Quarterly gross domestic product (GDP) growth in the G20 slowed to +0.7% in the fourth quarter of 2011, compared with +0.9% in the third quarter, according to provisional results from this first ever release of the G20 GDP aggregate. In 2011 as a whole, G20 GDP grew by 2.8%, a marked deceleration compared with the +5.0% growth recorded in 2010.
The G20 GDP quaterly in volume terms
The G20 GDP aggregate masks diverging patterns among the world’s largest economies.
In the United States, GDP growth increased to +0.7% in the fourth quarter of 2011, compared with +0.5% in the third quarter. In India and Indonesia growth increased strongly, but in China it slowed to +2.0%, compared with +2.3% in the third quarter. In Japan, economic growth decreased to -0.2%, following the strong rebound to +1.7% in the third quarter. GDP growth was -0.3% in both the European Union and the euro area in the fourth quarter of 2011, the first negative growth since the second quarter of 2009.
Today’s release of the G20 GDP aggregate marks the first release of a G20 aggregate in the context of the implementation of the Data Gaps Initiative – a set of 20 recommendations on the further enhancement of statistics as agreed by the G20 finance ministers and central bank governors. The process is coordinated by the Inter-Agency Group on Economic and Financial Statistics (IAG), which comprises the International Monetary Fund (chair), the Bank for International Settlements, the European Central Bank, Eurostat, the OECD, the United Nations and the World Bank. The dissemination of the G20 GDP aggregate demonstrates cooperation between the agencies and progress in the Data Gaps Initiative and provides a timely measure of economic growth for the G20. In future the G20 aggregate will become part of a new regular OECD quarterly press release on economic growth at around 70 days after the reference quarter.Source: Website ECG Source Chart:http://www.ecb.int/press/pr/date/2012/html/pr120314.en.html Prečítať
The president of the European Central Bank has explained the latest monetary decisions of ECB in Brussels. Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. We will now report on the outcome of today’s meeting of the Governing Council. Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged. The information that has become available since the beginning of March broadly confirms our previous assessment. Inflation rates are likely to stay above 2% in 2012, with upside risks prevailing. Over the policy-relevant horizon, we expect price developments to remain in line with price stability. Consistent with this picture, the underlying pace of monetary expansion remains subdued. Survey indicators for economic growth have broadly stabilised at low levels in the early months of 2012, and a moderate recovery in activity is expected in the course of the year. The economic outlook remains subject to downside risks. Medium-term inflation expectations for the euro area economy must continue to be firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2% over the medium term. Over the last few months we have implemented both standard and non-standard monetary policy measures. This combination of measures has contributed to a stabilisation in the financial environment and an improvement in the transmission of our monetary policy. We need to carefully monitor further developments. It is also important to keep in mind that all our non-standard monetary policy measures are temporary in nature and that all the necessary tools are available to address upside risks to medium-term price stability in a firm and timely manner. Let me now explain our assessment in greater detail, starting with the economic analysis. Real GDP contracted by 0.3% in the euro area in the fourth quarter of 2011. Survey data confirm a stabilisation in economic activity at a low level in early 2012. We continue to expect the euro area economy to recover gradually in the course of the year. The outlook for economic activity should be supported by foreign demand, the very low short-term interest rates in the euro area, and all the measures taken to foster the proper functioning of the euro area economy. However, the remaining tensions in euro area sovereign debt markets and their impact on credit conditions, as well as the process of balance sheet adjustment in the financial and non-financial sectors and high unemployment in parts of the euro area, are expected to continue to dampen the underlying growth momentum. Downside risks to the economic outlook prevail. They relate in particular to a renewed intensification of tensions in euro area debt markets and their potential spillover to the euro area real economy. Downside risks also relate to further increases in commodity prices. Euro area annual HICP inflation was 2.6% in March 2012, according to Eurostat’s flash estimate, after 2.7% in the previous three months. Inflation is likely to stay above 2% in 2012, mainly owing to recent increases in energy prices, as well as recently announced rises in indirect taxes. On the basis of current futures prices for commodities, annual inflation rates should fall below 2% again in early 2013. In this context, we will pay particular attention to any signs of pass-through from higher energy prices to wages, profits and general price-setting. However, looking ahead, in an environment of modest growth in the euro area and well-anchored long-term inflation expectations, underlying price pressures should remain limited. Risks to the outlook for HICP inflation rates in the coming years are still seen to be broadly balanced, with upside risks in the near term mainly stemming from higher than expected oil prices and