piraeus bank group

SEE Economic Review April

Our readers will surely remember the Macroeconomic Balance Index (MBI) that we publish every year immediately following our annual forecast round. The aim of this index was, and still is, to provide a concise and comprehensive assessment of the imbalances (both internal and external)of each economy in our sample and, based on these imbalances, to provide a macroeconomic scorecard. In doing so, we are fully aware of the limitations of our approach. However, we are confident that our results provide an interesting and informative assessment of the macroeconomic situation in each of the economies we follow.


In its original format (first published in the March 2010 issue of this Review), the MBI was calculated using 4 variables. GDP growth was used as the cornerstone variable that reflected the increase in the overall output of each economy; the fiscal deficit and inflation rate were included as indicators of internal imbalances, while the current account deficit was our external imbalances indicator. The main criterion for the selection of these variables was simplicity and ease of computation. Nevertheless, when we revisited the issue of calculating the MBI this year, we had to admit that our index looked incomplete. Based on the experience we have accumulated in recent years, we have decided to augment our MBI with a number of additional macro-variables, so as to provide a more complete picture of the relative strengths and weaknesses of each economy. As a result, our revamped MBI is based on GDP growth, public debt and deficit, inflation, current account balance, private sector loans and deposits growth, unemployment and Real Effective Exchange Rate (REER) changes.


In order to provide some historical perspective for the new index, we provide estimates of the index from 2008 onwards. When calculating the index for the years up to 2011, we use historical values for the underlying components. For 2012, we follow a more forward-looking approach and employ our forecasts for these variables.


Based on these forecasts, our estimates for the 2012 MBI provide a bifurcated picture: Bulgaria and Romania clearly stand out as the best performers with virtually no difference between them. Similarly, in the runners-up group, Albania, Cyprus and Serbia have roughly equal scores.