The Wilder View

All of the Euro Area Usual Competitive Suspects in One Chart…But with a Twist

The European Commission’s Economic and Financial Affairs initiated the Macroeconomic Imbalance Procedure (MIP) Scoreboard. The MIP Scorecard will be used to identify emerging or persistent macroeconomic imbalances in a country. In their inaugural release, the EC listed 12 EU countries in need of further review for potential imbalances (program countries are exempt from this review process).

The accompanying database of the factors in the MIP score is made available at Eurostat. This database is particularly exciting for a data geek like me. Included in the MIP database is an indicator that I’ve wanted to construct for some time: country level exports as a share of world exports. World export share is a much broader measure of competitiveness than the commonly reported export share of country GDP.

Belgium, which is one of the 12 countries on review for potential imbalances, has experienced an 0.5 ppt drop in world export share, 2.4% in 2002 to 1.9% in 2010. Seems like a big drop – but what does a 1.9% export share mean in terms of the size of the Belgian population in the Euro area 12 (EA 12)? In 2010, Belgium’s world export share was 2.2 times what it’s EA 12 population share implies – loss of competitiveness, yes, but still competitive.

The chart below illustrates the following: (country world export share as a share of EA 12 world export share)/(country share of EA 12 population). The data can be downloaded at Eurostat: export share, and population).

If the index level > 1, then the country has a greater share of the EA 12 world export share than that implied by its population as compared to that of the EA 12 – competitive; If the index level < 1, then the country has a smaller share of the EA 12 world export share than that implied by its population relative to that of the EA 12 – not competitive.

Some takeaways from this chart are:

  1. All the usual ‘competitive’ suspects are at the top: Ireland, Netherlands, Belgium, Austria, Germany, and Finland. These countries hold in excess of 1.2 to 3.1 times EA 12 world export share than their relative size in the EA 12.
  2. All of the usual ‘uncompetitive’ suspects are at the bottom: Greece, Portugal, Spain, Italy, and France. These countries hold anywhere from 30% to 70% less world export share of that in the EA 12 than their population share would imply.
  3. Ireland is the most competitive in this respect, and Greece is the least.
  4. Germany is more in the middle with just a 27% higher export share of the EA world export share than that implied by its population share….

That’s it for today. I’d like to hear your feedback.


11 Responses to “All of the Euro Area Usual Competitive Suspects in One Chart…But with a Twist”

LluísFebruary 24th, 2012 at 11:45 pm

Size Matters.Population does not matter
Number, size and capital's origin firms is the most important.

Capital= no country no sector no hart…

LeothelastFebruary 26th, 2012 at 1:45 am

Netherlands' and Belgium's positions are misleading.
They are largely entrepot economies due to their big harbours, respectively Rotterdam and Antwerp.
Do the same numbers with imports and you will get similar readings.

Jane EdwardsFebruary 26th, 2012 at 5:09 pm

"Like" that you have a new toy to play with. It really is an interesting take, and a more fair one, on the countries involved. Too bad they don't include all countries 🙁 aj

Patrick_VBFebruary 27th, 2012 at 1:59 pm

In assessing the possibility for a euro area country to successfully achieve real GDP growth by relying on export growth, it's useful to remember that many EU countries, like Belgium, have most of their exports going to other EU countries. Given the implementation of tight fiscal consolidation plans and constitutionally imposed debt and deficit rules, I suspect that not much export growth can be expected from demand in neighbouring euro area countries over the coming years, as domestic demand growth in the euro area will most likely be very weak over the decade. So exports will have to be oriented mainly towards other, faster growing, economies to be able to contribute significantly to real GDP growth. This isn't the case of Belgian exports, which go predominantly towards Germany, France and the Netherlands.

Aad van der VaartFebruary 28th, 2012 at 9:17 am

The chart seems interesting, but is strongly misleading.
Example: The Netherlands in particular is a transit country for goods from all over the World to Germany.
Secondly one cannot Judge this chart without also taking imports of raw materials for the export industry into account. In other words, we should look at the added value for the export industry. If that is achievable.
Aad van der Vaart

rodeneugenFebruary 29th, 2012 at 11:48 pm

Credit rating agencies

The interest rates countries pay on sovereign debts are strongly connected to the ratings done by the credit rating agencies (CRA).
Oddly enough if we look at the following chart representing Greek debt rating by S&P and Moody we can see, that until end of 2009 both agencies rated Greece very highly. Is it possible that since beginning of 2010 something dramatic happened that suddenly all has changed or they just had no clue what credibility Greece had?….

What exactly happened with the Greek economy, that suddenly at beginning of 2010 everything has changed? Was it dramatic change in the current account?….

If we look the above chart we find surprisingly that the Greek current account deficit as percentage of GDP reached its peak of 15% at 2008 and in spite of negative GDP growth since 2008 its current account deficit as percentage of GDP started to decrease. According to this the Greek economy at the beginning of 2009 was not in better shape than at the end of it and it seems not S&P and not Moody knew about it.
So what really happened? Assuming that these agencies employ the very best professionals, probably something very basic is not right. If so, can we trust their new evaluations. Do they not do mistakes which can have additional serious consequences?

Following the crisis and very much influenced by the Maastricht criterions, the public discussion about the indicators representing economic strength is focused mainly on the relations between the GDP and governments budget deficits, accumulated debt (public and private) and the current account. Yet this indicators gave very partial picture,; since the government debt represents annual cash flow between the government and private sector, current account represents cash flow between the country and its commercial partners, and the accumulated debt represents the total liability of the country or the government. In this representation we are missing the assets and their annual rate of accumulation.
As a different method of evaluation of country i would suggest to try to evaluate the countries asset value and compare it to their liabilities. This method has of course many deficiencies, like the asset value has to be evaluated according to its market price, while that can be reduced substantially in times of crisis and over valued in times of prosperity not to speak about creating an accurate accounting of national assets. Yet it can be done

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