Growth
1990 Prices
Percent Change, Year Ago

• • • • • •

GDP growth strengthening since 1995. In 1998 GDP growth is estimated to be 2.8%. Relaunching Franco-German axis within Euroland will be foreign policy priority. Inflation down but unemployment persistently high. Consumption demand robust in 1998, driven by World Cup. GDP growth beginning to slow due to deteriorating world trade.

5 4 3 2 1 0 -1 -2 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

France - Inflation Rate
Consumer Price Index
Percent Change, Year Ago Percent

France - Unemployment Rate
Seasonally Adjusted
13 12 11

4

3

2 10 1 9 8

0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

France - Exchange Rate
Francs per US Dollar
FF/US$

• • • • • •

Euro conversion rate was 6.5596 francs. Slight improvement in employment due to World Cup, job-seekers increased in second half 1998. 35-hour week not expected to improve employment as few employers commit to job creation. Youth unemployment high, over 22% for under 25. High unemployment largely structural problem. Will require politically unpopular reforms. To spur job creation, tax reform will reduce corporate tax on wages. Some favorable tax exemptions will expire. Minimum tax rate will rise.

4.6 4.8 5.0 5.2 5.4 5.6 5.8 6.0 6.2 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

IV-33

EUROPE March 10, 1999 www.milken-inst.org

France: Current Economic Conditions
France - Interest Rates
Short-Term and Long-Term
Percent

• • • • • •

12 10 8 6 4 2

Yield curve flat as long rates have fallen to postwar lows. Due to “flight to quality” after Russian default. Budget deficit meets Maastricht criteria. Industrial production robust. Large swings in past few years and currently headed lower. Current account balance in strong surplus. Government debt high but leveling off at 57.7% of GDP. Government spending at 47% – third-highest in Europe after Belgium and Netherlands.

3 Month Interbank 10 Year Government Bond

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

France - Current Account Balance
As Percent of GDP
Percent

France - Industrial Production
Industrial Production
Percent Change, Year Ago

3

8 6

2

4 2

1 0 0 -2 -4 -1 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: IFS; WEFA

-6

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

France - Government Debt
As Percent of GDP
Percent Percent

France - Budget Balance
Government Surplus/Deficit as Percent of GDP
0 -1 -2

60 50 40

-3 30 -4 20 10 -5 -6

80

82

84

86

88

90

92

94

96

98

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

Source: WEFA

EUROPE March 10, 1999 www.milken-inst.org

IV-34

France: International Trade
France - Composition of Exports 1996
Steel & other Other metals 3% 8% Motor vehicles & transport equip. 14% Agricultural produce 15% Investment goods 28%

• • •

Exports have increased dramatically in 1990s and now equal 26.6% of GDP. France is third largest arms exporter after US and UK. Exports fell in 1998 due to Asian crisis and weakening EU demand; auto exports continue to be strong. Slowdown in British economy will affect French exports, especially autos. Trade surplus remains large, but under pressure.

•
Non-durable consumer goods 16%

•

Chemicals 16%

So urce: Eco no mist Intelligence Unit

France - Composition of Imports 1996
30

France - Trade Balance
Merchandise Exports, Imports, and Balance
US$ Billions

Steel & other metals 9% Agricultural produce 12% Motor vehicles & transport equip. 12%

Other 8%

Investment goods 27%

25 20 15 10 5

Exports Imports Trade Balance

Chemicals 16% Non-durable consumer products 16%

0 -5 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

So urce: Eco no mist Intelligence Unit

France - Destination of Exports 1997

France - Origin of Imports 1997

Germany 16% Other 42% UK 10% Italy 9% US 7% Spain 8% BelgiumLuxembourg 8% Spain 7%

Germany 17% Italy 10% US 9% UK 8%

Other 41%

So urce: Eco no mist Intelligence Unit

BelgiumLuxembourg So urce: Eco no mist Intelligence Unit 8%

IV-35

EUROPE March 10, 1999 www.milken-inst.org

France: International Trade and Finance
France - Role of Trade
As Percent of GDP
Percent

• •

GDP driven by dramatic increase in trade. Terms of trade improved in 1990s as export prices rose faster than import prices. Foreign direct investment and portfolio investment up strongly, reflecting favorable prospects within Euroland. Investment flows show positive outlook. Major negative is underutilized labor force and inflexible labor markets. Official reserves at a comfortable level and rising – reflecting strength and stability of the franc in anticipation of currency unification.

27 26 25 24 23 22 21 20 19 80 82 84 86 88 90 92 94 96 98
Exports Imports

•

•

•
Source: IFS

France - Portfolio Investment
Inflows and Outflows
US$ Billions US$ Billions

France - Foreign Direct Investment
Direct Investment Inflows
12 10 8 6 4 2 0

30 20 10 0 -10 -20 -30 -40 -50

Inflows into France Outflows from France

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

France - Terms of Trade
Export Price/Import Price
Ratio

France - Official Reserves
Total Reserves Minus Gold and as Percent of GDP
US$ Billions Percent

1.10 1.08 1.06

45
Reserves Minus Gold - L Reserves as % of GDP - R

3.2 3.0 2.8 2.6 2.4

40

35 1.04 1.02 1.00 25 0.98 0.96 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

30

2.2 2.0 1.8

20

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

1.6

EUROPE March 10, 1999 www.milken-inst.org

IV-36

France: Finance
France - Equity Index
CAC 40 Index
Index

• • • • •

4500 4000 3500 3000 2500 2000 1500 1000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Bloomberg

French equities have performed well in the 1990s, marred only by the Russian default. Market capitalization of 48% of GDP is low compared to European average. Equity market concentration is low at 38.4% for the top 10 firms. Market-adjusted debt ratio of .59 equals European average. Banking sector assets equal 107% of GDP, also EU average. Banking concentration ratio also in middle of range. Corporate bond market small relative to other large European economies.
France - Consumer Confidence
Seasonally Adjusted
Percent Balance of Opinion

•

France - Domestic Credit
Claims on Public and Private Sector
Francs, Billion

10000 8000 6000

Claims on Private Sector Claims on Public Sector

-5 -10 -15 -20

4000 -25 2000 0 -30 -35

80

82

84

86

88

90

92

94

96

98

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

Source: IFS

• • • •

France - Gross Fixed Capital Formation

Combined corporate taxes about average for Euroland. Strong growth in corporate gross fixed investment. Consumer confidence improving with strong move toward positive balance of opinion. Credit claims on private and public sectors have been rising steadily, heavily favoring private credit creation. Household savings rate – 13.6% of household disposable income – is the highest among major European countries.

Seasonally Adjusted
Francs, Billion

370 360 350 340 330 320

•

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

IV-37

EUROPE March 10, 1999 www.milken-inst.org

France: Labor Markets and Demographics
France - Hourly Wages Cost
Blue Collar Workers
Index April 1993=100

•

115 110 105 100 95 90 85

Wage costs are up over past decade. Particularly at lower skill levels where France is at competitive disadvantage relative to periphery economies. High wage costs and greater opportunities for capital mobility within Europe create difficulties for reducing structural unemployment. The population is growing older with fewer births, immigration, and longer life spans. Life expectancy is up since 1962. As with all “pay as you go” systems, demographic pressures will strain France’s pension system.

•

•

•
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

France - Unit Labor Costs
Textiles and Engineering
Index January 1993=100 Percent

France - Capacity Utilization
Capacity Utilization
90

800
Textiles Engineering

88 86

750

700

84 82

650 80 600 78

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

France - Young and Old Dependents
Young and Elderly as Percent of Total Population
Percent Years

France - Life Expectancy at Birth
Total Years
85
Males Females Total

35
0 - 19 Years Old 60 Years and Older

30

80

25

75

20

70

15

1950

1960

1970

1980

1990

2000

2010

2020

65

1962
Source: World Bank

1996

Source: United Nations

EUROPE March 10, 1999 www.milken-inst.org

IV-38

Germany: Current Economic Conditions
Germany - Real GDP Growth
1990 Prices
Percent Change, Year Ago

• •

20 15 10 5 0 -5

Economic growth is projected to decline to less than 2.5% in 1998. German economy at $2.1 trillion – largest in Europe. Everything appears Maastricht compliant. Major priorities are EU employment policy pact and finance and agricultural reforms. Problem: structural unemployment. High wages and burdensome labor regulations likely to keep unemployment in double digits for years. Labor supply side factors also put brakes on job creation. Former East German states still suffer significantly higher unemployment, double the rate in the West.
Germany - Unemployment Rate
East Germany vs. West Germany
Percent

• • •

•
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

•
Germany - Unemployment Rate
Seasonally Adjusted

Percent

12 11

25 20

Former E. Germany (not SA) Former W. Germany (SA)

10 9 8 7 5 6 5 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

15 10

0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

Germany - Exchange Rate
Deutsche Mark per US Dollar
DM/US$

•

1.3 1.4 1.5 1.6 1.7 1.8 1.9

Launch of euro and monetary policy successful, but Duisenberg and Lafontaine still at odds on foreign exchange controls. Schröeder has already clashed with Bundesbank over monetary stimulus and growth targets. Deutsche mark remains strong. Appreciation against dollar stabilized. Yield curve is flattening again, driven up by higher short-term interest rates. Long-term assets look less attractive.

• • • •
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

IV-39

EUROPE March 10, 1999 www.milken-inst.org

Germany: Current Economic Conditions
Germany - Government Consumption
As Percent of GDP
Percent

•

20.5 20.0 19.5 19.0 18.5 18.0 17.5

Government expenditure and consumption shot up in the early 1990s with unification of East and West Germany. So did private consumption, which now stands at about 57% of GDP. Capacity utilization rates reflect difficulties in absorbing labor market slack.

• •

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Germany - Government Expenditures
As Percent of GDP
Percent Percent

Private Consumption
As Percent of GDP
59 58 57

34 33 32

56 31 55 30 29 54 53

80

82

84

86

88

90

92

94

96

98

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Source: IFS

Germany - Capacity Utilization
Total Manufacturing Industries
Percent

Germany - Normalized Unit Labor Costs
Core and Periphery Labor Pressures
Percent change, Year Ago

90 88 86 84

40 30 20 10

Germany Greece

82 80 78 76 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

0 -10 -20

80

82

84

86

88

90

92

94

96

98

Source: IFS

EUROPE March 10, 1999 www.milken-inst.org

IV-40

Germany: Current Economic Conditions
Germany - Inflation Rate
Consumer Price Index
Percent Change, Year Ago

• • •

Inflation under control – about 1%. Social spending is chronic concern. Government deficits barely within Maastricht targets. Public consumption has reached plateau at 20%. Demands of an aging population will create upward pressure. Aside from reunification dip, industrial production is up and stable.

7 6 5 4 3 2 1 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

•

Germany - Goverment Consumption Comparison
As Percent of GDP
Percent

Germany - Industrial Production
3 Month Moving Average
Percent Change, Year Ago

23 22 21 20 19 18 17 16 15 70 75

Germany United States

10

5

0

-5

80

85

90

95

-10

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Sources: IFS; Bureau of Economic Analysis

Germany - Capital Investment
Gross Fixed Capital Formation
US$ Billions Percent

Germany - Budget Balance
Government Surplus/Deficit as Percent of GDP
0

550 500

-1 450 400 350 -3 300 250 -4 -2

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

IV-41

EUROPE March 10, 1999 www.milken-inst.org

Germany: International Trade
Germany - Composition of Exports 1997

•

Germany is major trading nation, despite significant import restrictions. External demand drives the German economy. Slump in demand from commodity producing countries and global economic downturn hit exports hard. Domestic demand is unlikely to pick up all the slack left by withering international demand.

Other 23% Textiles & clothing 4% Food & tobacco 4% Metals & manufactures 8% Chemicals 13%

•
Machinery 31%

•

Motor vehicles 17%

So urce: Eco no mist Intelligence Unit

Germany - Composition of Imports 1997

Germany - Trade Balance
Merchandise Exports, Imports, and Balance
US$ Billions

60

Other 36%

Machinery 22%

50 40 30
Exports Imports Trade Balance

Road vehicles 10% Metals & manufactures 7% Textiles & clothing 8%
So urce: Eco no mist Intelligence Unit

20 10 0 -10

Chemicals 9% Food & tobacco 8%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Germany - Destination of Exports 1997
France 11%

Germany - Origin of Imports 1997
France 11% Netherlands 9% Other 46% Italy 8% US 8% UK 7% BelgiumLuxembourg 6%

US 9% UK 9% Italy 7% Netherlands 7% Japan 5%

Other 49%

BelgiumLuxembourg 6% So urce: Eco no mist Intelligence Unit

Japan 2%

So urce: Eco no mist Intelligence Unit

EUROPE March 10, 1999 www.milken-inst.org

IV-42

Germany: International Trade
Germany - Role of Trade
As Percent of GDP
Percent

• • •

German trade is well balanced between intra-EU and trade with the US. After UK, Germany is second most important European market for US companies. Economic turnaround in much of Euroland’s peripheral countries may shift toward greater intraEU trade. Export growth slowed in 1998 due to after effects of Asian and Russian crises.

