BBVA EAGLEs ESADE€¦ · Page 3 BBVA EAGLEs ESADE/ 15th February, 2011 Section 1Growth prospects...
Transcript of BBVA EAGLEs ESADE€¦ · Page 3 BBVA EAGLEs ESADE/ 15th February, 2011 Section 1Growth prospects...
BBVA EAGLEs ESADEBarcelona, 15th February, 2011
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BBVA EAGLEs ESADE/ 15th February, 2011
Section 1
Emerging Economies: Current SituationSection 2
The Future of Emerging Economies Introducing the EAGLEsResilience against riskInvestment opportunities
Agenda
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Section 1
Growth prospects are very positive The emerging economies are mainly responsible for global growth.• The global economy mantains strong growth, and should reach 4.4% in 2011 and 2012• The economic dynamism will remain vigorous in Asia and LatAm, where growth rates will exceed those recorded
in developed countries
GDP growth forecast (%)Source: BBVA Research
Contribution to global growthSource: BBVA Research
-3-2-10123456
2007 2008 2009 2010 2011 2012Rest of World Emerging MarketsOther advanced Ecs. EurozoneUS Global Growth
0
3
6
9
12
US EMU China EmergingAsia exChina
LatAm7 EAGLEs
2010 2011 2012
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Section 1
There are pressure factors in the economies Pressure factors on prices and external positions• Higher raw material prices owing to short-term factors: bad weather, geopolitical risk, and greater investment flows
into commodities• Moreover, the pace of differential activity with developed markets and appreciation pressures generate a trend
towards impairment of current accounts in some key countries (Brazil)
-3-2-1012345678
ene 09 abr 09 jul 09 oct 09 ene 10 abr 10 jul 10 oct 10 ene 11
China LatAm7Asia Emergente (ex China & India) EEUUUEM
Inflation (annual %)Source: BBVA Research and Datastream
Brazil: Current Account BalanceSource: BBVA Research
-3,0
-2,5
-2,0
-1,5
-1,0
-0,5
0,0
0,5
1,0
1,5
07 08 09 10 11
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BBVA EAGLEs ESADE/ 15th February, 2011
Section 1
But the challenges appear manageable and there is room for the implementation of policiesEven so, inflation remains contained and there is broad capacity for reaction through monetary policy…• Despite the upside risk of inflation (derived mainly from food and energy), a significant recovery is not expected • Our expectations are modest increases in interest rates, but there is room to accelerate them effectively if inflation
risks materialize
Inflation (annual average; %)Source: BBVA Research
Official interest ratesSource: BBVA Research
0
2
4
6
Asia
ex-C
hina
Chin
a
Bras
il
Chile
Colo
mbi
a
Méx
ico
Perú
2009 2010 2011
0
1
2
3
4
5
6
7
8
9
jun
09
sep
09
dic
09
mar
10
jun
10
sep
10
dic
10
mar
11
jun
11
sep
11
dic
11
US EMU China EAsia exc China Latam
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AgendaSection 1
Emerging Economies: Current SituationSection 2
The Future of Emerging EconomiesIntroducing the EAGLEsResilience against riskInvestment opportunities
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Section 2
The future of Emerging Economies World rotation: slowdown in G7 vs sustained growth in EEs
Beyond BRICs: other emerging markets are relevant
EAGLEs: Emerging And Growth-Leading Economies
1
2
3
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BBVA EAGLEs ESADE/ 15th February, 2011
Section 2
World rotation: Slowdown in G7 vs sustained growth in EEs• Growth in G7 countries is expected to remain below 2% for the next 10 years• Growth in emerging markets will outpace the G7 average by 4pp including China, and 2.5pp excluding the Asian
giant
Note: 45 Emerging Markets– Argentina, Bahrain, Bangladesh, Brazil, Bulgaria, Chile, China, Colombia, Czech Rep., Egypt, Estonia, Hungary, India, Indonesia, Iran, Jordan, Korea, Kuwait, Latvia, Lithuania, Malaysia, Mauricio, Mexico, Morocco, Nigeria, Oman, Pakistan, Peru, Philippines, Poland, Qatar, Romania, Russia, Slovak Rep., South Africa, Sri Lanka, Sudan, Taiwan, Thailand, Tunisia, Turkey, Ukraine, UAE, Venezuela, Vietnam.
