FTM: Macro- and micro-economic storytelling
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The document outlines a workshop led by Dr. Aleš Pustovrh, focusing on macro- and micro-economic storytelling and studies, using real-world examples such as Slovenia's budget and the case of Cimos. It discusses key principles of economics, such as budget deficits, analysis of fiscal policies, and the financial performance of individual companies, while emphasizing the importance of thorough data analysis and critical reporting. The presentation also highlights the interplay between economic theory and political realities, particularly regarding austerity measures and upcoming elections in Slovenia.
FTM: Macro- and micro-economic storytelling
- 1. FOLLOW THE MONEY WORKSHOP Macro- and micro-economic storytelling
- 2. Dr. Ales Pustovrh, ABC Pospeševalnik Dr. Aleš Pustovrh Freelance Contributor for The Economist Intelligence Unit, ABC Pospeševalnik, Ekonomska Fakulteta
- 3. :00 – 9:45 Aleš Pustovrh Presentation of a real world case where macroeconomics and political economics are critical to an understanding of events (e.g., Brexit or one of the attendee’s proposed stories). Introduction to basic principles and vocabulary of macroeconomics; brief introduction to political economy 10:00 – 10:45 Aleš Pustovrh Further introduction to political economy. Presentation of a real world case where a knowledge of microeconomics is valuable (e.g., competition policy regarding mobile phone providers or an attendee case). Introduction to basic principles and vocabulary of microeconomics
- 4. •Gathering data •Analyzing data and developing the idea •Presenting your idea ! Good project work requires…
- 5. MACRO-ECONOMICS field of economics that studies the behavior of the aggregate economy – country economy as a whole
- 6. Case study – Slovenian budget in 2016 and 2017 ‚Proračunski primanjkljaj se je lani zmanjšal skoraj za polovico – z 1,277 milijarde evrov v letu 2015 na 687 milijonov evrov.‘ – Dnevnik, 18.1.2017 How do you report this ? Is this good or bad or irrelevent news that most people will not care about ?
- 7. Case study – different opinions among experts Kljub tako občutnemu znižanju primanjkljaja pa Marko Jaklič z ljubljanske ekonomske fakultete ocenjuje, da za kakšno »zmagoslavje« ni nobenega razloga. »Če upoštevamo, da smo v konjunkturi, bi morali imeti presežek,« meni Jaklič. Maks Tajnikar: ni razloga, da se ne bi primanjkljaj znižal tudi letos, bo lahko vlada kljub fiskalnemu pravilu in zahtevam Bruslja lažje uresničila že izvedene »odpustke« kot tudi dane obljube. Med drugim sporazum s sindikati javnega sektorja, spremembe socialne zakonodaje, dvig najnižjih pokojnin, zdravstveno reformo…
- 8. Data on the budget - Current data on expenditure and revenue of public sector: http://www.mf.gov.si/si/delovna_podrocja/javne_finance/tekoca_gibanja_v_javni h_financah/konsolidirana_bilanca_javnega_financiranja/ - Budget planning – current budget for 2016: http://www.mf.gov.si/si/delovna_podrocja/proracun/sprejeti_proracun/2016/spre jeti_proracun_republike_slovenije_za_leto_2016/ - Up-to-date official analysis: http://www.mf.gov.si/si/delovna_podrocja/javne_finance/tekoca_gibanja_v_javni h_financah/bilten_javnih_financ/ - Newspaper reports: https://www.dnevnik.si/1042759993/slovenija/lanski- proracunski-primanjkljaj-150-milijonov-evrov-nizji-od-predvidenega
- 9. First observations • We spend more than we get revenue – 9 bln EUR expenditure from the budget, 8,31 bln EUR income. This creates a deficit of 687 mio EUR. • This deficit was much larger in 2015: 1.277 mio EUR • Even the deficit we were planning for 2016 was larger: 839 mio EUR. • Slovenia has a primary budget surplus – we‘ve paid 1,05 bln Eur for interest on our loans, without those we would have a surplus of 364 mio EUR. • THESE ARE FACTS THAT SHOULD BE REPORTED.
- 10. Analysis:We need to compare this in time and space In order to do so, we usually compare deficit with GDP – it is a proxy for measuring if we will be able to finance our expenditure. In 2016, we do not have the estimated GDP yet. Officially, UMAR was predicting exactly 40 bln Eur of GDP for 2016 (but they are usually wrong !). This means we had a estimated budget deficit of 1.7 % of GDP. • We need to compare this for Slovenia for longer time period (the best result since 2008 – but we have never had a surplus – ever !) • We need to compare this with other countries (Germany – surplus !) • Official data source: EUROSTAT - http://ec.europa.eu/eurostat/data/database
- 11. Analysis: What does that mean ? • Can we spend more now ? • YES, but…
- 12. What does it mean ? • …not necessarily ! We made commitments to the EU and our lenders that we will keep lowering the deficit and try to repay our debts ! • Check the deficit targets for 2017: http://www.mf.gov.si/si/delovna_podrocja/proracun/sprejeti_proracun/ • Some signs are not too promising: http://www.delo.si/gospodarstvo/finance/bruselj-v-sloveniji-tveganje-krsitve- proracunskih-pravil-eu.html • Analyse why the deficit is lower than expected: expenditure was low, but also tax receipts !