40
Exports Imports

30

20

•
10

0

80

82

84

86

88

90

92

94

96

98

Source: IFS

Germany - Trade Balance with United States
US Merchandise Trade Balance
US$ Billions

Germany - Trade Balance with Europe
EU Merchandise Trade Balance
US$ Billions

5 4 3 2
Exports to US Imports from US Trade Balance with US

30 25 20 15 10
EU Trade Balance Exports to EU Imports from EU

1 0 -1

5 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IMF, Direction of Trade

-5

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IMF, Direction of Trade

Germany - Current Account Balance
As Percent of GDP
Percent

• • • •

Capital account shows outflow of funds in 1997 and 1998. Investors appear to be diversifying with other Euroland member countries. Reunification had a major negative effect on Germany’s current account. Hike in interest rates and strong defense of deutsche mark have also been important.

4 3 2 1 0 -1 -2

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: IFS; WEFA

IV-43

EUROPE March 10, 1999 www.milken-inst.org

Germany: Finance
Germany - Foreign Direct Investment
Foreign Investment Flows
US$ Billions

• •
• •

Germany remains attractive investment destination. Bond yields will rise when investors re-enter Asia and Latin America. Government debt is slightly above 60% of GDP - just outside the Maastricht target zone. Official reserves have been stable for six years.

6

4

2

0

-2

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Germany - Portfolio Investment
Inflows and Outflows
US$ Billions
Percent

Germany - Foreign Liabilities
As Percent of GDP
1.4 1.2 1.0 0.8 0.6 0.4 0.2

60 40 20 0 -20 -40 -60

Inflows into Germany Outflows from Germany

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Germany - Official Reserves
Total Reserves Minus Gold and as Percent of GDP
US$ Billions Percent

Germany - Government Debt
As Percent of GDP
Percent

130 120 110 100 90 80 70 60 50

Reserves Minus Gold - L Reserves as % of GDP - R

5.5

65 60 55

5.0

4.5 50 4.0 45 40 3.5 35 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

3.0

30

80

82

84

86

88

90

92

94

96

98

Source: WEFA

EUROPE March 10, 1999 www.milken-inst.org

IV-44

Germany: Finance
Germany - Equity Index
DAX Index
Index

• • • •

German equity markets have performed very well in 1990s, rising almost 400%. Market capitalization is low at 39% of GDP – compared with 140% in US and 156% in UK. Concentration of equity market is in the middle range for Europe. Top 10 firms equal 51% of total equities. The DAX, the largest stock exchange, lists a relatively small number of industrials. Market-adjusted debt ratio is third largest in Europe. Banks dominate the German financial landscape. Banking sector assets are 130% of GDP. Corporate bond sector largest among European countries.
Germany - Index Comparison
Standard and Poor's 500 vs. German DAX
Index Jan. 1, 1990=100

6000 5000 4000 3000 2000 1000

• •
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Bloomberg

•

Germany DAX
Price Earnings Ratio
Ratio

55 50 45 40 35 30 25 20 15 1993 1994 1995 1996 1997 1998 1999

400 350 300 250 200 150 100 50

United States S&P 500 German DAX Index

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: Bloomberg; WEFA

Source: Bloomberg

Germany - Interest Rates
Short-Term and Long-Term
Percent US$ Billions

Germany - Claims on Private Sector
Banks vs. Non-Banks
3000 2500 2000
Deposit Money Banks Non-Bank Financial Institutions

10

3-month Interbank 10 Year Government Bond

8

6

1500 1000

4 500 2 0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

IV-45

EUROPE March 10, 1999 www.milken-inst.org

Germany: Demographics
Germany - Young and Old Dependents
Young and Elderly as Percent of Total Population
Percent

•

35 30 25 20 15 10

0 - 19 Years Old 60 Years and Older

Germany’s population is aging, which has placed enormous strains on the pension system. The country will have to rethink its pension policies. Today there are more older Germans than younger. The increasing dependency ratio of total population to the labor force is the result of an aging population and entry barriers to immigration. Germans are having fewer babies, with the birth rate lower in former East Germany than West. Aside from reunification spike in 1989-1990, population growth is down. Nine percent of Germany’s population comprises foreigners. Many come looking for work and push the unemployment rate even higher.
Germany - Population Indicators
Former East vs. Former West, 1997 East (thousands) 14,083 3.5 6.5 10.9 -4.4 1.9 71.77 79.02 West (thousands) 67,974 5.5 10.7 10.4 +0.3 2.4 74.07 80.21

•

• •
1950 1960 1970 1980 1990 2000 2010 2020

•

Source: United Nations

Germany - Life Expectancy at Birth
Total Years
Years

80 78 76 74 72 70 68 66

Males Females Total

1962
Source: World Bank

1996

Indicator Population Marriages Live births Deaths Excess of births (+) or of deaths (-) Divorces Life expectancy (years): Men Women
Source: Federal Statistical Office Germany

Germany - Population Growth
Germany vs. United States
Percent Change

Germany - Population by Citizenship
1997 Number (millions) 2.11 1.27 .61 .36 .28 .19 .11 74.64 7.42

2.5 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0

Germany United States

Citizenship Turkey Yugoslavia Italy Greece Poland Austria United States
Note: Germany data not available for 1991

Percent 2.57 1.55 .74 .44 .35 .23 .13 90.96 9.04

50

55

60

65

70

75

80

85

90

95

Total Germans Total Foreigners
Source: Federal Statistical Office Germany

Source: IFS

EUROPE March 10, 1999 www.milken-inst.org

IV-46

Greece: Current Economic Conditions
Greece - Real GDP Growth
1990 Prices
Percent Change, Year Ago

• • • • • •

GDP growth is projected to be about 3.4% in 1998. Inflation trending lower in the late 1990s. Inflation must be reduced from 5% to 2% to gain entry into the EMU. Greece converged long-term interest rates as criteria for EMU membership. The drachma has weakened for over a decade. Explosive gains in stock market in the past two years – over 200% growth.

5 4 3 2 1 0 -1

80

82

84

86

88

90

92

94

96

98

Source: WEFA

Greece - Inflation Rate
Consumer Price Index
Percent Change, Year Ago Percent

Greece - Interest Rates
Short-Term and Long-Term
100
3 Month Interbank Long Term Bond

25 20 15 10 5 0

80 60 40 20 0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: Bloomberg; Datastream

Greece - Exchange Rate
Drachmas Per US Dollar
DR/US$ Index

Greece - Equity Index
Athens Stock Exchange Composite Index
3000 2500 2000

150

200

250 1500 300 1000 500

350

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

IV-47

EUROPE March 10, 1999 www.milken-inst.org

Greece: Current Economic Conditions
Greece - Official Reserves
Total Reserves Minus Gold and as Percent of GDP
US$ Billions Percent

• •

20
Reserves Minus Gold - L Reserves as % of GDP - R

16 14 12 10

Official reserves increased in past five years, falling only once in 1997. EMU membership requires government deficit as a percentage of GDP to be 3% or lower. Estimates forecast 2.8% in 1998. Falling oil prices – offset by increased exports to OECD countries – flattened current account balance as % GDP. Unemployment in manufacturing is prolonging a labor restructuring. Recent recovery of industrial production is estimated to account for 24% of GDP.

15

10 8 5 6 4 0 80 82 84 86 88 90 92 94 96 98 2

•

• •

Source: IFS

Greece - Current Account Balance
As Percent of GDP
Percent

Greece - Industrial Production
Industrial Production Index
Percent Change, Year Ago

-6 -8 -10

10

5

0 -12 -14 -16 -5

80

82

84

86

88

90

92

94

96

98

-10

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Source: IFS

Greece - Unemployment
Unemployment Rate
Percent Percent

Greece - Budget Balance
Government Surplus/Deficit as Percent of GDP
0

12 10 8

-5

-10 6 4 2 -15

80

82

84

86

88

90

92

94

96

98

-20

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

Source: Datastream

EUROPE March 10, 1999 www.milken-inst.org

IV-48

Greece: International Trade
Greece - Composition of Exports 1996
Manufactures 26% Food & beverages 11% Petroleum products 6% Raw materials & semi-finished goods 3%

• • • •

Greece has maintained a negative trade balance for over two decades. Capital and manufactured consumer goods make up 60% of Greece’s imports Manufactures and goods and beverages dominate exports. Germany receives most of Greece’s exports. A large portion of Greece’s imports come from Italy.

Other 50%

Tobacco 2%

Minerals 2%

So urce: Eco no mist Intelligence Unit

Greece - Composition of Imports 1996

Greece - Trade Balance
Merchandise Exports, Imports, and Balance
US$ Billions

5

Iron & steel 2% Chemicals 4% Crude oil 6% Food 12%

Other 16% Manufactured consumer goods 36%

4 3 2 1 0 -1 -2

Exports Imports Trade Balance

Capital goods 24%

-3

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

So urce: Eco no mist Intelligence Unit

Greece - Destination of Exports 1997

Greece - Origin of Imports 1997

Germany 19% Other 41% Other 51% Italy 14% UK 6% France 5%
So urce: Eco no mist Intelligence Unit

Italy 18%

Germany 14% France 10% UK Netherlands 6% 7%

US 5%

Spain 4%

So urce: Eco no mist Intelligence Unit

IV-49

EUROPE March 10, 1999 www.milken-inst.org

Greece: Finance
Greece - Foreign Direct Investment
Foreign Investment Flows
US$ Billions

• •

1.2

Foreign direct investment rose in 1980s, leveling off in 1992. Foreign liabilities as percent of GDP increased since 1991, now over 30%. Regulation of banks may be implemented to control growth of lending and fight inflationary pressures. The growth of private house lending has increased significantly in past five years. Government debt has exceeded GDP for the past five years after increasing since 1980.

1.0

•
0.8

•
0.6

•
80 82 84 86 88 90 92 94 96 98

0.4

Source: IFS

Greece - Private Sector Bank Lending
Growth of Housing and Total
Percent Change, Year Ago Percent

Greece - Foreign Liabilities
As Percent of GDP
35 30 25 20 15 10

50 40 30 20 10 0

Total Housing

80

82

84

86

88

90

92

94

96

98

80

82

84

86

88

90

92

94

96

98

Source: Datastream

Source: IFS

Greece - Business Climate
Consumer Confidence Survey
Balance of Opinion Percent

Greece - Government Debt
As Percent of GDP
120 100 80

10 0 -10

60 -20 40 -30 -40 20 0

80

82

84

86

88

90

92

94

96

98

80

82

84

86

88

90

92

94

96

98

Source: WEFA

Source: WEFA

EUROPE March 10, 1999 www.milken-inst.org

IV-50

Hungary: Current Economic Conditions
Hungary - Real GDP Growth
1990 Prices
Percent Change, Year Ago

• • • • •

GDP growth in Hungary is estimated at 5% in 1998. Inflation is down – near decade low. Short rates declining – near 1993 lows. The forint continues to weaken against dollar – mostly from global foreign exchange crisis. Budapest Stock Exchange starting to recover from plunge during Russian crisis.

10 5 0 -5 -10 -15

80

82

84

86

88

90

92

94

96

98

Source: IFS

Hungary - Inflation Rate
Consumer Price Index
Percent Change, Year Ago

Hungary - Short-Term Interest Rate
3 Month Interbank
Percent

40 35 30

40 35 30

25 25 20 15 10 20 15

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

Hungary - Exchange Rate
Forints Per US Dollar
HF/US$ Index

Hungary - Equity Index
Budapest Stock Index
10000 8000 6000

50

100

150 4000 200 2000 0

250

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Bloomberg

IV-51

EUROPE March 10, 1999 www.milken-inst.org

Hungary: Current Economic Conditions
Hungary - Official Reserves
Total Reserves Minus Gold and as Percent of GDP
US$ Billions Percent

• • • •

12 10 8 6

Reserves Minus Gold - L Reserves as % of GDP - R

35 30 25 20 15

Falling reserves from defense of forint following Russian crisis. Current account balance as a percent of GDP is negative but improving. Industrial production up. Growth rate 14% during the first nine months of 1998. Unemployment improving but regional jobless rate varies widely.

4 2 0

10 5 80 82 84 86 88 90 92 94 96 98 0

Sources: IFS; Datastream

Hungary - Current Account Balance
As Percent of GDP
Percent

Hungary - Industrial Production
Industrial Production Index
Percent Change, Year Ago

0 -2 -4 -6 -8 -10 -12 -14 -16 80 82 84 86 88 90 92 94 96 98

20 10 0 -10 -20 -30

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Source: IFS

Hungary - Unemployment Rate
3 Month Moving Average
Percent Percent

Hungary - Budget Balance
Government Surplus/Deficit as Percent of GDP
0 -1 -2 -3 -4 -5 -6

14 12 10 8 6 4 2 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

-7

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

EUROPE March 10, 1999 www.milken-inst.org

IV-52

Hungary: International Trade
Hungary - Composition of Exports 1997
Raw materials 4% Food & beverages 13% Fuels & electricity 3%

• • •

Most significant category of exports and imports: machinery and equipment. Trade deficit since late 1992 but trade surplus with EU. Germany was Hungary’s most significant trading partner in 1997. Hungary’s trade surplus with Germany was $812 million in the first three quarters of 1998. Exports to United States up 58% during the first three quarters of 1998. The US is now Hungary’s fourth largest export partner.