indirect tax increases. Downside risks continue to exist owing to weaker than expected developments in economic activity. The monetary analysis indicates that the underlying pace of monetary expansion has remained subdued. The annual growth rate of M3 was 2.8% in February 2012, compared with 2.5% in January. In both January and February we observed a strengthening in the deposit base of banks. Annual loan growth to the private sector has remained subdued, with the rate (adjusted for loan sales and securitisation) moderating in February to 1.1% year on year, from 1.5% in January. The annual growth rates of loans to non-financial corporations and loans to households (adjusted for loan sales and securitisation) stood at 0.6% and 1.8% respectively in February. The volume of MFI loans to non-financial corporations and households remained practically unchanged compared with the previous month. Money and credit data up to February confirm a broad stabilisation of financial conditions and thereby the avoidance of an abrupt and disorderly adjustment in the balance sheets of credit institutions, as intended by our measures. Funding conditions for banks have generally improved, and there has been increased issuance activity and a re-opening of some segments of funding markets. The demand for credit remains weak in the light of still subdued economic activity and the ongoing process of balance sheet adjustment in non-financial sectors. The full supportive impact of the Eurosystem’s non-standard measures will need time to unfold and to have a positive effect on the growth of loans when demand recovers. In this context, it should be noted that the second three-year longer-term refinancing operation was only settled on 1 March 2012. Following the stabilisation in the financial environment, it is essential for banks to strengthen their resilience further, including by retaining earnings. The soundness of banks’ balance sheets will be a key factor in facilitating both an appropriate provision of credit to the economy and the normalisation of all funding channels. To sum up, the economic analysis indicates that price developments should remain in line with price stability over the medium term. A cross-check with the signals from the monetary analysis confirms this picture. In order to support confidence, sustainable growth and employment, the Governing Council calls upon governments to restore sound fiscal positions and implement strong structural reforms. Commitments under the Stability and Growth Pact need to be fully honoured and weaknesses in competitiveness forcefully addressed. National policy-makers need to fully meet their responsibilities to ensure fiscal sustainability, to increase the adjustment capacity of product and labour markets, to enhance productivity and competitiveness, and to ensure the soundness of their financial system. In particular, countries which have suffered losses in cost competitiveness need to ensure sufficient wage adjustment and foster productivity growth. Let me conclude by recalling that the single monetary policy naturally focuses on maintaining medium-term price stability for the euro area as a whole. It is up to national policy-makers to foster domestic developments which support the competitiveness of their economies. Both prudent fiscal policies and competitive and flexible product and labour markets are of crucial importance for the functioning of the euro area economy. See Q & A during the Press Conference under the following link: http://www.ecb.int/press/pressconf/2012/html/is120404.en.html Source: Website ECB Source picture: http://www.ecb.int/ecb/orga/decisions/html/cvdraghi.de.html Picture European Flag: www.fotolia.dePrečítať
Housing cycles and financial stabilityHousing markets have certain characteristics that intrinsically link them to financial stability. House price collapses can have systemic consequences. We know this from the current crisis and we know this from past crises. This fact raises a number of important questions for policymakers. In a speech at the EMF Annual Conference 2011 Peter Praet, member of the Executive Board of the ECB, poited out the role of the policymaker and turned to the question if there are price bubbles and how to identify them. He asked if a price bubble in housing markets should be dealt differently than in other assets. Peter Praet said: "The potential risks of asset price bubbles tend to vary across asset classes. Research by the IMF has shown that housing busts are, on average, twice as costly in terms of output losses as equity price busts. This reflects the higher exposure of banks to mortgages than shares. A key conclusion of literature on historical financial crises is that they tend to have worse outcomes when banks are distressed. For example, in October 1987 stock markets around the world fell sharply, but this did not represent a threat to the banking system and so, its impact was contained. In contrast, many researchers trace the origins of the current financial crisis back to the bursting of the US house price bubble. The link between house prices, banking crises and recessions is not unique to the current situation: a number of studies examining crises in both advanced and emerging economies over time and across countries have shown that they tend to coincide with the bursting of house price bubbles. The securitisation of mortgage loans has not only tended to weaken the origination process but has tended to expose countries’ financial systems to real estate excesses in other countries. By transferring the credit risk the originator can exacerbate the boom without fear of the consequences of a collapse." http://www.ecb.int/press/key/date/2011/html/sp111124.en.html Source: Website of European Central Bank, www.ecb.int Source Picture:http://www.ecb.int/ecb/orga/decisions/html/cvpraet.en.html
