Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Economic outlook. Are we getting out of the mess? Brussels, February 03 2011. Freddy Van den Spiegel Chief Economist History of the crisis • 2007: starting problems in US housing market and “toxic” financial products. • 2008: major banks fail in US and EU, global economy into recession. • 2009: global recession. • 2010: sovereign risks. • 2011: currency and trade wars or gradual normalisation? February 03, 2011 | 2 But surprising economic recovery Changing forecasts: 2010 Forecasts Date of forecast: sep/09 jan/10 apr/10 jul/10 okt/01 World 3,1 3,9 4,2 4,6 4,8 US 1,5 2,7 3,1 3,3 2,6 EMU 0,3 1,0 1,0 1,0 1,7 China 9,0 10,0 10,0 10,5 10,5 Russia 1,5 3,6 4,0 4,3 4,0 Source: IMF February 03, 2011 | 3 1. Economic outlook: focus on the consensus view. US: Growth is back but quid sustainability? • Corporate sector healthy. • Consumer sector fragile. • Government sector supportive beyond reasonable levels. • External balance deteriorating again. • Banking sector: deleveraging going on but still a long way to go. CONTINUOUS RECOVERY GOING ON BUT REMAINS VULNERABLE SUSTAINABLE FOR HOW LONG? February 03, 2011 | 4 1. Economic outlook: focus on the consensus view. EMU: Growth is back but slower than US. • Corporate sector healthy. • Consumer sector hesitant. • External sector pulling economy. • Government debt levels increasing but still under control. • Banking sector stabilised, but vulnerable. • Monetary and Economic Cohesion at risk. SUSTAINABLE GROWTH BUT FINANCIAL AND POLITICAL UNCERTAINTY February 03, 2011 | 5 1. Economic outlook: focus on the consensus view. Belgium: strong performance within EMU • Corporate sector healthy. • Consumer sector strong. • Government sector the Achilles’ heel. • External sector pulling economy. • Banking sector oversized and vulnerable: ongoing need to deleverage. Nice profile with political and financial weak spots. February 03, 2011 | 6 1. Economic outlook: focus on the consensus view. Russia: sustained growth. • Activity supported by oil prices. • Consumer sector benefitting from lower unemployment. • Government sector: room for expansion. • External sector: comfortable balance. • Tighter monetary policy due to inflation. • Long term potential. February 03, 2011 | 7 1. Economic outlook: focus on the consensus view. Asia: Continued growth and apparent stability. • No fundamental problems with crisis (banks and government debt). • But based on massive government support. • But still focused on exports which is unsustainable. • But inflationary pressures building. And not only a China story February 03, 2011 | 8 MAJOR NEW ECONOMIES: REAL GDP GROWTH (%YoY) IMF Figures 12 IMF Forecasts 10 8 6 4 2 0 00 01 02 03 04 05 06 07 08 09 10 11 12 -2 -4 -6 India Brazil Indonesia Russia -8 -10 February 03, 2011 | 9 1. Economic outlook: focus on the consensus view. Asia: Continued growth and apparent stability. • No fundamental problems with crisis (banks and government debt). • But based on massive government support. • But still focused on exports which is unsustainable. • But inflationary pressures building. And not only a China story Growth can continue at high speed, but increasing dangers of conflicts with major clients and internal bottle necks. February 03, 2011 | 10 1. Economic outlook: focus on the consensus view. Summary. US EMU Belgium Russia China GDP Growth 2010 2011 2012 2,8 2,1 2,8 1,7 1,6 1,7 2,1 2,2 2,0 4,1 4,2 4,5 10,0 9,0 9,4 2010 1,6 1,6 2,3 6,9 3,2 Inflation 2011 1,1 2,2 