Machinery & equipment 45%

• •

Other manufactures 35%
So urce: Eco no mist Intelligence Unit

Hungary - Composition of Imports 1997
Food & Raw Materials beverages 3% 4% Fuels 10% Machinery & equipment 42%
2.5 2.0 1.5 1.0 0.5 0.0 -0.5

Hungary - Trade Balance
Merchandise Exports, Imports, and Balance
US$ Billions

Exports Imports Trade Balance

Other manufactures 41%
So urce: Eco no mist Intelligence Unit

-1.0 -1.5
Note: Data not available for 1991

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Hungary - Destination of Exports 1997

Hungary - Origin of Imports 1997

Germany 27% Other 41% Germany 37% Other 45% Russia 5%

Austria 11% Russia 7% Italy 10%

Italy 6%

Austria 11%

So urce: Eco no mist Intelligence Unit

So urce: Eco no mist Intelligence Unit

IV-53

EUROPE March 10, 1999 www.milken-inst.org

Hungary: Finance
Hungary - Foreign Direct Investment
Foreign Investment Flows
US$ Billions

• •

Foreign direct investment holding up well despite pressure from the Russian crisis. Portfolio investment negatively affected by Russian crisis. Risk-averse investors taking money out of Hungary. Foreign liabilities as a percent of GDP up.

5 4 3 2 1 0

•

80

82

84

86

88

90

92

94

96

98

Source: IFS

Hungary - Portfolio Investment
Portfolio Investment Liabilities
US$ Billions Percent

Hungary - Foreign Liabilities
As Percent of GDP
17 16 15 14 13

1.5 1.0 0.5 0.0 -0.5 -1.0

Inflows into Hungary Outflows from Hungary

Note: Outflow data not availabe for 1995Q1, 1996Q2

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

12

80

82

84

86

88

90

92

94

96

98

Source: Datastream

Hungary - Destinations of Exports
Exports as Percent of Hungary's World Exports
Percent Percent

Hungary - Origins of Imports
Imports as Percent of Hungary's World Imports
35 30

40

30
Germany Austria Italy Russia (U.S.S.R.)

25 20 15 10 5

20

Germany Austria Italy Russia (U.S.S.R.)

10

0

80

82

84

86

88

90

92

94

96

98

0

80

82

84

86

88

90

92

94

96

98

Sources: IMF, Direction of Trade; Economist Intelligence Unit

Sources: IMF, Direction of Trade; Economist Intelligence Unit

EUROPE March 10, 1999 www.milken-inst.org

IV-54

Italy: Current Economic Conditions
Italy - Real GDP Growth
1990 Prices
Percent Change, Year Ago

• • •

Real GDP growth has slowed in 1998 with sluggish domestic demand. Remarkable progress has been made to qualify under Maastricht guidelines for euro currency union. Strong euro support reflects hope for external discipline to stabilize domestic politics.

4 3 2 1 0 -1 -2

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

Italy - Inflation Rate
Consumer Price Index
Percent Change, Year Ago Percent

Italy - Interest Rates
Short-Term and Long-Term
14 12 10 8 6 4 2
3 Month Interbank 10 Year Government Bond

7 6 5 4 3 2 1

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

Italy - Exchange Rate
Lire per US Dollar
L/US$

• •

1000 1200 1400 1600 1800 2000

Maastricht discipline successful as inflation slows to less than 2% and budget deficit shrinks. Unemployment persistently high at over 12%. Main problem is structural unemployment, a nagging characterstic of European economies. Yield curve fairly flat with 10-year bond rate at 4.5% – roughly 100 basis points above three-month interbank rate. Exchange rate depreciation of past six years has reversed in anticipation of the euro.

• •

•
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

IV-55

EUROPE March 10, 1999 www.milken-inst.org

Italy: Current Economic Conditions
Italy - Unemployment Rate
Seasonally Adjusted
Percent

•

13 12 11 10 9 8

A dual economy persists with unemployment in the South at 22.5%, the center at 9.5%, and the North at 5.9%. Political disagreements between leftist parties who demand public job creation and centrist parties who argue for private-sector investment. Budget plan includes tax cuts, especially for investment and employment in south.

•

•

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

Italy - Current Account Balance
As Percent of GDP
Percent

Italy - Industrial Production
Industrial Production
Percent Change, Year Ago

4 3 2 1

15

10

5 0 -1 -2 -3 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

0

-5

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

Italy - Budget Balance
Government Surplus/Deficit as Percent of GDP
Percent

• • • •

Industrial production sank early in 1998 and has only recovered slightly. Budget deficit dramatically down to 2.6% of GDP – well within Maastricht target zone. Privatization continues -- especially in the banking sector. Mergers and consolidation have restructured the financial sector.

0 -2 -4 -6 -8 -10 -12

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

EUROPE March 10, 1999 www.milken-inst.org

IV-56

Italy: International Trade
Italy - Composition of Exports 1997
Non-metal Other minerals 17% 4% Minerals & nonferrous metals 4% Food & tobacco 4% Chemicals 9% Transport equip 10%
So urce: Eco no mist Intelligence Unit

• • •

Exports equal 24.7% of GDP. The trade balance in surplus since 1993. Brief 1998 deterioration in surplus mostly due to Asian crisis. Large trade surpluses with France, Spain, UK, East Europe, and US. Wider deficit with Germany and Asia. With added euro discipline on budget policy and monetary policy, trade prognosis looks promising.

Engineering products 36%

• • •

Textiles, clothing & leather 16%

Italy - Composition of Imports 1997
Food & tobacco Textiles, 8% clothing & Engineering leather products 9% 28% Minerals & nonferrous metals 11% Energy Chemicals products 17% Transport equip 13% 14%
So urce: Eco no mist Intelligence Unit

Italy - Trade Balance
Merchandise Exports, Imports, and Balance
US$ Billions

30

Exports Imports Trade Balance

20

10

0

-10

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Italy - Destination of Exports 1997

Italy - Origin of Imports 1997

Germany 16%

Germany 18%

Other 49%

France 12% US 8%

Other 46%

France 13% UK 7% Netherlands 6%

Netherlands 3%

Spain 5%

UK 7%

BelgiumLuxembourg 5%
So urce: Eco no mist Intelligence Unit

US 5%

So urce: Eco no mist Intelligence Unit

IV-57

EUROPE March 10, 1999 www.milken-inst.org

Italy: International Trade
Italy - Role of Trade
As Percent of GDP
Percent

•

26
Exports Imports

Dramatic increase in exports reflects depreciation of the lire to the dollar in 1992 and increased competitiveness of the export sector. Low FDI highlights difficulty in attracting foreign firms. Portfolio investment recovered sharply with strong net inflows. Terms of trade have improved in 1990s, as export prices stay high. Lire strengthened against the deutsche mark in anticipation of monetary unity.

24 22 20 18 16

• • • •

80

82

84

86

88

90

92

94

96

98

Source: IFS

Italy - Portfolio Investment
Inflows and Outflows
US$ Billions US$ Billions

Italy - Foreign Direct Investment
Foreign Investment Inflows
3.0 2.5 2.0

40

Inflows into Italy Outflows from Italy

20

0

1.5 1.0

-20 0.5 -40 0.0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Italy - Exchange Rate
Lire per US Dollar
L/US$ Ratio

Italy - Terms of Trade
Export Price/Import Price
1.15 1.10 1.05 1.00 0.95 0.90
Note: Data not available for Nov. - Dec. 1995

1000 1200 1400 1600 1800 2000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

EUROPE March 10, 1999 www.milken-inst.org

IV-58

Italy: Labor Markets
Italy - Young and Old Dependents
Young and Elderly as Percent of Total Population
Percent

• •

Italy’s demographics are the worst in Europe –rapidly aging population and low birth rate. Unit labor costs fell precipitously with 1991’s depreciation of the lire. In the last two years, labor has recaptured half of that decline. Labor market has become more stable since 1994 with decrease in hours lost due to strikes. Government debt at 121.6% of GDP is secondhighest in EU after Belgium. Public consumption has fallen due to privatization.

35
0 - 19 Years Old 60 Years and Older

30 25 20 15 10

• • •
1950 1960 1970 1980 1990 2000 2010 2020
Source: United Nations

Italy - Industrial Stoppages
Working Hours Lost
Millions Index, 1990=100

Italy - Labor Costs
Unit Labor Costs
105 100 95 90 85 80 75 70

16 14 12 10 8 6 4 2 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

65

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Italy - Government Debt
As Percent of GDP
Percent Percent

Italy - Public Consumption
As Percent of GDP
18.5

120 110 100 90

18.0

17.5 80 70 60 50 80 82 84 86 88 90 92 94 96 98 16.5 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

17.0

Source: WEFA

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EUROPE March 10, 1999 www.milken-inst.org

Italy: Finance
Italy - Equity Index
MIB General Index
Index

• • •

Equity market capitalization is 30% of GDP - one of the lowest in the EU. The market-adjusted debt ratio is .79 - highest after Austria and Greece. Equity market concentration ratio high with top ten firms equal to 57% of market cap. Compares to 54% average for EU countries. Bank concentration ratio lowest in EU. Total banking assets equal only 85% of GDP. The rise in consumer confidence has faltered with pessimistic forecasts for global economy.

1200 1000 800 600 400 200

• •
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

Italy - Gross Fixed Capital Formation
Seasonally Adjusted
Lire 1990, Trillion

Italy - Consumer Confidence
Seasonally Adjusted
Percent Balance of Opinion

68 66

0

-10 64 62 60 -30 58 56 -40 -20

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

Italy - Capacity Utilization
Capacity Utilization
Percent

Italy - Comparative Long-Term Interest Rates
10 Year Government Bond
Percent

82

14 12

Italy Germany

80 10 78 8 6 76 4 74 2

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

EUROPE March 10, 1999 www.milken-inst.org

IV-60

Netherlands: Current Economic Conditions
Netherlands - Real GDP Growth
1990 Prices
Percent Change, Year Ago

•

5 4 3 2 1 0 -1

Consensus Economics predicts GDP growth at 3.7% for 1998; deteriorating producers’ confidence and stockbuilding. Inflation was down through most of 1998. Interest rates down to meet EU standards. The ASE is very dollar-sensitive. US stock market drop in September 1998 had a dramatic impact. Third-quarter share prices fell 20%, but have since risen.

• • •

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

Netherlands - Inflation Rate
Consumer Price Index
Percent Change, Year Ago Percent

Netherlands - Interest Rates
Short-Term and Long-Term
10
3 Month Interbank 10 Year Government Bond

4.5 4.0 3.5 3.0

8

6 2.5 2.0 1.5 1.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

4

2

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: WEFA; Datastream

Netherlands - Exchange Rate
Guilders Per US Dollar
NG/US$ Index

Netherlands - Equity Index
Amsterdam Stock Exchange CBS General Index
1600 1400 1200 1000

1.5 1.6 1.7 1.8

800 1.9 2.0 2.1 600 400 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

200

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Bloomberg

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EUROPE March 10, 1999 www.milken-inst.org

Netherlands: Current Economic Conditions
Netherlands - Official Reserves
Total Reserves Minus Gold and as Percent of GDP
US$ Billions Percent

• • •

Official reserves down from peak in 1994. Industrial production was down throughout 1998. Chemicals sector fell the most. The unemployment rate fell in 1998. Netherlands and Luxembourg have the lowest unemployment rates in the EU. Hourly wages grew in the third quarter of 1998 caused by numerous job vacancies in the second quarter. Deficits have been declining through the 1990s.

35 30 25 20

Reserves Minus Gold - L Reserves as % of GDP - R

11 10 9 8

15 10 5 0 80 82 84 86 88 90 92 94 96 98 7 6 5

•

•

Source: IFS

Netherlands - Current Account Balance
As Percent of GDP
Percent

Netherlands - Industrial Production
Industrial Production Index
Percent Change, Year Ago

8

10

6

5

4

0

2

-5

0

80

82

84

86

88

90

92

94

96

98

-10

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Source: IFS

Netherlands - Unemployment Rate
3 Month Moving Average
Percent Percent

Netherlands - Budget Balance
Government Surplus/Deficit as Percent of GDP
0 -1 -2 -3 -4 -5

7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0 3.5 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

EUROPE March 10, 1999 www.milken-inst.org

IV-62

Netherlands: International Trade
Netherlands - Composition of Exports 1997

•

The trade surplus remained stagnant in 1998. G13 billion deficit from non-EU countries was offset by a G20 billion surplus from EU countries. Merchandise trade deficit with Southeast Asia was up. The Asian deficit grew by G8.8 billion in the first half of 1998. Although most trade is done with European neighbors, the Netherlands is an entry port for goods re-exported to other EU countries. This makes Dutch trade vulnerable to depreciations of Asian currencies.

