piraeus bank group

SEE & Egypt Economic Review - August 2013

In the current issue of our SEE & Egypt Review, we update and expand our Macroeconomic Balance Index (MBI), which is our primary country scoring tool. As all of you must have realized by now, the MBI has proven to be an evolving standard given that we have never stopped tweaking and improving it (for previous versions see SEE & Egypt Review: April 2012 and March 2010). 

Keeping up with this tradition, we have now extended our MBI in two directions. First, we have expanded the informational set used in the estimation of the index. As a result the MBI is now based on a Macroeconomic dimension, which consists of Real GDP annual growth rate, GPD per capita in the country’s national currency, Unemployment Rate and Inflation. A Fiscal dimension based on Fiscal Balance and Public Debt both as a percentage of GDP. An External Balance dimension based on Current Account Balance, Foreign Direct Investments and Gross External Debt expressed as a percentage of GDP and International Reserves in months of imports. A Banking dimension based on Banking Liquidity (Loans to Deposits) and Non-Performing Loans as a percentage of total Loans and finally a Political Assessment dimension, based on the ICRG Political Risk Indicator. 

Even more important from the increased information set is the introduction of a dynamic aspect in our index construction methodology. Up to now the MBI ranking for each economy depended on its score; relative to the score of all other economies under examination. Hence, this was essentially a cross-sectional exercise (without a time dimension) and as such it failed to recognise each economy’s annual performance (improvement or deterioration) relative to its past average performance. 

This has now been rectified by splitting the MBI into two components, 

i) the Static MBI, which is - in all means and purposes – based on the old methodology and 
ii) the Dynamic MBI, which assesses each economy’s relative performance, but now the metric of comparison is not the macroeconomic variables per se (i.e. GDP growth), rather the deviation of the macro variables from their medium-term averages (i.e. GDP growth 2012 – average GDP growth 2006-2009).

Director, Economic Analysis & Markets Division