On 1 January 2012 there were 7,533 MFIs resident in the euro area, compared with 7,865 on 1 January 2011. In relative terms, the decrease was particularly pronounced in Ireland (-15%), Luxembourg (-8%), Cyprus (-6%), France (-5%) and Greece (-5%). In absolute terms, Ireland (-106), France (-59), Luxembourg (-48) and Germany (-43) were the main contributors to the net decrease of 332 units in the euro area. 2011 saw a substantial decrease in the number of money market funds, as an MFI sub-sector, owing in part to their new definition, under Guideline ECB/2011/13, which is more closely in line with that used for supervisory purposes. The contraction in this sub-sector was most prominent in Ireland (-97), Luxembourg (-46) and France (-29). Despite the enlargement of the euro area through the accession of Greece (2001), Slovenia (2007), Cyprus and Malta (both 2008), Slovakia (2009) and Estonia (2011), the number of MFIs in the euro area has decreased by 24% or 2,323 institutions since 1 January 1999. On 1 January 2012 Germany and France accounted for 41% of all euro area MFIs, a share slightly greater than that recorded on 1 January 2011. On 1 January 2012 there were 9,587 MFIs resident in the EU, a net decrease of 334 units (-3%) since 1 January 2011. Compared with the situation on 1 January 1999 (10,909 MFIs in the EU), there has been a net decrease of 1,322 units (-12%), despite the addition of 1,608 MFIs on 1 May 2004, when ten new Member States acceded, and of a further 72 MFIs on 1 January 2007, when Bulgaria and Romania joined the EU. source: website of ECBPrečítať
"Value Added Tax (VAT) is paid for by citizens, collected by businesses and accounts for over 20% of national revenues. It therefore has a significant impact on every single EU citizen. However, it is now 40 years since the EU VAT system was first set up, and the regime no longer fits with our service-driven, technology-based economy. The time has come for an ambitious VAT reform." said Algirdas Šemeta, Commissioner for Taxation, Customs, Anti-fraud and Audit. On this basis, the Commission adopted a Communication on the future of VAT. This sets out the fundamental characteristics that must underlie the new VAT regime, and priority actions needed to create a simpler, more efficient and more robust VAT system in the EU. Three overriding objectives shape the vision for the new VAT system: First, VAT must be made more workable for businesses. A simpler, more transparent VAT system would relieve businesses of considerable administrative burdens and encourage greater cross-border trade. This, in turn, will be good for growth. Among the measures envisaged for a more business-friendly VAT are expanding the one-stop-shop approach for cross border transactions; standardizing VAT declarations; and providing clear and easy access to the details of all national VAT regimes through a central web-portal. Second, VAT must be made more efficient in supporting Member States' fiscal consolidation efforts and sustainable economic growth. Broadening tax bases and limiting the use of reduced rates could generate new revenue for Member States without the need for rate increases. The standard VAT rate could even be reduced in some Member States, without any impact on revenue, if exemptions and reductions were removed. The Communication sets out the principles that should guide the review of exemptions and reduced rates. The Commission will also be analysing Member States' use of reduced rates and exemptions when reviewing their fiscal policies in the context of the European Semester (see MEMO/11/11). Third, the huge revenue losses that occur today due to uncollected VAT and fraud need to be stopped. It is estimated that around 12% of the total VAT which should be collected, is not (so-called VAT Gap). In 2012 the Commission will propose a quick reaction mechanism to ensure Member States can respond better to suspected fraud schemes. Furthermore, the Commission will see whether current anti-fraud mechanisms, such as Eurofisc, need to be strengthened and will explore the possibility of a cross-border audit team to facilitate multilateral controls. Finally, the Commission has concluded that the long-standing question of changing to a VAT system based on taxation at origin is no longer relevant. Therefore, VAT will continue to be collected in the country of destination (i.e. where the customer is located), and the Commission will work on creating a modern EU VAT system based on this principle. Background On 1st December 2010, the Commission adopted a Green Paper on "The future of VAT – Towards a simpler, more robust and efficient VAT system". This Green Paper was followed by a six month public consultation in which the Commission received 1700 contributions from businesses, academics, citizens and tax authorities. The European Parliament, the European Economic and Social Committee and the Tax Policy Group consisting of the personal representatives of the finance ministers welcomed the Green Paper and confirmed the need to reform the EU VAT system. In parallel, the Commission carried out an economic evaluation of the VAT system. For the full text of the Communication and more details on VAT, see: http://ec.europa.eu/taxation_customs/taxation/vat/key_documents/communications/index_en.htm Homepage of Commissioner Algirdas Šemeta, EU Taxation and Customs Union, Audit and Anti-fraud Commissioner: http://ec.europa.eu/commission_2010-2014/semeta/index_en.htm MEMO/11/874 Source: EU Commission Source picture: www.fotolia.dePrečítať