Other 24% Raw materials, oils & fats 5% Fuels 7% Chemicals, plastics, etc. 16%
So urce: Eco no mist Intelligence Unit

•
Machinery & transport equip. 31%

•

Food, drink & tobacco 17%

Netherlands - Composition of Imports 1997
20 15

Netherlands - Trade Balance
Merchandise Exports, Imports, and Balance
US$ Billions

Exports Imports Trade Balance

Other 32%

Machinery & transport equip. 36%

10 5

Textiles & clothing 3% Fuels 7%

So urce: Eco no mist Intelligence Unit

Chemicals, plastics, etc. 11% Food, drink & tobacco 11%

0 -5

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Netherlands - Destination of Exports 1997

Netherlands - Origin of Imports 1997

Other 33%

Germany 27% Other 42% BelgiumLuxembourg 13% France 7%
So urce: Eco no mist Intelligence Unit

Germany 21%

BelgiumLuxembourg 11% UK 10%

Italy 6%

UK 10%

France 11%

US 9%

So urce: Eco no mist Intelligence Unit

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EUROPE March 10, 1999 www.milken-inst.org

Netherlands: Finance
Netherlands - Foreign Direct Investment
Foreign Investment Flows
US$ Billions

• •

Fixed investment declined 1998, led by housing. Net inflows of portfolio investment were near zero in early 1998, after reaching more then G10 billion in 1997. Y2K and euro created surge in investment in computer and office equipment. Foreign liabilities are at a 20-year high. The government debt as percent of GDP ratio is above 60%. This is maximum allowed in the Maastricht treaty.

14 12 10 8 6 4 2 0 80 82 84 86 88 90 92 94 96 98

•
• •

Source: IFS

Netherlands - Portfolio Investment
Inflows and Outflows
US$ Billions Percent

Netherlands - Foreign Liabilities
As Percent of GDP
90 80 70

15 10 5 0

Inflows into Netherlands Outflows from Netherlands

60 -5 -10 -15 50 40

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

80

82

84

86

88

90

92

94

96

98

Source: IFS

Netherlands - Government Debt
As Percent of GDP
Percent US$ Billions

Netherlands - Capital Investment
Gross Fixed Capital Formation
85 80 75 70 65 60 55 50

85 80 75 70 65 60 55 50 45 80 82 84 86 88 90 92 94 96 98

45

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Source: WEFA

EUROPE March 10, 1999 www.milken-inst.org

IV-64

Norway: Current Economic Conditions
Norway - Real GDP Growth
1990 Prices
Percent Change, Year Ago

• •

8

Real GDP is estimated to have slowed in 1998. Continued slowdown of investment activity. Inflation subdued from weak kroner and low international prices. Kroner weakened against other European currencies and US$ in 1998. In August 1998, kroner fell to its lowest value since 1990. Private consumption grew in 1998 driven by rising employment and large wage settlements. Equities dropped in mid-1998. Large European exposure to Russia.

6

•

4

•
2

•
0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Norway - Inflation Rate
Consumer Price Index
Percent Change, Year Ago Percent

Norway - Interest Rates
Short-Term and Long-Term
16 14
3 Month Interbank 10 Year Government Bond

5 4

12 3 2 1 4 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

10 8 6

2

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

Norway - Exchange Rate
Kroner Per US Dollar
NK/US$ Index

Norway - Equity Index
Oslo Stock Exchange OBX Index
800 700 600 500 400 300 200

5.0 5.5 6.0 6.5 7.0 7.5 8.0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Bloomberg

IV-65

EUROPE March 10, 1999 www.milken-inst.org

Norway: Current Economic Conditions
Norway - Official Reserves
Total Reserves Minus Gold and as Percent of GDP
US$ Billions Percent

• • •

Official reserves down from 1997 peak. Low oil prices and higher import prices decreased the current account surplus. Industrial output declined in the first half of 1998. Poor performance of offshore industries. Despite this, manufacturing output expanded in 1998. Working population has reached record levels. Most new jobs created in construction, offshore and services sectors. Government debt as a percent of GDP has greatly improved from 1994.

30 25 20

Reserves Minus Gold - L Reserves as % of GDP - R

20

18

16 15 14 10 5 0 12

•

•
80 82 84 86 88 90 92 94 96 98 10
Source: IFS

Norway - Current Account Balance
As Percent of GDP
Percent

Norway - Industrial Production
Industrial Production Index
Percent Change, Year Ago

8 6 4 2 0 -2 -4 -6 80 82 84 86 88 90 92 94 96 98

12 10 8 6 4 2 0 -2 -4 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Source: IFS

Norway - Unemployment
Unemployment Rate
Percent Percent

Norway - Government Debt
As Percent of GDP
55 50

6.5 6.0 5.5 5.0 4.5 4.0

45 40 35

3.5 3.0
Note: Data interpolated

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: WEFA; Milken Institute

30

80

82

84

86

88

90

92

94

96

98

Source: WEFA

EUROPE March 10, 1999 www.milken-inst.org

IV-66

Norway: International Trade
Norway - Composition of Exports 1997
Petroleum products 7% Food & tobacco 7% Metal products 12% Machinery & transport equipment 14%
So urce: Eco no mist Intelligence Unit

•

Paper & paper products 4% Oil, gas & related products 56%

Norway lost trade surplus in August 1998 – first time since May 1990. Caused by falling oil prices and more imports. Exports to Asia have sunk due to crisis. Malaysian demand down 63% and Taiwan down 58%. European demand for exports remained strong in 1998. Share of raw materials in total exports dropped due to poor prices and production. Manufacturing grew to compensate.

• • •

Norway - Composition of Imports 1997

Norway - Trade Balance
Merchandise Exports, Imports, and Balance
US$ Billions

6 5

Other 33%

Machinery & transport equipment 34%

Exports Imports Trade Balance

4 3 2

Food & tobacco 4% Transport vehicles 5% Textiles & cloth 6%
So urce: Eco no mist Intelligence Unit

1

Metal products 9% Chemical & mineral products 9%

0 -1 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Norway - Destination of Exports 1997

Norway - Origin of Imports 1997

UK 19% Other 36% Other 42%

Sweden 16%

Netherlands 11%

Germany 14% UK 9% Japan 5% US 7% Denmark 7%

US 6% France Sweden 9% 9%
So urce: Eco no mist Intelligence Unit

Germany 10%

So urce: Eco no mist Intelligence Unit

IV-67

EUROPE March 10, 1999 www.milken-inst.org

Norway: Finance
Norway - Foreign Direct Investment
Foreign Investment Flows
US$ Billions

•

4 3 2 1 0 -1

Oil production fell to lowest level in four years – poor global prices and demand. Third-quarter 1998 production was only 3.01 million barrels per day. Main source of gross fixed investment is offshore sector investing in oil exploration and drilling. Growth of investment in the mainland sectors slowed in 1998. Petroleum output growth outpaced overall GDP growth.

• •

•

80

82

84

86

88

90

92

94

96

98

Source: IFS

Norway - Portfolio Investment
Inflows and Outflows
US$ Billions Percent

Norway - Foreign Liabiliies
As Percent of GDP
25 20 15

5

Inflows into Norway Outflows from Norway

0

-5 10 -10 5 0

-15

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

80

82

84

86

88

90

92

94

96

98

Source: IFS

Norway - Petroleum Output Growth
Compared to GDP
Index=1990 Percent

Norway - Oil Production Employment
As Percent of Total Employment
20

200
Petroleum GDP

150

19

100

18

50

17

0

80

82

84

86

88

90

92

94

96

98

16

80

82

84

86

88

90

92

94

96

98

Source: IFS

Sources: Datstream; IFS

EUROPE March 10, 1999 www.milken-inst.org

IV-68

Poland: Current Economic Conditions
Poland - Real GDP Growth
Constant Prices
Percent Change, Year Ago

• • • • •

Economic growth is estimated to be 5.8% in 1998. Lower inflation from sagging global commodity and manufacturing prices. Interest rates less sensitive to portfolio investment. Monetary policy can be eased. Zloty’s position against dollar down steadily since float. Equity market one of the most successful of former Eastern Bloc countries. Poland’s equity market felt financial collapse in Russia.

8 7 6 5 4 3

•
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Bloomberg

Poland - Inflation Rate
Consumer Price Index
Percent Change, Year Ago Percent

Poland - Interest Rates
Short-Term and Long-Term
50 40 30 20 10 0
3 Month Interbank Long Term Bond

100 80 60 40 20 0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: WEFA; Datastream

Poland - Exchange Rate
Zlotys Per US Dollar
PZ/US$ Index

Poland - Equity Index
Warsaw Stock Exchange General Index
25000 20000

0.5 1.0 1.5 2.0 2.5 3.0

15000 10000 5000

3.5 4.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Bloomberg

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EUROPE March 10, 1999 www.milken-inst.org

Poland: Current Economic Conditions
Poland - Official Reserves
Total Reserves Minus Gold and as Percent of GDP
US$ Billions Percent

• •

30 25 20 15 10
Reserves Minus Gold - L Reserves as % of GDP - R

20

Foreign inflows main source of Hungary’s foreign exchange reserves. Industrial production down during most of 1998. Unemployment high, but declining. Regional unemployment varies considerably. Poland’s fiscal situation continues to improve. Budget deficit just over 1% of GDP in 1997.

15

• •

10

5 5 0 0

80

82

84

86

88

90

92

94

96

98

Source: IFS

Poland - Current Account Balance
As Percent of GDP
Percent

Poland - Industrial Production
Industrial Production Index
Percent Change, Year Ago

5 0 -5

20 10 0 -10

-10 -20 -15 -20 -30 -40

80

82

84

86

88

90

92

94

96

98

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

Source: IFS

Poland - Unemployment
Unemployment Rate
Percent Percent

Poland - Budget Balance
Government Surplus/Deficit as Percent of GDP
1 0 -1 -2 -3 -4 -5 -6

17 16 15 14 13 12 11 10 9 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

-7

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

EUROPE March 10, 1999 www.milken-inst.org

IV-70

Poland: International Trade
Poland - Composition of Exports 1997
Mineral fuels 7% Food & live animals 12% Machinery & equipment 21% Other 3%

• •

Poland’s two main export categories: manufactured goods and chemicals, and machinery and equipment. Germany is Poland’s most significant trading partner. Germany receives 34% of Polish exports and provides 27% of Polish imports. Export levels held steady in 1998 despite zloty devaluation. Poland’s trade with Russia could decline this year from Russian currency crisis. Trade balance still negative – import levels high.

Manufactured goods, chemicals 57%

• • •

So urce: Eco no mist Intelligence Unit

Poland - Composition of Imports 1997
Other Food & live 5% animals 8% Mineral fuels 9%

Poland - Trade Balance
Merchandise Exports, Imports, and Balance
US$ Billions

6 4

Exports Imports Trade Balance

Manufactured goods, chemicals 42%

2 0 -2

Machinery & equipment 36%
So urce: Eco no mist Intelligence Unit

-4

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Poland - Destination of Exports 1996

Poland - Origin of Imports 1996

Other 34%

Germany 34%

Germany 27% Other 39%

UK Russia 4% 7% Netherlands US Italy France 4% 6% 5% 6%
So urce: Eco no mist Intelligence Unit

US 2% France Netherlands 4% 5%
So urce: Eco no mist Intelligence Unit

Italy 10% Russia UK 7% 6%

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Poland: Finance
Poland - Foreign Direct Investment
Foreign Investment Flows
US$ Billions

• • •

Foreign direct investment up since opening of Polish economy in early 1990s. Foreign liabilities as % of GDP constant during this time. Poland’s population growth rate down since early 1980s. Exception: period right after demise of communism. Poland’s retention of land ownership during Soviet control led to emergence of market-driven enterprise. Germany is critical to Polish trade. Germany overtook former Soviet Union as Poland’s major trade partner.

5 4 3 2 1 0

• •
80 82 84 86 88 90 92 94 96 98
Source: IFS

Poland - Foreign Liabilities
As Percent of GDP
Percent Percent

Poland - Population Growth Rate
Population Growth Rate
1.00 0.80 0.60

20

15

10 0.40 5 0.20 0.00

0

80

82

84

86

88

90

92

94

96

98

80

82

84

86

88

90

92

94

96

98

Source: International Financial Statistics

Source: IFS

Poland - Historical Destinations of Exports
Exports as Percent of Poland's World Exports
Percent Percent

Poland - Historical Origins of Imports
Imports as Percent of Poland's World Imports
42

40
Germany Russia (U.S.S.R.) United States United Kingdom

30

34 25 17
Germany Russia (U.S.S.R.) United States United Kingdom

20

10

8 0

0

80

82

84

86

88

90

92

94

96

98

80

82

84

86

88

90

92

94

96

98

Sources: Direction of Trade; Economist Intelligence Unit

Sources: Direction of Trade; Economist Intelligence Unit

EUROPE March 10, 1999 www.milken-inst.org

IV-72

Portugal: Current Economic Conditions
Portugal - Real GDP Growth
1990 Prices
Percent Change, Year Ago

• • • • •

Real GDP growth projected at 3.9% in 1998. Inflation down. Portugal met stringent euro requirement. Interest rates are trending south. The escudo against the dollar declined recently but still up from the lows in early 1998. Portugal’s equity market made big correction in 1998.