GDP adjusted by PPP: growth ratesSource: BBVA Research and IMF
0
1
2
3
4
5
6
7
1980's 1990´s 2000's 2010's
EM without China Average
G7 Average
Emerging Markets Average
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Section 2
Beyond the BRICs, other EEs are relevantOther emerging economies (EEs):
• Their combined size is larger than the G6• Contribution to global growth over the next 10 years will be 4 times greater
Emerging EconomiesExpected GDP growth 8 Billion
Emerging EconomiesCurrent GDP 15 Billion
G6Expected GDP growth 2 Billion
G6Current GDP 14 Billion
G6 Aggregate: Canada, Germany, France, Italy, Japan and UKEmerging Economies: other Emerging Economies excluding Brazil, Russia, India and China
GDP: Current size and expected increase (Billions of USD, adjusted by PPP)Source: BBVA Research and IMF
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Section 2
Absolute growth is better than absolute size
BRICs (GS)
Absolute size• Bigger does not necessarily determine a
potential market
BBVA EAGLEs
Based on absolute growth• Large enough size plus…• Fast enough growth
No clear cut-off
Static concept• Allows no anticipation: inertia• Long horizon: at least 20-25 years• Why only four countries? Subjective
Defined cut-off: the G6
Dynamic concept• Anticipation: dynamic concept• Short horizon: next 10 years• Flexible number of countries: “Club
admission” depends on performance
BBVA EAGLEs is the group of countries whose expected contribution to global growth is greater than the average of the G6
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China US. India
12.63.6
3.6
Section 2
China is light-years away• China’s contribution to global growth represents 70% of the contributions of the BRICs
• In 2017, China’s PPP-adjusted GDP will overtake US GDP
• India is another world-class player
GDP adjusted by PPP: 2020 level (Billions of USD)Source: BBVA Research and IMF
GDP adjusted by PPP: change between 2010-2020 (Billions of USD)Source: BBVA Research and IMF
China US. India0
5
15
20
25
10
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G6 average: Canada, Germany, France, Italy, Japan and UK
Japan Germany United KingdomCanada France Italy
0.44
0.41
0.35
0.33
0.15
0.73
Section 2
EAGLEs: Emerging And Growth-Leading Economies• In absolute terms, each EAGLE economy will contribute more to global growth than the G6 average
• The BRICs plus Korea, Indonesia, Mexico, Turkey, Egypt and Taiwan
GDP adjusted by PPP: change between 2010-2020 (Billions of USD)Source: BBVA Research and IMF
GDP adjusted by PPP: change between 2010-2020 (Billions of USD)Source: BBVA Research and IMF
Brazil Indonesia Korea Russia Mexico
Egypt Turkey Taiwan G6 Average
0.74
1.14
0.74 0.59
0.50
0.42
0.41
0.41
0.41
0.94
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Section 2
Bigger size does not mean better opportunitiesFox example, the case of Indonesia and Korea, compared with Russia
GDP adjusted by PPP: change between 2010-2020 (Billions of USD)Source: BBVA Research and IMF
0.0 0.5 1.0 1.5 2.0 2.5 3.00.0
0.2
0.4
0.6
0.8
1.0
1.2Indonesia
KoreaRussia
GDP in 2010
Abso
lute
gro
wth
bet
wee
n 20
10-2
020
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Thailand Nigeria Poland ColombiaSouth Africa Malaysia Vietnam BangladeshArgentina Peru Philippines Italy
0.37
0.32
0.300.28 0.28
0.24
0.200.17
0.15
0.270.26
0.25
Section 2
Anticipation: Who will be the next EAGLEs?Another eleven economies are expected to contribute to global growth more than Italy, the smaller contribution in the G6
GDP adjusted by PPP: change between 2010-2020 (Billions of USD)Source: BBVA Research and IMF
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CIVETS: Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa. Next 11: Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Korea, Turkey and Vietnam. MIST: Mexico, Indonesia, Korea, Turkey
Section 2
EAGLEs: A better concept in terms of both GDP and geographyEAGLEs include the world’s most important economies over the next ten years
EAGLEs and other groups: absolute growth 2010-2020 (GDP adjusted by PPP, Billions of USD)Source: BBVA Research and IMF
0
5
10
15
20
25
EAGLEs BRICs BRICs exChina
CIVETS Next11
MIST G60
2
4
6
8
10
12
Absolute Growthbetween 2010-2020
Number of countries (Right)
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AgendaSection 1
Emerging Economies: Current SituationSection 2
The Future of Emerging EconomiesIntroducing the EAGLEs
Resilience against riskInvestment opportunities
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Source: BBVA Research
The “EAGLEs Nest”
ThailandNigeriaPolandColombiaSouth AfricaMalaysiaVietnamBangladeshArgentinaPeruPhilippines
Bangladesh
PeruVietnam
Philippines
Nigeria
MalaysiaColombia
Egypt
South Africa
Thailand
Argentina Poland
Taiwan
Australia
Turkey
Indonesia
Korea
Mexico
Brazil
Russia
0
1
2
3
4
5
6
7
8
9
10
100 600 1,100 1,600 2,100 2,600GDP adjusted by PPP (Billions of USD)
GD
P g
row
th (%
, avg
. 10
year
s)
G6 averageItaly
Section 2
Resilience: There is room for a negative prediction error• It will be difficult for most EAGLEs to be excluded from the club
• Some countries in “The Nest” are close to becoming EAGLEs