2,6 8,3 3,8 2010 1,6 1,5 2,1 6,6 3,1 Inflation 2011 1,1 1,3 1,6 7,5 3,3 2012 0,8 1,6 1,8 8,7 3,8 Budget Balance 2010 2011 2012 -8,9 -8,6 -7,0 -6,2 -4,7 -3,7 -4,6 -3,8 -3,1 -3,9 -3,5 -3,0 -2,7 -2,3 -2,5 2012 1,1 1,2 1,8 6,5 3,0 Budget Balance 2010 2011 2012 -10,5 -8,8 -6,8 -6,3 -4,6 -3,5 -4,9 -4,5 -3,6 -4,8 -3,6 -2,9 -1,9 -2,2 -2,1 Source: BNP Paribas US EMU Belgium Russia China GDP Growth 2010 2011 2012 2,7 2,2 3,1 1,7 1,7 2,0 2,1 1,8 1,8 4,0 4,3 4,4 10,5 9,7 9,7 Source: OECD/IMF February 03, 2011 | 11 1. Economic outlook: the consensus view. 2. Are we getting out of the mess: overview of developments in risk areas. February 03, 2011 | 12 2. Are we getting out of the mess? Overview of risk areas. • Banking health. • Confidence stable. • Lending to private sector recovers. • Profitability back but still vulnerable • Stress tests reassuring but controversial. • But exposure to risky assets remains significant. • But funding gap remains wide. • But new regulations create uncertainty. • But many weaker banks remain dependent on ECB in some countries. BANKS ARE RECOVERING BUT STILL VERY VULNERABLE, A LONG WAY TO GO February 03, 2011 | 13 2. Are we getting out of the mess? Overview of risk areas. Central Banks balance sheets. • Massive support during the crisis and no serious exit yet. • Leading to inflation? Conclusion: no hurry to exit, but what when M3 wakes up? February 03, 2011 | 14 2. Are we getting out of the mess? Overview of risk areas. Government finances. • Deficits and unsustainable debt levels. • Deficits are structural: no easy way out. Conclusion: Governments cannot continue to support the economy but have no other option in case of (unexpected) further slowdown. A dangerous potential dilemma. February 03, 2011 | 15 2. Are we getting out of the mess? Overview of risk areas. Economic divergence within EURO zone. • Diverging performance. • GDP growth: from top performers to PIGS. • Unemployment. • Government deficit. • Government debt. • Current account. • Competitiveness. February 03, 2011 | 16 2. Are we getting out of the mess? Overview of risk areas. Performance 1999-2009 EMU Netherlands Germany Belgium France Ireland Spain Portugal Italy Greece GDP 1,5 1,9 1,0 1,7 1,6 4,4 2,8 1,2 0,6 3,4 Government debt (end 2009) 78,9 60,9 73,2 96,7 77,6 64,0 53,2 76,8 115,8 115,1 Unemployment (end 2009) 9,4 3,4 7,5 7,9 9,4 11,9 18,0 9,6 7,8 9,5 Government deficit -1,8 -0,8 -2,0 -1,0 -3,1 -0,6 -1,3 -4,0 -3,0 -5,9 Inflation 2,0 2,3 1,6 2,0 1,8 2,9 2,9 2,6 2,3 3,1 Current account 0,2 5,4 3,3 2,6 0,3 -2,1 -5,8 -9,2 -1,5 -9,0 120,2 124,6 106,9 123,1 121,1 134,0 131,4 127,0 132,2 137,6 ULC (2000 = 100) February 03, 2011 | 17 2. Are we getting out of the mess? Overview of risk areas. YIELD ON EMU GOVERNMENT BONDS 10Y Spread with German Bund 10y in bp 17/01/2011 1000 1000 950 950 900 900 Belgium 850 850 800 Spain 800 750 750 Italy 700 650 700 650 Portugal 600 550 600 550 Ireland 500 500 450 450 Greece 400 400 350 350 300 300 250 250 200 200 150 150 100 100 50 50 0 jan/07 0 apr/07 jul/07 okt/07 jan/08 apr/08 jul/08 okt/08 jan/09 apr/09 jul/09 okt/09 jan/10 apr/10 jul/10 okt/10 jan/11 February 03, 2011 | 18 2. Are we getting out of the mess? Overview of risk areas. Government Finances / Sovereign Debt crisis in Europe • Divergence within EU: the EURO crisis. • Crisis as a consequence. • Political reaction • Rescue package • National Austerity Programs. • Reform of Economic Governance. February 03, 2011 | 19 2. Are we getting out of the mess? Overview of risk