15

10

5

0

-5

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

Portugal - Inflation Rate
Consumer Price Index
Percent Change, Year Ago Percent

Portugal - Interest Rates
Short-Term and Long-Term
25
3 Month Interbank 10 Year Government Bond

16 14 12 10 8 6 4 2 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

20 15 10 5 0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

Portugal - Exchange Rate
Escudos Per US Dollar
PE/US$ Index

Portugal - Equity Index
Lisbon Stock Exchange General Index
3500 3000 2500 2000

120 130 140 150 160 170 180 190 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

1500 1000 500

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Bloomberg

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EUROPE March 10, 1999 www.milken-inst.org

Portugal: Current Economic Conditions
Portugal - Official Reserves
Total Reserves Minus Gold and as Percent of GDP
US$ Billions Percent

• • • • • •

Reserves near $20 million for each of past five years. Current account balance between −5% and −10% of GDP since early 1990s. Industrial production off since early 1998. Currency crises spurred drop in foreign demand. Unemployment down in first half of 1998 but up in third quarter from loss of World Fair Expo jobs. Portugal’s fiscal situation is improving – deficit as a percentage of GDP dropping. Portugal has lowered high government deficit by curbing tax evasion.

25
Reserves Minus Gold - L Reserves as % of GDP - R

30 25 20

20

15 15 10 10 5 5 0

0

80

82

84

86

88

90

92

94

96

98

Sources: IFS; WEFA

Portugal - Current Account Balance
As Percent of GDP
Percent

Portugal - Industrial Production
Industrial Production Index
Percent Change, Year Ago

-5 -10 -15

15 10 5

-20 0 -25 -30 -35 -5 -10

80

82

84

86

88

90

92

94

96

98

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

Source: IFS

Portugal - Unemployment Rate
3 Month Moving Average
Percent Percent

Portugal - Budget Balance
Government Surplus/Deficit as Percent of GDP
0

8 7 6

-2

-4 5 4 3 -6

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

-8

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

EUROPE March 10, 1999 www.milken-inst.org

IV-74

Portugal: International Trade
Portugal - Composition of Exports 1996

• •

Portugal’s largest export and import category in 1996 – machinery. Merchandise trade deficits during 1990s. Exports up during 1998 – 11.8% year-on-year in the second quarter. Imports also up – 16% year-on-year in second quarter. Most significant destination of exports in 1997 – Germany. Most significant origin of imports - Spain.

Other 32%

Machinery 17% Vehicles & transport equip. 16%

• • • •

Minerals 5% Textiles 7%

Shoes 8%

Clothing 15%

So urce: Eco no mist Intelligence Unit

Portugal - Composition of Imports 1996

Portugal - Trade Balance
Exports, Imports, and Balance
US$ Billions

5 4

Exports Imports Trade Balance

Other 31%

Machinery 21%

3 2 1

Textiles 7% Combustible Agricultural fuels Chemicals products 8% 8% 10%
So urce: Eco no mist Intelligence Unit

Vehicles & transport equip. 15%

0 -1 -2 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

Portugal - Destination of Exports 1997

Portugal - Origin of Imports 1997

Other 30%

Germany 20%

Other 31%

Spain 23%

US 5% Netherlands 5%

Spain 14%

Netherlands 5%

Germany 15% UK 7% Italy 8% France 11%

UK 12%

France 14%

So urce: Eco no mist Intelligence Unit

So urce: Eco no mist Intelligence Unit

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Portugal: Finance
Portugal - Foreign Direct Investment
Foreign Investment Flows
US$ Billions

• • • •
•

Portugal’s FDI up dramatically in 1997. Key is more open economy and less government intervention. Capital flight tapering off slowly. Considerable variation in portfolio investment in the 1990s. Portugal’s government and foreign debt higher than most other European countries. Government debt as a percent of GDP varying between 60% and 70% throughout the 1990s.

3.0 2.5 2.0 1.5 1.0 0.5 0.0

80

82

84

86

88

90

92

94

96

98

Source: IFS

Portugal - Portfolio Investment
Inflows and Outflows
US$ Billions Percent

Portugal - Foreign Liabilities
As Percent of GDP
120

4
Inflows into Portugal Outflows from Portugal

100 80

2

0

60 40

-2 20 -4 0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

80

82

84

86

88

90

92

94

96

98

Source: IFS

Portugal - Foreign Demand
Manufacturing
Percent Balance of Opinion Percent

Portugal - Government Debt
As Percent of GDP
70

20 0 -20

60

50 -40 -60 -80 40

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

30

80

82

84

86

88

90

92

94

96

98

Source: WEFA

EUROPE March 10, 1999 www.milken-inst.org

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Russia: Current Economic Conditions
Russia - Real GDP Growth
1990 Prices
Percent Change, Year Ago

• • • •

Russian real GDP is estimated to fall 4.6% in 1998. After combating inflation from 1993-1997, exchange rates dropped in the third quarter of 1998. The ruble plunged after the government defaulted on its debt and printed more currency in 1998. Collapse of the ruble paralyzed investments and brought Russian equity markets to new lows.

5

0

-5

-10

-15

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Economist Intelligence Unit

Russia - Inflation Rate
Consumer Price Index
Percent Change, Year Ago Percent

Russia - Short-Term Interest Rates
90 Day Interbank Rate
200

100 80 60

150

100 40 20 0
Note: 1067% in September 1993

50

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

Russia - Exchange Rate
Rubles per US Dollar
RU/US$ Index

Russia - Equity Index
RTS Index
600 500 400

0 5 10

300 15 200 20 25 100 0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: IFS; Bloomberg

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: Datastream; Bloomberg

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Russia: Current Economic Conditions
Russia - Official Reserves
Total Reserves Minus Gold and as Percent of GDP
US$ Billions Percent

• •

25
Reserves Minus Gold - L Reserves as % of GDP - R

5

Official reserves are less than half of what they were a year earlier. Current account balance as a percent of GDP dropped significantly in 1997 as trade collapsed. Negative industrial production growth since 1994. Production output climbed up in 1997, sliding back into negative territory in 1998. Unemployment rate rising steady since 1993.

20

4

15 3 10 2

• • •

5

0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: IFS; EIU; Milken Institute

1

Russia - Current Account Balance
As Percent of GDP
Percent

Russia - Industrial Production
Industrial Production
Percent Change, Year Ago

35 30 25 20

5 0 -5 -10 -15

15 10 5

-20 -25 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

-30

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

Russia - Unemployment Rate
Seasonally Adjusted
Percent Percent

Russia - Budget Balance
Government Surplus/Deficit as Percent of GDP
0 -2

12

10 -4 8 -6 -8 6 -10 4 -12

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

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Russia: International Trade
Russia - Composition of Exports 1997

• • •

Trade balance mostly positive since breakup of the Soviet Union. Crash of commodities (especially oil) should change these terms of trade presently. The former states of the Soviet Union continue to be Russia’s major trade partners. Russia’s largest exports – crude petroleum, natural gas, and platinum. Over 60% of Russian imports include machinery and equipment, food, and agriculture products.

Other 14% Chemicals 8% Machinery & equip. 10% Metals 21%
So urce: Eco no mist Intelligence Unit

Fuels & energy 47%

• •

Russia - Composition of Imports 1997

Russia - Trade Balance
Merchandise Exports, Imports, and Balance
US$ Billions

10

Other 17% Metals 7%

8

Exports Imports Trade Balance

Machinery & equip. 35%

6 4 2

Chemicals 15% Food & agricultural raw materials 26%

0 -2

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

So urce: Eco no mist Intelligence Unit

Russia - Destination of Exports 1997
Ukraine 9%

Russia - Origin of Imports 1997

Germany 8% Belarus 5% Netherlands 5% Commonwealth of Independent States 19%

Other 29%

Germany 12% Ukraine 9% Belarus 8% US 7%

Other 54%

Commonwealth of Independent States 35%
So urce: Eco no mist Intelligence Unit

So urce: Eco no mist Intelligence Unit

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Russia: Banking and Finance
Russia - Foreign Share of Banking Capital
Total Foreign Investment and Percent of Banking Capital
US$ Billions Percent

• •

3.0 2.5

Foreign Invesments in Russian Banking Capital - L Foreign Share of Russian Banking Capital - R

5.0

Large foreign exchange positions hurt Russia’s top 20 banks in 1998 crisis. Small and medium-size banks ended up ahead due to little exposure. Government debt began to climb in 1996. Russia paid off old loans with IMF monetary packages. Debt nearly doubled in 1998 as the government defaulted on its loans and ruble tumble. Direct and portfolio investment increased in 1996 but dropped at the end of 1997 as returns weakened.

4.5 2.0 1.5 1.0 3.5 0.5 0.0 3.0 4.0

• • •

Oct. 96 Oct. 97 Jan. 98 Apr. 98
Sources: Central Bank of Russia; Milken Institute

Jul. 98

Oct. 98

Breakdown of Russian Banks by Financial Stability
Share of Assets and Retail Deposits in Foreign Exchange Positions
Percent

Russia - Government Debt
As Percent of GDP
100

Group Categories

Number of Share of Banks Total Assets

Share of Total Retail Deposits 8.4% 19.6%

Capital Required (Ruble, bln) 0 6

80

Solvent and Liquid Banks Stable Regional Banks Which Need Some Capital Injection Systemically Important Insolvent Banks Which Will Receive Government Financial Support Banks Subject to Liquidation
Source: Troika Dialog Research

590 190

15% 10%

60

18

41%

40.0%

48

40

720

34%

32.0%

87

20

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

Russia - Portfolio Investment
Inflows and Outflows
US$ Billions US$ Billions

Russia - Foreign Direct Investment
Foreign Investment Inflows
2.5 2.0 1.5

10 8 6 4

Inflows into Russia Outflows from Russia

1.0 2 0 -2 0.5 0.0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

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Russia: Finance
Russia - Role of Trade
Trade as Percent of GDP
Percent

• •

35
Exports as % of GDP Imports as % of GDP

International trade revenues made a smaller contribution to GDP on weaker export prices. Deteriorating economy may lead to increased arms exports and sale of nuclear weapons technology – quite worrisome. Russia is trailing former Soviet republics despite greater natural resources and labor force. Consumption dropping throughout the 1990s but barter transactions have flourished. Estimates put three-fourths or more of functioning economy running on barter basis.

30 25 20 15 10

• • •
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Economist Intelligence Unit

Russia - Arms Exports
Arms Transfer Deliveries and Total Trade
US$ Billion

Russia and Former Soviet Republic Comparison
Per Capita Income - Purchase Power Parity
US$ Thousands

4.0 3.5 3.0 2.5 2.0 1.5 1.0

6.0 5.5 5.0 4.5 4.0 3.5 3.0

Russia Estonia

Latvia Lithuania

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: US Arms Control and Disarmament Agency

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Economist Intelligence Unit

Russia - Consumption
Real Private, Government, and Total Consumption
Index 1990=100 Percent

Russia - Capital Investments
Percent of Production/Non-Production Facility Investment
Production Facilities Non-Production Facilities

100 95 90
Total Private Government

100 80 60

85 40 80 75 70 20 0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Goskomstat

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Russia: Demographics
Russia - Poverty Level
Millions of People in Poverty and Percent of Population
Millions Percent

• •

50
Number of Population Living in Poverty - L Percent of Total Population in Poverty - R

35 30 25 20

Over 20% of the Russian population below poverty level. Russia may be superior to the US in many numerical social indicators. But quantity does not reflect quality. Russia ranks first in the world for the most legally induced abortions. Development of new housing is continuing at a stable pace under corporate and private construction groups. Privatization of apartments soared after the demise of communism, then decreased each year thereafter. Move to a market economy is very incomplete.

40

30 15 20 10 5 10 1995
Source: Goskomstat

• • • •

1996

1997

1998

0

Russia - Wages and Salaries
Per Employee
Rubles

Social Indicator and Public Expenditure Comparison Russia vs. United States

1400 1200 1000 800 600 400 200 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

Russia Expenditure on Health ( as % of GDP) Population Per Physician Number of Hospitals Expenditure on Education (as % of GDP) Literacy Rate (%) Number of Public Libraries Expenditure on Social Welfare (as % of GDP) Crime Rate (Offenses per 100,000 Population) Divorce Rate (%) Legal Induced Abortions (per 100 Live Births)
Sources: Illustrated Book of World Rankings; World Development Indicators

US 12.7 385 6580 5.5 95.5 9170 6.7 5852 52.2 35.5

3.0 241 12265 4.3 98.2 33200 7.9 1857 60.8 339.0

Russia - Housing
Increase of New Housing
Million Sq. Meters of Total Living Space Thousands

Russia - Privatization of Apartments
Privatization of Government and State Apartments
6 5 4 3 2 1 0

60 50 40 30 20 10 0

Residential Housing Individual Private Construction

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Goskomstat

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Goskomstat

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Russia: Commodity Production
Russia - Agriculture
Real Agriculture Production
Index 1990=100

• • • • •

100

Agriculture production has declined since 1990 and leveled off in 1997. Russia expecting worst harvest in decades from harsh weather conditions. Export revenues are down from low commodity prices and reduced production. Oil output – one of Russia’s largest exports – hit a 50-year low in 1998. Russia is the world leader in natural gas production.