- 13. Conclusion • If we want to keep our obligations (and we are legally obliged to do so !) we need to keep lowering our deficit. • But tax receipts are only 2.7 % higher that last year – in spit of fast growth (close to 3 % in real terms, probably more than 3 % in nominal terms – check Stat.si for nominal data, not real data since they use fixed prices) ! • The reason for low deficit is strong control over budget expenditure ! • Essentially, austerity measures !
- 14. Political economy Technically, it is clear what needs to be done: we need to keep lowering the deficit. • In the past, we succeeded due to austerity measures. We‘ve increased the taxes but failed to collected more of them. • Now, at least 2 of the coalition parties are opposing austerity measures in spite of the legal requirements to continue lowering deficit (there are good economic reasons for that, too). But technically&economically this is not a question. • This is a political question ! Next year, the elections are coming and each party wants to get more money for its voters.
- 15. ANY QUESTIONS ?
- 16. MICRO-ECONOMICS Study of the economic behavior of individual units of an economy (such as a person, household, firm, or industry)
- 17. Case: Cimos
- 18. Data sources for micro ◻Annual reports: http://www.cimos.eu/index.php?page=letna_ p orocila&item=99 ◻However: good analysis of Cimos ! - http://www.drugisvet.com/naslovnica/ali-res- resujemo-cimos.html
- 19. ANALYSIS - MICRO ◻How much is Cimos worth ? Why ? ◻Simple rule: calculate its net present value by adding and discounting its future positive and negative cash flows. ◻You have all the data in teh annual reports – for the past (use cash flow or EBITDA)!
- 20. Analysis ◻However, how will you know about the future ? ◻However, these calculations might have different results for different investors ! ⬜The calculation for the government is different (unemployment benefits) than for the current owners (banks) than for the single investor left.
- 21. Analysis ◻ This depends on the plans that will influence their future cash flows. ◻ Who knows what will happen in next 5-10 years with CIMOS ?
- 22. Analysis: what can happen ? ◻ Scenario 1: It goes bankrupt ◻ Scenario 2: It continues the same way it has in the past ◻Scenario 3: It is bought and sold its assets
- 23. Analysis ◻If it goes bankrupt it will cost the government (actually 2 government !) unemployment benefits and lost taxes that would be paid. In Slovenia, there are 2000 employees. ⬜Outside Slovenia another 3000.
- 24. Analysis ◻CIMOS Group is still making app. 30 million EBITDA per year. But the core company‘s EBITDA has fallen to 15 million in 2015 (do not forget they also have the 2016 data already but it is not public yet). ◻It could fall further is revenue from sales fall faster than its costs. !
- 25. Analysis ◻ Rule of thumb I use: 5 years EBITDA is the value of the company. In CIMOS: 150 million EUR. ◻ The offer from potential buyer is 105 million + 70 million into equity = 175 million EUR ◻This is based on the assumption it will continue to be as profitable as before ! But…
- 26. Analysis ◻But the company still has 190 million EUR of loans and obligations (270 mil. In the whole group) and app. 235 million EUR of assetss (320 in the whole group). ◻Quite big difference between the core company and the group !
- 27. Analysis ◻And CIMOS‘es customers are very reluctant to continue working with company that is in very bad financial situation: it has only 42 million EUR capital but 270 million obligations (15%:85%). They might prefer to buy from its competitors if its financing structure does not improve (that is why the acquirer wants to invest 70 mil EUR in equity).
- 29. Most common mistakes I see in the articles ◻ Send questions by email and just publish answers (no insights !) - TAKE YOUR TIME TO DO PROPER ANALISYS ◻ Using one-sided sources – challange yourself with reading the opinions that you do not agree with ! ◻ Non-critical quoting of sources (all they say) – a lot of the sources have agenda (remember the mayor from the morning)?
- 30. Most common mistakes I see in the articles ◻Too much focus on non-stories and ingorant about other stories (CIMOS vs. OUTFIT7)
- 31. •Gathering data •Analyzing data and developing the idea •Presenting your idea ! Good project work requires…
- 32. • Structure • Written text • Emphasis (design elements, graphs…) • Delivery (passion) • DIFFERENTIATION Rules for good presentations…