areas. Government Finances / Sovereign Debt crisis in Europe • Divergence within EU: the EURO crisis • Crisis as a consequence • Political reaction. CONCLUSION: • PROBLEMS ARE UNDER CONTROL FOR THE TIME BEING BUT THE FUNDAMENTAL ISSUE OF COMPETITIVENESS IS FAR FROM RESOLVED; • MARKETS DO NOT BELIEVE THIS IS A SOLUTION, ESPECIALLY FOR GREECE • THIS ISSUE WILL CONTINUE TO WEIGHT ON EU ECONOMIES • POLITICAL REACTIONS UNCREDIBLE SO FAR February 03, 2011 | 20 2. Are we getting out of the mess? Overview of risk areas. Inflation/deflation - Inflation on the rise worldwide. - Pressures from commodities and monetary expansion. - Core inflation remains low for the moment. - Inflation expectations remain in check for the moment. A REMAKE OF THE 2007-08 SCENARIO WITH INFLATION SURPRISE AS A TRIGGER FOR CRISIS? February 03, 2011 | 21 2. Are we getting out of the mess? Overview of risk areas. Global imbalances and geopolitical tensions/ protectionism. • Imbalances in trade flows. February 03, 2011 | 22 Current Account Balances February 03, 2011 | 23 Current Account Balances February 03, 2011 | 24 2. Are we getting out of the mess? Overview of risk areas. Global imbalances and geopolitical tensions/ protectionism. • Imbalances in trade flows. • Financial imbalances. February 03, 2011 | 25 Q 1 Q 19 1 7 Q 19 0 1 7 Q 19 1 1 7 Q 19 2 1 7 Q 19 3 1 7 Q 19 4 1 7 Q 19 5 1 7 Q 19 6 1 7 Q 19 7 1 7 Q 19 8 1 7 Q 19 9 1 8 Q 19 0 1 8 Q 19 1 1 8 Q 19 2 1 8 Q 19 3 1 8 Q 19 4 1 8 Q 19 5 1 8 Q 19 6 1 8 Q 19 7 1 8 Q 19 8 1 8 Q 19 9 1 9 Q 19 0 1 9 Q 19 1 1 9 Q 19 2 1 9 Q 19 3 1 9 Q 19 4 1 9 Q 19 5 1 9 Q 19 6 1 9 Q 19 7 1 9 Q 19 8 1 9 Q 20 9 1 0 Q 20 0 1 0 Q 20 1 1 0 Q 20 2 1 0 Q 20 3 1 0 Q 20 4 1 0 Q 20 5 1 0 Q 20 6 1 0 Q 20 7 1 0 Q 20 8 1 09 20 10 2. Are we getting out of the mess? Overview of risk areas. US: NET FOREIGN ASSET POSITION OF THE US (in mio USD) "-" indicates net debtor position of US w.r.t. rest of the World (stock) 1.000.000 0 -1.000.000 -2.000.000 -3.000.000 -4.000.000 -5.000.000 -6.000.000 -7.000.000 -8.000.000 -9.000.000 Source: Federal Reserve February 03, 2011 | 26 2. Are we getting out of the mess? Overview of risk areas. CHINA: GOLD AND FOREIGN RESERVES Billion USD 3000 2800 2600 2400 2200 2000 1800 1600 1400 1200 1000 800 600 400 200 0 jan/80 jan/82 jan/84 jan/86 jan/88 jan/90 jan/92 jan/94 jan/96 jan/98 jan/00 jan/02 jan/04 jan/06 jan/08 jan/10 Source: Thomson Financial Datastream February 03, 2011 | 27 2. Are we getting out of the mess? Overview of risk areas. Global imbalances and geopolitical tensions/ protectionism. • Imbalances in trade flows. • Financial imbalances. AS A CONSEQUENCE TENDENCY TO NATIONALISM AND PROTECTIONISM: THE END OF GLOBALISATION? February 03, 2011 | 28 2. Are we getting out of the mess? Overview of risk areas. • Banking health. • Central Banks balance sheets. • Government finances. • Divergence within EMU – future of EURO. • Inflation / deflation. • Global imbalances and geopolitical stress / protectionism. THE BIGGEST RISK: INTERCONNECTEDNESS AND POTENTIAL CHAIN REACTIONS. February 03, 2011 | 29 2. Are we getting out of the mess? Overview of risk areas. DRAMA Example of chain reactions. Double dip Government finance (Sovereign risk) Deflation Banking trouble Euro crisis February 03, 2011 | 30 3. Globalisation and EU – Russia relationship Conditions to support economic integration • Common culture • Neighbourhood • Complementarity • Political willingness EU – RUSSIA ECONOMIC INTEGRATION HAS A HUGE POTENTIAL February 03, 2011 | 31 Thank you.