90

80

70

60

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

Russia - Natural Gas
Natural Gas Production
Billion Cubic Meters Million Metric Tons

Russia - Crude Petroleum
Crude Petroleum Production
500 450 400 350 300 250

660 640 620 600 580 560

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

Russia - Coal
Coal Production
Million Metric Tons

Percent of World Commodity Production by Russia Natural Gas Platinum Crude Oil Wheat Gold Copper Live Cattle Hogs

360 340 320 300 280 260 240 220 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

32.5 12.3 8.9 7.3 5.3 4.7 3.3 2.1

Source: Commodity Research Bureau

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Russia: Population
Russia - Population
Total Population and Percent Growth
Millions Percent Change, Year Ago

• •

149.0
Population Growth - R Total Population - L

-0.5

Population growth and life expectancy decreased since “democratization” of Russia. Recent migration figures are evidence of massive departures, fewer arrivals. A higher death rate than birth rate is the result of the deterioration of health conditions. Medical supplies are difficult to find. Fewer births and a decreasing population growth forecast older dependents outnumbering young within 20 years.

148.5

-0.4

-0.3 148.0 -0.2 147.5

• • •

-0.1

147.0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: WEFA; Goskomstat

0.0

Russia - Young and Old Dependents
Young and Elderly as Percent of Total Population
Percent Years

Russia - Life Expectancy
Total Years
70 69 68 67 66 65 64

40 35 30 25 20 15 10 5 1950 1960 1970 1980

0 - 19 Years Old 60 Years and Older

1990

2000

2010

2020

63

1987

1989

1991

1993

1995

1997

Source: United Nations

Source: World Development Indicators

Russia - Birth and Death Rate
Per 1000
Per 1000 Thousand Persons

Russia - Migration
Migration In-and-Outflow With Non-CIS and Baltic States
150
1996 1997

20 15 10

100

50 5 0 -5
Birth Rate Death Rate Natural Decrease

Migration Difference
0

Arrivals
-50 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Goskomstat

Departures

-10

-100

Source: Goskomstat

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Spain: Current Economic Conditions
Spain - Real GDP Growth
1990 Prices
Percent Change, Year Ago

• • • • •

In 1998 growth is expected to be 3.8%, versus 3.4% a year earlier. More important, Spain’s entry into Euroland has initiated an amazing economic turnaround. The EU and Maastricht have implemented fiscal and monetary disciplines that Spain lacked for some time. The degree of monetary and exchange rate policy coordination are the high points of EU integration. This has been impressive – many throughout Europe (especially periphery countries) would not get here.

5 4 3 2 1 0 -1 -2 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Spain - Inflation Rate
Consumer Price Index
Percent Change, Year Ago Percent

Spain - Public Consumption
As Percent of GDP
18 17 16 15

8 7 6 5 4 3 2 1 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

14 13 12

80

82

84

86

88

90

92

94

96

98

Source: WEFA

Spain - Unemployment Rate
Seasonally Adjusted
Percent

• • • •

For example, the peseta ran up until 1/1/99 when it was locked in to the euro. With hard peg of ERM (exchange rate mechanism), speculation opportunities are gone within the EU. Today, Spain is comfortably locked into policy coordination with other euro members. However, all but a few periphery and industrialized EU countries are saddled with double-digit rates of joblessness.

20 18 16 14 12 10

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Bloomberg

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Spain: Current Economic Conditions
Spain - Official Reserves
Total Reserves Minus Gold and as Percent of GDP
US$ Billions Percent

• •

80
Reserves Minus Gold - L Reserves as % of GDP - R

14

Spain brought the peseta foreign exchange values into compliance with ECU and EMU requirements. Graph at left shows that, even though periphery countries received much more generous bands, the events of 1993-95 still buffeted the peseta. Spain actually had a run down to the deutsche mark in preparation for 1999. As Spain moves to integrate some important industries with Portugal, some returns to scale are expected. With fiscal and inflation disciplined by Maastricht requirements, interest rates have followed. Long rates are down 75%, and short rates by half.
Spain - Industrial Production
Industrial Production
Percent Change, Year Ago

70

12

60

10

• •

50

8

40

6

30

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

4

• •

• •

ECB now has reigns of monetary policy; all Euroland countries have given up this policy tool. Regulation hopping has been under way for some time, with Britain attracting the lion’s share of industrial and financial relocations. Spain may also soon provide an attractive alternate destination for corporations seeking regulation and tax relief. Concerns about Spain’s infrastructure persist. Domestic demand is expected to be flat for 1999, on top of the depressed international situation. This will erode new orders.

15 10 5 0 -5 -10

•

• • •

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Spain - Capacity Utilization
Capacity Utilization
Percent

Spain - New Industry Orders
Total Industry New Orders
Percent Balance of Opinion

82 80

20 0

78 76 74 72 -60 70 68 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

-20 -40

-80

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

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Spain: Current Economic Conditions
• • • Industrial output growth continues strong, as is gross fixed investment. Business investment has been brisk, pushed largely by solid recovery in construction investment. Consumer sentiment has bounced back, and this strong domestic demand (coupled with low savings) is driving economic growth. Looking at the economy: capacity utilization is rising, interest rates are low (and still falling), and corporate earnings were solid for 1997, the last year of available data. Current account balances OK for now; international downturn – and continuing strong domestic demand – may push Spain’s current accounts into red in 1999.
Spain - Consumer Opinion
Seasonally Adjusted
Percent Percent

Spain - Short-Term Interest Rate
Prime Interest Rate
Percent

14

12

10

•

8

•

6

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source:WEFA

Spain - Current Account Balance
As Percent of GDP
5 0 -5 -10 -15 -20

10 0 -10 -20 -30 -40

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Spain - Gross Fixed Capital Formation
Gross Fixed Capital Formation
US$ Billions

Spain - Detail of Industrial Production
Index 1990=100

Industrial Production

110 100

140 130 120
Construction Consumer Goods Inv. Goods

90 110 80 70 60 50 100 90 80 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

70

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

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Spain: International Trade
Spain - Composition of Exports 1997
Energy products 3% Raw materials & intermediate products 43%

• • • •

Spain has been riding a weaker peseta to buoy exports to the UK and US. Since most trade occurs within EU, the effect of the weaker peseta was minimized. Spain has locked into the euro fixed rate of 85 pesetas to the deutsche mark. The services sector (dominated by tourism in Spain) continued in the black in 1998.

Capital goods 14%

Consumer goods 40%
So urce: Eco no mist Intelligence Unit

Spain - Composition of Imports 1997
Energy products 9% Capital goods 17% Raw materials & intermediate products 50%
15

Spain - Trade Balance
Merchandise Exports, Imports and Balance
US$ Billions

10

Exports Imports Trade Balance

5

0

Consumer goods 24%
So urce: Eco no mist Intelligence Unit

-5

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Spain - Destination of Exports 1997

Origin of Imports 1997

OPEC 3% Latin America 5% Japan 1% US 4%

Other 17% Latin America 3% OPEC 7% Japan 3%

Other 16%

EU 70%

US 6%

EU 65%

So urce: Eco no mist Intelligence Unit

So urce: Eco no mist Intelligence Unit

EUROPE March 10, 1999 www.milken-inst.org

IV-88

Spain: Financial Conditions
• Equity investment weathered 1997 and 1998 well. There was initial sell-off in the third quarter of 1998, in response to Russia, when share price index fell over 30 percent. Profit taking subsided and shares rebounded. Though off highs, investment remains strong. Not surprisingly, Spanish banks disproportionately invested (in absolute terms and relative to assets) in Latin America. This high exposure of large Spanish banks to Latin America will continue to be a concern. Heavy investment by Spanish banks (the opening of a retail market) took place in Mexico last year This may place a strain on domestic investment and dry up credit if losses mount.
Spain - Foreign Direct Investment
Direct Investment Inflows
US$ Billions US$ Billions

Spain - Equity Index
Madrid Stock Exchange Shares Index
Index

1000

• • •

800

600

400

•
•

200

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Bloomberg

Spain - Portfolio Investment
Inflows and Outflows
25 20
Inflows into Spain Outflows from Spain

5 4 3 2 1 0

15 10 5 0 -5 -10 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

-15

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Spain - Capital Accounts
As Percent of GDP
Percent Percent

Spain - Interest Rates
Short-Term and Long-Term
16 14
3 Month Interbank 10 Year Government Bond

4

3

12 10

2 8 1 6 4 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

2

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

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Spain: Demographics
Spain - Population Growth
Population Statistics
Millions Percent Change

•
1.6

Spain has entered into developed country status on most social and economic indicators. Spain had fallen far behind on literacy since WWII, but has improved on education and literacy indicators. We can likely expect increases in productivity down the road as the labor force gains skills. Population growth is slowing to a moderate pace – but nothing compared to Northern countries or Italy.

39.5
Population - L Percent Change - R

1.4 1.2 1.0 0.8

•

39.0 38.5 38.0 37.5 37.0

• •

0.6 0.4 0.2 80 82 84 86 88 90 92 94 96 98 0.0

Source: IFS

Spain - Literacy Rate
Adult Literacy Rate
Percent Years

Spain - Life Expectancy
Total Years
82 80
Males Females Total

96 94 92 90 88 86

78 76 74 72 70 68 1960
Source: World Bank

1990

66

1962
Source: World Bank

1996

EUROPE March 10, 1999 www.milken-inst.org

IV-90

Sweden: Current Economic Conditions
Sweden - Real GDP Growth
1990 Prices
Percent Change, Year Ago

• •

6 4 2 0 -2 -4 -6

Real GDP growth is estimated at between 2-3% last year. Falling global commodity prices underscored negative inflation by end 1998. Central bank did not follow several European countries and US with rate cut due to low inflation and weak krona. Consumer demand has remained robust. Negative (year-on-year) CPI was partly the result of cut in tobacco taxes and lower property taxes.

•

• •
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Sweden - Inflation Rate
Consumer Price Index
Percent Change, Year Ago Percent

Sweden - Interest Rates
Short-Term and Long-Term
20
3 Month Interbank 10 Year Government Bond

14 12 10 8 6 4 2 0 -2 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

15

10

5

0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: WEFA; Bloomberg

Sweden - Exchange Rate
Kronor Per US Dollar
SK/US$ Index

Sweden - Equity Index
Affarsvarlden General Index
4000 3500 3000 2500 2000 1500 1000

5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

500

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Bloomberg

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Sweden: Current Economic Conditions
Sweden - Official Reserves
Total Reserves Minus Gold and as Percent of GDP
US$ Billions Percent

• •

25
Reserves Minus Gold - L Reserves as % of GDP - R

12

About 90% of industrial output produced by private firms. Unemployment still high by historical standards. Employment in real estate and business services up, though down in financial services in 1998. Fall in the unemployment rate would be more substantial if the improved labor-market conditions did not lead to a higher participation rate. Government budget moving into balance. Current account balance offset by worsening service balance and deterioration of the income and current transfers balance.

20

10

• •

15

8

10

6

5

4

• •

0

80

82

84

86

88

90

92

94

96

98

2

Source: IFS

Sweden - Current Account Balance
As Percent of GDP
Percent

Sweden - Industrial Production
Industrial Production Index
Percent Change, Year Ago

6 4 2 0 -2 -4

15 10 5 0 -5 -10

80

82

84

86

88

90

92

94

96

98

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Source: IFS

Sweden - Unemployment Rate
Unemployment Rate
Percent Percent

Sweden - Budget Balance
Government Surplus/Deficit as Percent of GDP
2 0

10 8 6 4 2 0

-2 -4 -6 -8 -10 -12 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Bloomberg

-14

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

EUROPE March 10, 1999 www.milken-inst.org

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Sweden: International Trade
Sweden - Composition of Exports 1997

• • •

Sweden is heavily dependent on foreign trade. Major exports – timber, hydropower, and iron ore. Slowdown in export volume growth due to Asian crisis. Minerals, steel, and food sectors affected. Sweden’s largest trading partners are its European neighbors. Information technology sector continued to show the fastest export growth rates. Trade surpluses continue.