Indifference curves: size and growth of the EAGLEs and the NestSource: BBVA Research
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Section 2
Resilience: Less dependence on external demand• China is fundamental: BBVA Research forecasts anticipate a moderation in export growth of around 1/3 compared
to the pre-crisis period
• On the other hand, faster growth of emerging economies and the growing importance of South-South trade can anticipate better export performance in EAGLEs than in developed countries
China: contributions to GDP GrowthSource: BBVA Research
External demand growth forecastSource: BBVA Research
GDP Exports Imports Net exports
2005-2007 2011-2015
-4
-2
0
2
4
6
8
10
12
14
Taiw
an
Kore
a
Indo
nesi
a
Braz
il
Indi
a
Egyp
t
Chi
na
G6
aver
age
Rus
sia
Mex
ico
Turk
ey
G6 USA Rest of the World
0.0
1.0
2.0
3.0
4.0
5.0
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Section 2
Resilience: Low dependence on raw materials and China• Exposure to raw materials is a greater risk than dependence on China, with the exception of Russia
• In the case of the “Nest” some economies are more dependent on China and on commodities
Exports to China and commodity exports: % of GDPSource: BBVA Research
Note: Australia is not an Emerging Economy
0.0
G7USA
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
0 3 6 9 12 15 18
Commodity exports to the world as a % of GDP (2009)
Russia
Australia
Indonesia
Brazil
India
TurkeyChinaMexico Egypt
Tota
l exp
orts
from
Chi
na a
s a
% o
f GD
P (2
009)
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Section 2
Resilience: The institutions are improving, the difference with G6 narrows • Most EAGLEs show significant progress in recent years in institutions indicators
• The greatest progress was made in political stability, while control of corruption remains a weakness
Note: The bars show the difference between EAGLEs and the G6 average for the 4 indicators obtained from the composite indexes of the Worldwide Governance Indicator: 1. Political stability and absence of violence, 2. Government’s effectiveness and regulation quality, 3. Rule of law, 4. Control of corruption. The lines represent the average gap between EAGLEs and the G6.G6: Canada, Germany, France, Italy, Japan and UK
Institutions: political stability and absence of violence/terrorism Source: BBVA Research and WB
Institutions: control of corruptionSource: BBVA Research and WB
Chi
na
Indi
a
Braz
il
Kore
a
Indo
nesi
a
Rus
sia
Mex
ico
Turk
ey
Egyp
t
Taiw
an
2009 Difference EAGLEs vs G6 in 2000 2009 Difference EAGLEs vs G6 in 2000
0.0
0.5
1.0
1.5
2.0
2.5
3.0 Improvement indicator: 0.30 Improvement indicator: 0.26
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Chi
na
Indi
a
Braz
il
Kore
a
Indo
nesi
a
Rus
sia
Mex
ico
Turk
ey
Egyp
t
Taiw
an
2009 Difference EAGLEs vs G6 in 2000 2009 Difference EAGLEs vs G6 in 2000
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AgendaSection 1
Emerging Economies: Current SituationSection 2
The Future of Emerging EconomiesIntroducing the EAGLEsResilience against risk
Investment opportunities
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Out of scale:
• China = 6% worldwide FDI, 30% global growth
• India = 2% worldwide FDI, 9% global growth
Section 2
FDI: The EAGLEs are undervalued• EAGLEs’ participation in global FDI is low; they are expected to be major recipients of FDI flows in coming years
• The G6 is clearly overrated
G6
Turkey
TaiwanEgypt
Mexico
Russia
Korea Indonesia
Brazil
0.0
2.0
4.0
6.0
0.0 2.0 4.0Participation in global growth (2010-2020)
Par
ticip
atio
n in
glo
bal F
DI f
low
s (2
005-
2009
)
G6 average: Canada, Germany, France, Italy, Japan and UK
Share of world GDP growth and FDI inflowsSource: BBVA Research & UNCTAD
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Section 2
Population: The demographic bonus benefits EAGLEsPopulation growth drives the contribution to global GDP
• With the additional impact of the increase in working-age population (which will continue to grow over the next decade, even in China) and employment rates
Contribution to potential GDP growth: Population growth, global participation rate and NAIRUSource: BBVA Research
Chi
na
Indi
a
Braz
il
Kore
a
Indo
nesi
a
Rus
sia
Mex
ico
Turk
ey
Egyp
t
Taiw
an
G7
aver
age-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
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Section 2
The middle classes will grow more in EAGLEs• Households with monthly income higher than USD 800 adjusted by PPP
• China is the country with the largest middle class
• The gains in Brazil and Russia are considerable
• In other countries, more time is still needed
G7: Middle class growthMillions of people with annual income above USD 9,600 adjusted by PPPSource: BBVA Research
EAGLEs: Middle class growthMillions of people with annual income above USD 9,600 adjusted by PPPSource: BBVA Research
Absolute change, 2010 - 2020 Millions of people, 2010
CAN GER FRA RU ITA JAP USA
3.51.3
4.1 4.2 1.4
-3.3
35.9
-50
0
50
100
150
200
250
300
350
Absolute change, 2010 - 2020 Millions of people, 2010
BRA CHN EGP IDN IND KOR MEX RUS TUR TAW-50
0
50
100
150
200
250
300
350
14.2
188.3
0.1 1.1 5.73.9 9.5 13.1
7.2 3.4