Other 22%

Iron & steel 6% Chemicals 9% Transport equipment 14%
So urce: Eco no mist Intelligence Unit

Machinery incl. electrical 35%

• • •

Wood products, pulp & paper 14%

Sweden - Composition of Imports 1997

Sweden - Trade Balance
Merchandise Exports, Imports, and Balance
US$ Billions

10 8
Exports Imports Trade Balance

Other 30%

Machinery incl. electrical 33%

6 4 2

Food & tobacco 7% Transport Minerals & fuels Chemicals equipment 8% 11% 11%
So urce: Eco no mist Intelligence Unit

0 -2

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Sweden - Destination of Exports 1997

Sweden - Origin of Imports 1997

Germany 11% UK 9% Other 52% Norway 9% US 8% Finland 5%
So urce: Eco no mist Intelligence Unit

Germany 19% Other 43%

UK 10% Norway 8% France US 6% 6% Denmark 8%

Denmark 6%

So urce: Eco no mist Intelligence Unit

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EUROPE March 10, 1999 www.milken-inst.org

Sweden: Finance
Sweden - Foreign Direct Investment
Foreign Investment Flows
US$ Billions

• • • • •

Sweden’s high standard of living is mostly subsidized by welfare benefits. Social security is 21% of GDP and 37% of government expenditures. Investment as % of GDP is small and declining. Government debt is high – well outside 60% of GDP Maastricht target. Large declines in portfolio investment flows since 1994.

16 14 12 10 8 6 4 2 0 80 82 84 86 88 90 92 94 96 98

Source: IFS

Sweden - Portfolio Investment
Inflows and Outflows
US$ Billions Percent

Sweden - Foreign Liabilities
As Percent of GDP
7 6 5

10 5 0 -5 -10

Inflows into Sweden Outflows from Sweden

4 3 2 1

-15

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

0

80

82

84

86

88

90

92

94

96

98

Source: IFS

Sweden - Social Security
As Percent of GDP
Percent Percent

Sweden - Government Debt
As Percent of GDP
90

30
Sweden United States

25 20 15 10 5

80 70 60 50 40

80

82

84

86

88

90

92

94

96

98

80

82

84

86

88

90

92

94

96

98

Sources: WEFA, IFS

Source: WEFA

EUROPE March 10, 1999 www.milken-inst.org

IV-94

Switzerland: Current Economic Conditions
Switzerland - Real GDP Growth
1990 Prices
Percent Change, Year Ago

•

5 4 3 2 1 0 -1 -2 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

GDP growth was flat from 1991 through 1996. Picked up again in 4th quarter 1997, and falling again in 1998. Poor GDP growth in the 1990s has resulted in an accelerated unemployment rate. Most unemployment is foreign “guest” workers as foreigners make up 40% of the unemployed. Inflation during this slowdown has dropped to close to zero, did not pick up with 1997 growth spurt.

• • •

Switzerland - Inflation Rate
Consumer Price Index
Percent Change, Year Ago

Switzerland - Interest Rates
Short-Term and Long-Term
Percent

7 6

10
3 Month Interbank 10 Year Government Bond

8 5 4 3 2 1 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

6 4 2 0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: WEFA; Datastream

Switzerland - Exchange Rate
Swiss Francs Per US Dollar
SF/US$

•

1.1 1.2 1.3

Interest rates underwent long decline during economic slowdown. Yield curve is normal, poised for continued growth. Swiss franc has returned to trading range of 1.4 to 1.6 to the dollar. Appreciation against euro would increase competitive pressures on Swiss business. 70% of Swiss households rent their homes. Rents are controlled and linked to interest rates rather than prices. New legislation would link to prices.

•

•
1.4 1.5 1.6

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

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Switzerland: Current Economic Conditions
Switzerland - Unemployment
Unemployment Rate
Percent

• •

6 5 4 3 2 1 0

Industrial production picked up in 1997, retreating in 1998, drop off in Asian orders. Current account surplus is almost 9% of GDP. Budget deficit at less than 2% of GDP. Government hopes to balance by 2001 with spending cuts and unemployment insurance surcharge. Public finance is most sound of all industrialized countries. Official reserves have risen steadily since 1985.

•

• •
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

Switzerland - Current Account Balance
As Percent of GDP
Percent

Switzerland - Industrial Production
Industrial Production Index
Percent Change, Year Ago

10 8 6 4 2 0

15 10 5 0 -5 -10

80

82

84

86

88

90

92

94

96

98

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Source: IFS

Switzerland - Official Reserves
Total Reserves Minus Gold and as Percent of GDP
US$ Billions Percent

Switzerland - Budget Balance
Government Surplus/Deficit as Percent of GDP
Percent

40

Reserves Minus Gold - L Reserves as % of GDP - R

18 17 16 15

0.0 -0.5 -1.0 -1.5 -2.0 -2.5

30

20 14 10 13 12 0 80 82 84 86 88 90 92 94 96 98 11

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

Source: IFS

EUROPE March 10, 1999 www.milken-inst.org

IV-96

Switzerland: Current Economic Conditions
Switzerland - Relative Normalized Unit Labor Costs
1990 Prices
Index 1990=100

• •

120 115

The Swiss labor market is atypical due to the large number of foreign “guest” workers. Unit labor costs rising despite high unemployment. Rising job vacancies – tightening of the labor market. The number of short-time workers has fallen – jobs filled by guest workers. Public consumption rose as a result of the rise in unemployment during the mid-1990s. The Swiss-ECU exchange rate gives an indication of the currency relationship of the Swiss franc relative to the new euro, revealing a pro-cyclical appreciation.

•
110 105 100 95

• •
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Switzerland - Labor Market
Job Vacancies, Seasonally Adjusted
Millions Thousands

Switzerland - Short-Time Workers
Number of Persons
60 50

20

15 40 10 30 20 5 10 0 0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

Switzerland - Public Consumption
Including Social Security
US$ Billions SF/ECU

Switzerland - ECU Exchange Rate
Swiss Francs per ECU
1.4 1.5 1.6

11

10

9 1.7 8 1.8 1.9

7

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: IFS; WEFA

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

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Switzerland: Current Economic Conditions
Switzerland - Bank Assets
Top 10 Bank's Assets as Percent of GDP
Percent

• • •

4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: The Banker; IFS

Investment abroad has decreased. Foreign direct investment has stagnated. Switzerland has a higher credit exposure to Russia and Asia than most European countries. Exposure to Latin America is minimal. Switzerland’s total exposure as a percentage of market value is 11%, less than average of 27%. Swiss equities have performed well in 1990s. Sharp correction in 1998 during Russia’s financial turmoil. The banking sector’s assets are progressively a larger proportion of Switzerland’s GDP.

• •

Switzerland - Investment
Investment Flows
US$ Billions Index

Switzerland - Equity Index
Swiss Market Index
10000 8000 6000 4000 2000 0

10 5 0 -5 -10 -15

Investment Abroad Direct Foreign Investment

84

86

88

90

92

94

96

98

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Bloomberg

Source: IFS

Switzerland - Credit Risk Exposure
Estimated Credit Risk from Major European Listed Banks
Percent

Switzerland - Per Capita Real Income
1990 Prices
US$ Thousands

60 50 40 30

Switzerland Europe 9

40
Switzerland Western Europe

Switzerland Credit Exposure Total as a Percent of Market Value: 11%

35 30 25

20 10 0 20 15

Russia
Source: J.P. Morgan Estimates

Tiger Asia

Latin America

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

EUROPE March 10, 1999 www.milken-inst.org

IV-98

Switzerland: International Trade
Switzerland - Composition of Exports 1997
Agriculture, forestry & fish Textiles, products clothing & 4% shoes 4% Metals & metal manufactures 9% Precision instruments, watches & jewelry 16%
So urce: Eco no mist Intelligence Unit

• •

Switzerland strongly integrated into international markets with exports equal to 40% of GDP. Merchandise trade is relatively balanced as exports and imports hover at parity. Goods and services exports exceed imports by wide margin. Most Swiss trade is with European partners. Major export industries are precision instruments, machinery, and chemicals. Export growth was strong in 1997. GDP and trade surplus increase.

Other 11% Machinery 28%

• • •

Chemicals 28%

Precision instruments, Textiles, watches & clothing & jewellery 8% shoes 10% Agriculture, forestry & fish products 11% Metals & metal manufactures 11%

Switzerland - Composition of Imports 1997
10 8

Switzerland - Trade Balance
Merchandise Exports, Imports, and Balance
US$ Billions

Exports Imports Trade Balance

Machinery 27%

6 4 2 0

Vehicles 13%

Chemicals 20%

-2

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

So urce: Eco no mist Intelligence Unit

Switzerland - Destination of Exports 1997

Switzerland - Origin of Imports 1997

Germany 23% Other 40%

Other 31%

Germany 31%

US 10% France 9% Italy 8%

Japan 4%

UK 6%

Japan 3% Netherlands 5%

US 7%

Italy 11%

France 12%

So urce: Eco no mist Intelligence Unit

So urce: Eco no mist Intelligence Unit

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Switzerland: Finance
Switzerland - Foreign Direct Investment
Foreign Investment Flows
US$ Billions

•

5 4 3 2 1 0

FDI and portfolio investment inflows reveal favorable economic prognosis and investment climate. Switzerland is still major financial haven. Swiss government invests up to 25% of state pension assets in the stock market – only in Swiss companies. Government debt has risen steadily since 1991. Since 1990, exports are larger share of GDP than imports.

• • •
•

80

82

84

86

88

90

92

94

96

98

Source: IFS

Switzerland - Portfolio Investment
Inflows and Outflows
US$ Billions Percent

Switzerland - Role of Trade
As Percent of GDP
40
Exports Imports

20 10 0

Inflows into Switzerland Outflows from Swizterland

38 36

-10 34 -20 -30 -40 32 30

80

82

84

86

88

90

92

94

96

98

80

82

84

86

88

90

92

94

96

98

Source: IFS

Source: IFS

•

Switzerland - Government Debt

Government spending is third lowest in Europe. Economic slowdown has run up government debt to over 50% of GDP. Equity market capitalization is 228% of GDP – highest in Europe. Banking sector assets are 209% of GDP – also highest in Europe. Market debt ratio is .29 – lowest in Europe. Bank assets and equity are the most concentrated in Europe. Top five bank assets equal 5% of GDP and the top 10 firms equal 78.6% of total equity market capitalization.

As Percent of GDP
Percent

55 50 45 40 35 30 25 20 80 82 84 86 88 90 92 94 96 98

• • • •

Source: WEFA

EUROPE March 10, 1999 www.milken-inst.org

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Turkey: Current Economic Conditions
Turkey - Real GDP Growth
1990 Prices
Percent Change, Year Ago

• •

Turkish economy defies odds, grows at an estimated 6% per year. Double-digit inflation ... an obstacle to full membership in the European Union ... an obstacle to higher levels of foreign direct investment. Treasury bill rates, 75% in July, jumped to 140% after emerging market crisis hit Turkey...other rates high as well. Stock market rewards investors with world’s secondhighest rate of return (after Russia) in 1997; from August to September 1998, 55% of value lost. Lira continues to fall versus US dollar.

15 10 5 0 -5 -10 -15

•

•

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

•

Turkey - Inflation Rate
Consumer Price Index
Percent Change, Year Ago Percent

Turkey - Interest Rates
Short-Term and Long-Term
400
Overnight Interbank Long Term Bond

130 120 110 100 90 80 70 60 50 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

300

200

100

0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: Bloomberg; Datastream

Turkey - Exchange Rate
Thousands of Liras Per US Dollar
TL/US$ Index

Turkey - Equity Index
Turkey Stock Market National Index
5000 4000

0 50 100 150 200 250

3000 2000 1000

300 350 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Bloomberg

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Turkey: Current Economic Conditions
Turkey - Official Reserves
Total Reserves Minus Gold and as Percent of GDP
US$ Billions Percent

•

20
Reserves Minus Gold - L Reserves as % of GDP - R

10

Foreign reserves peak at $26 billion in June 1998; by November they fall to $19 billion after central bank intervenes, defending lira. Industrial production: nearly zero in 1998. Current account deficit as a percent of GDP on the increase since approaching zero in 1994, 1995. The economy growing, unemployment continues to fall.

15

8

• •

6 10 4 5

•

2

0

80

82

84

86

88

90

92

94

96

98

0

Sources: IFS; WEFA

Turkey - Current Account Balance
As Percent of GDP
Percent

Turkey - Industrial Production
Industrial Production Index
Percent Change, Year Ago

5 0 -5

20

10

0 -10 -15 -20 -10

80

82

84

86

88

90

92

94

96

98

-20

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Source: IFS

Turkey - Unemployment
Unemployment Rate
Percent Percent

Turkey - Budget Balance
Government Surplus/Deficit as Percent of GDP
0 -2 -4 -6 -8 -10 -12

9 9 8 8 7 7 6 6
Note: Data interpolated

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: Datastream; Milken Institute

-14

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

EUROPE March 10, 1999 www.milken-inst.org

IV-102

Turkey: International Trade
Turkey - Composition of Exports 1997 Clothing & textiles 28% Iron, steel & metals 12% Vegetables, fruits & nuts 7%

• • • •

EU is Turkey’s largest trading partner. Imports outpace exports ... rising trade deficit. Textiles and clothing are largest export items. Official exports to Russia – the third-argest export market behind US and Germany – fell in value 16% in the first seven months of 1998 versus a year ago. Exports to Asia fell 45% in the same period, but Asia accounts for only 2.6% of exports (down from 4.8% a year earlier).

Other 43% Minerals 2% Transportation vehicles 2%

•

Source: Economist Intelligence Unit

Processed food & tobacco 6%

Turkey - Composition of Imports 1997

Turkey - Trade Balance
Merchandise Exports, Imports, and Balance
US$ Billions

5

Other 25% Spinning materials 5%
Iron, steel, & metals Chemicals 9% 10%
Source: Economist Intelligence Unit

Mechanical & electrical machinery 26%

4 3 2 1

Exports Imports Trade Balance

Minerals 13% Transportation vehicles 12%

0 -1 -2 -3 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Turkey - Destination of Exports 1997 Germany 20% US 8% Italy 5% Russia 8%

Turkey - Origin of Imports 1997

Germany 17% US 9% Other 51% Italy 9% France UK 2% 6%
Source: Economist Intelligence Unit

Other 49%

France UK 4% 6%
Source: Economist Intelligence Unit

Russia 6%

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Turkey: Finance and Government Accounts
Turkey - Foreign Direct Investment
Foreign Investment Flows
US$ Billions

• • • •

Foreign direct investment grew dramatically in the 1990s; but level is low. Portfolio investment inflows to Turkey also strong, but low – just $1 billion. Exports to EU up 6% in first seven months of 1998. Debt service as a percentage of exports above 20%... access to international capital markets – domestic debt converted to cheaper foreign loans – needed if Turkey to reduce debt service burden.

1.0 0.8 0.6 0.4 0.2 0.0

80

82

84

86

88

90

92

94

96

98

Source: IFS

Turkey - Portfolio Investment
Inflows and Outflows
US$ Billions US$ Billions

Turkey - Exports to EU
Exports to the European Union
1.2 1.0

2.5 2.0 1.5 1.0 0.5 0.0

Inflows into Turkey Outflows from Turkey

0.9 0.7 0.6

-0.5 -1.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

0.4

1990 1991 1992 1993 1994 1995 1996 1997 1998
Source: WEFA

Turkey - Debt Service
As Percent of Exports
Percent Percent

Turkey - Multilateral Debt
As Percent of Total Debt
22 20 18 16

40 35 30 25

14 20 15 10 12 10 75 80 85 90 95 8 75 80 85 90 95

Source: World Bank

Source: World Bank

EUROPE March 10, 1999 www.milken-inst.org

IV-104

United Kingdom: Current Economic Conditions
United Kingdom - Real GDP Growth
1990 Prices
Percent Change, Year Ago

• • • •

GDP is estimated to grow at about 3%. UK opted out of joining Euroblock – it would not allow them to pursue monetary independence. Low inflation and unemployment at a cyclical peak. Inflation hit 2.5% official target. Unemployment rate at cyclical low. Private-sector average earnings climb. “Flight to quality” due to Russian default resulted in fall in UK government bond yields.

6 4 2 0 -2 -4

•

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

United Kingdom - Inflation Rate
Consumer Price Index
Percent Change, Year Ago Percent

United Kingdom - Interest Rates
Short-Term and Long-Term Interest Rates
16 14 12 10 8 6 4
3 Month Interbank 10 Year Government Bond

12 10 8 6 4 2 0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

United Kingdom - Unemployment
Unemployment Rate
Percent

•

11 10 9 8 7 6

Tight labor markets and price pressures result in tight monetary policy, higher short-term rates, and inverted yield curve. Manufacturing hit by strong sterling and weak export demand. Data shows a “two-speed economy” – thriving services sector and depressed manufacturing sector. Labor markets more liberalized than rest of Euroland. Greater absorption of unemployed into labor market.

• • •

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

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United Kingdom: Current Economic Conditions
United Kingdom - Comparative Real GDP Growth
1990 Prices
Percent Change, Year Ago

• • •

20 15 10 5 0 -5
United Kingdom Germany United States

Monetary tightening peaked in June. Central bank cut rates in October. UK most volatile economy of G7 countries over the past three decades. New government recognizes long-standing record of macroeconomic instability hampers medium-term growth. Policy response has been new statutes for monetary policy and a Code for Fiscal Stability. Increase accountability and transparency of monetary policy. Long-term stability and greater predictability of monetary policy is goal.

•

80

82

84

86

88

90

92

94

96

98

•

Source: IFS

United Kingdom - Exchange Rate
Pounds Sterling per US Dollar
£/US$ £/DM

United Kingdom - Exchange Rate
Pounds Sterling per Deutsche Mark
0.30

0.50

0.55

0.35

0.60

0.40

0.65

0.45

0.70

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

0.50

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

• •

Largest difference is with German economy. Interest rates are still higher in UK. Compatibility between UK and Euroland depends on ability of authorities to guide monetary and fiscal policies in sync with continent. UK used exchange rate policy as macroeconomic tool to absorb shocks and manage business cycle. Currency unification would forfeit this tool.

United Kingdom - Long-Term Interest Rates
10 Year Government Bond
Percent

14 12 10 8 6 4 2
United Kingdom Germany United States

•

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Datastream

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IV-106

United Kingdom: Current Economic Conditions
United Kingdom - Public Consumption
As Percent of GDP
Percent

•

26

Public consumption has fallen over past two decades. Increased spending cuts, policy reforms, and privatization efforts. UK national accounting system is now compiled on the basis of 1995 European system of national accounts (ESA 95). Public finances continue to improve from increased tax receipts and falling unemployment. Budget deficit still largest among major European economies. Maastricht discipline has driven Euroland deficits under 3%. Outstanding government debt is lowest among larger European economies.
United Kingdom - Industrial Production
Seasonally Adjusted
Percent Change, Year Ago

24

•

22

• •

20

18

80

82

84

86

88

90

92

94

96

98

Source: WEFA

•

United Kingdom - Budget Balance
Government Surplus/Deficit as Percent of GDP
Percent

0

8 6

-2

4 2

-4 0 -6 -2 -4 -8 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: OECD, Milken Institute

-6

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

United Kingdom - Government Debt
Government Debt as Percent of GDP
Percent

United Kingdom - Manufacturing Production
Seasonally Adjusted
Index 1990=100

55 50

104 102 100

45 40 35

98 96 94 92

30

80

82

84

86

88

90

92

94

96

98

90

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

Source: WEFA

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United Kingdom: International Trade
United Kingdom - Composition of Exports 1997
Basic materials 2% Other Fuels 1% 6% Food & tobacco 7% Finished manufactures 58%

• •

Exports account for 28.4% of GDP Downturn in the world economy and weak demand in Asia hurt oil and manufacturing exports. Widening trade deficit. Outlook remains strong in service sector. Sterling exchange rate versus the euro expected to weaken further as euro becomes competing reserve currency to the dollar. This will help exports. Germany and US are major trading partners.

• •

Semimanufactures 26%

•

So urce: Eco no mist Intelligence Unit

United Kingdom - Composition of Imports 1996
Fuels Basic materials 3% 3% Food & tobacco 9% Finished manufactures 59%
30

United Kingdom - Trade Balance
Merchandise Exports, Imports, and Balance
US$ Billions

Other 1%
20

Exports Imports Trade Balance

10

Semimanufactures 25%

0

-10
So urce: Eco no mist Intelligence Unit

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

United Kingdom - Destination of Exports 1997

United Kingdom - Origin of Imports 1997

US 12% Germany 12% Other 53% France 9% Netherlands 8% Ireland 6%
So urce: Eco no mist Intelligence Unit

Germany 13% US 13%

Other 54%

France 9% Italy Netherlands 6% 5%
So urce: Eco no mist Intelligence Unit

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IV-108

United Kingdom: International Trade
United Kingdom - Role of Trade
Trade As Percent of GDP
Percent

• • •

32
Exports Imports

International trade has driven growth in the 1990s with sharp rise in both exports and imports. Terms of trade have been generally favorable for UK trade despite of oil price declines. Current account balance still in surplus. Widening of trade deficit gives gloomy outlook. Trade prospects heavily dependent on global economy.

30 28 26 24 22

•

80

82

84

86

88

90

92

94

96

98

Source: IFS

United Kingdom - Current Account Balance
As Percent of GDP
Percent Ratio

United Kingdom - Terms of Trade
Export Price Index/Import Price Index
1.06 1.04 1.02 1.00 0.98 0.96

10 5 0 -5 -10 -15

75

80

85

90

95

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

Sources: IFS; WEFA

United Kingdom - Trade Balance with EU
Merchandise Exports, Imports, and Balance
US$ Billions

United Kingdom - Trade Balance with US
Merchandise Exports, Imports, and Balance
US$ Billions

15
Trade Balance with EU Exports to EU Imports from EU

5 4 3 2
Trade Balance with US Exports to US Imports from US

10

5 1 0 0 -1 -5 80 82 84 86 88 90 92 94 96 98 -2 80 82 84 86 88 90 92 94 96 98

Sources: WEFA; IMF, Direction of Trade

Sources: WEFA; IMF, Direction of Trade

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United Kingdom: Finance
United Kingdom - Equity Index
Financial Times Stock Exchange 100 Index
Index

• •

6000 5000

Equities have performed well in 1990s. Decline in 1998 due to financial turmoil after Russian default. Market-adjusted debt ratio of .30 lowest among EU countries. Market capitalization at 156% of GDP – -highest among EU countries – compares to US market capitalization of 140%. Equity market concentration ratio is 43.2% compared to 55% European average. Bond/equity yield ratio fallen from 2:1 to 1.3:1, suggests market discounting of deflationary period and declining confidence.

•
4000 3000 2000 1000

• •
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Bloomberg

United Kingdom - Domestic Credit
Claims on Public and Private Sector
US$ Billions

United Kingdom - Consumer Confidence
Seasonally Adjusted
Percent Balance of Opinion

40 30 20

Claims on Public Sector Claims on Private Sector

10 0 -10

10 -20 0 -10 -20 -30 -40

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Sources: IFS; WEFA

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

• •

United Kingdom - Labor Productivity

Labor productivity up dramatically in the 1990s fueling wage hikes, especially in service sector. Ratio of claims on private sector to total domestic credit is third highest in Europe after Norway and Finland. Banking sector assets are higher than European average at 116% of GDP. Banking concentration ratio is fairly high compared to Germany or Italy but comparable to France. Consumer confidence has steadily improved with the long expansion but suffered setback with Russian default.

Productivity per Employee
Index 1990=100

115

110

• • •

105

100

95

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

EUROPE March 10, 1999 www.milken-inst.org

IV-110

United Kingdom: Finance
United Kingdom - Foreign Direct Investment
Direct Investment Inflows
US$ Billions

• •

20 15

FDI strong, but plans for Asian FDI shelved by major Asian manufacturers. Portfolio investment has fallen off with outflows exceeding inflows. Foreign liabilities have come down strongly. Still reflect significant borrowing from abroad and desirability of owning sterling denominated securities. Official reserves have been halved since 1995. Job vacancies rising as labor market tightens.

•
10 5 0 -5

• •
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

United Kingdom - Portfolio Investment
Inflows and Outflows
US$ Billions Thousands

United Kingdom - Labor Markets
Job Vacancies, Seasonally Adjusted
350 300 250

40 20 0 -20

Inflows into UK Outflows from UK

200 -40 -60 -80 150 100

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

United Kingdom - Official Reserves
Total Reserves Minus Gold and as Percent of GDP
US$ Billions Percent

United Kingdom - Foreign Liabilities
As Percent of GDP
Percent

45

Reserves Minus Gold - L Reserves as % of GDP - R

4.5

8 7 6 5 4 3

42

4.0

39

3.5

36

3.0

33

2.5

30

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

2.0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

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EUROPE March 10, 1999 www.milken-inst.org

United Kingdom: Compensation and Demographics
United Kingdom - Weekly Wage Earnings
Seasonally Adjusted
Index 1990=100

• •

150 140 130 120 110 100 90

Wages rising steadily during long recovery as labor market tightens. Unit labor costs in manufacturing have plateaued. Manufacturing costs constrained by competitive pressures. UK’s demographic trends are not as stark as Germany or Italy. Long-range concern with low birth rates and greater longevity. State pension scheme is two-tiered system -- a basic compulsory state national insurance plan and optional employer pensions. Savings ratio has declined with growing prosperity, in the low-middle range for Europe.
United Kingdom - Young and Old Dependents
As Percent of Total Population
Percent

•

•

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: IFS

•

United Kingdom - Manufacturing Unit Labor Costs
Seasonally Adjusted
Index 1990=100

125 120 115

35
0 - 19 Years Old 60 Years and Older

30 25

110 20 105 100 95 15 10

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

1950

1960

1970

1980

1990

2000

2010

2020

Source: United Nations

United Kingdom - Savings Ratio
Percent of Disposable Income
Percent Years

Big Jump in Life Expectancy
Total Years
80 78 76 74
Males Females Total

12 11 10 9

72 8 7 6 70 68 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: WEFA

66

1962
Source: World Bank

1996

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