Emerging Markets: The Engines Of Growth2f60f9cd-4de8-42b9... · Emerging Markets > Developed...
Transcript of Emerging Markets: The Engines Of Growth2f60f9cd-4de8-42b9... · Emerging Markets > Developed...
Emerging Markets: The Engines Of GrowthMedia Round Table, Hong Kong, March 7 2019 Dr Jérôme Haegeli, Group Chief Economist
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1. Economic Environment
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‘’The shift in economic power from the West to the East continues’’
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Emerging Markets: The Place To Be
3Source: Swiss Re Institute, IMF
United States:2.2%
Latin America: 2.1%
China: 6.1%
Euro area:1.2%
Real GDP growth in 2019
EM Asia excl. China: 6.2%
EMs will continue grow significantly faster than DMs
China has overtaken the USand contributes more to global GDP (ppp)
0% 10% 20%
1998
2008
2018
USA
China
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Emerging Markets > Developed Markets
4Source: Swiss Re Institute, China National Bureau of Statistics
Change in (average) 10-year rolling GDP growth volatility in 2018
Higher quality growth in EMs China transitions from industry to service focused economy
19%10%
45%
41%
36%49%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2018
Agriculture Industry Services
EM China DM
-49% -32% +19%
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Macro Challenges Nature China Brazil India Russia Mexico Turkey Indonesia
Ageing demographics Structural l L l L l L L
Trade dependence Cyclical/Structural L l L L L L L
Financial volatility Cyclical l l L L L L L
Productivity growth Structural l l L L L L L
High indebtedness Cyclical/Structural l l L l L L L
Competitiveness pillar China Brazil India Russia Mexico Turkey Indonesia
Market size L l L l l l L
Innovation capability L L L l l L L
Financial system L L l l l L L
Infrastructure L l l l l L L
Business dynamism L l l l l L L
Global Competitiveness Index Score l l l l L l L
Macro challenges: Asian EM Fundamentals Better Compared To Others
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l= current conditions pose an obstacle for growth prospects and require actionl= current conditions are not critical but could benefit from proactive policymakingl= current conditions do not represent an obstacle for growthSource: Swiss Re Institute
Challenge Competitiveness
l= current conditions pose an obstacle for growth prospects and require actionl= current conditions are not critical but could benefit from proactive policymakingl= current conditions do not represent an obstacle for growthSource: Swiss Re Institute
On the bottom tercile of the 140 countriesOn the middle tercile of the 140 countriesOn the top tercile of the 140 countries
Source: Global Competitiveness Report (World Economic Forum), Swiss Re Institute
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Economic Reforms Key To Avoid Credit Boom Bust Episodes
Note: includes lending to households and non-financial corporationsSource: Swiss Re Institute, based on BIS data
0
50
100
150
200
250
1980 1985 1990 1995 2000 2005 2010 2015 2020
Private non-financial sector debt, as % of GDP
Japan asset price bubble Spanish housing crash
Thailand (Asian crisis)
China credit boomUS subprime crisis
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Our Expectations For The 2019 NPC Meeting. Reforms Now More Important Given Risk of Current Account Turning Into Deficit This Year
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•GDP growth target: 6.0%-6.5% (lowered)
•CPI target: below 3% (unchanged)
•Monetary policy: Prudently moderate
•Fiscal policy: Proactive, incl. ongoing progress on infrastructure front
•Reform focus: SOE, taxation and financing, market access and social management
•Opening-up: Foreign Investment Law, Patent Law
Economic Development Targets
Policy Stance Reforms and Opening-Up
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General Public Release
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2.Insurance Market
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‘’Emerging Asia and China will continue to power global insurance market growth’’
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40%
23%
28%33%
13%16%
4%
3%
10%
22%
2% 1%
3%
2%
2018E premiums (USD)
Non-life: 2.38 tnLife: 2.85 tn
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China To Become Largest Insurance Market by Mid-2030s; The Shift From West To East Continues
North America
EuropeEmerging Asia
Adv. Asia
Oceania
Middle East and Africa
Latin America
Note: Premium share figures may not add up to 100% due to rounding.Source: Swiss Re Institute
Non-life market share (2008, 2013 and 2018E)Life market share (2008, 2013 and 2018E)
Asia accounts for 31% of
global premium
EM Asia:~3x stronger growth than world average!
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Infrastructure Provides Enormous Opportunities For Insurance Sector
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34 bn Premium potential from construction activities
65 and 2/3 countries and world population affected by BRI
6.4 trn Estimated infrastructure investments in BRI countries
Source: Swiss Re Institute
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Note: Protection gap is a measure of underinsurance. More detailed explanations around the protection gap estimates are available in Swiss Re Institute’s sigma 5/2018 “Global economic and insurance outlook 2020”Source: Swiss Re Institute
36 33
0 2
11 10 3 4
4326 27
4
Latin AmericaTotal: 28bn
EuropeTotal: 100bn
15 5 5NA
MEATotal: 25bn
178
6944
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Asia PacificTotal: 304bn
North AmericaTotal: 69bn
Mortality
Property cat
Property non cat
Agriculture
Lack Of Insurance Prominent In Asia
Protection gaps in USD bn
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3. Resilience
‘’The global economy is less resilient than 10Y ago. NPC focus on economic reforms would improve prospects for China and the global economy”
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10 Years After The Global Financial Crisis… The World Is Less Resilient
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+70trn 9.5trn -2%pts
High debt burden
Negative yielding sovereign bonds
Lower economic growth
Sources: IIF, IMF, Swiss Re Institute
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Resilience: Think Global, Act Local
14Source: Swiss Re Institute
Our Call For Action
• Strengthen private capital market solutions, lower barriers for long-term investors
• Encourage Public Private Partnerships (PPP)
• Leverage Multilateral Development Banks’ balance sheets
• Promote sustainable investing
• “Best practice” pilot transaction for tradable infrastructure asset class, eg with AIIB
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Key Messages
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The shift in economic power from the West to the East continues
China to become the world's largest insurance market by the mid-2030s
Global economy less resilient than 10y ago. NPC reform actions key for
China and global prospects
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Appendix
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Emerging Asia Will Continue To Power EM Insurance Market Growth
17Source: Swiss Re Institute
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China’s Growth in Insurance Line Of Business Leading To Being Largest Insurance Market In The World By Mid-2030s
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Non-motor lines
Green insurance
Protection type life insurance
Old-age related insurance
7.4% Non-life
Premium growth rates at least 2x higher than global average over the next 10 years
9.1% Life
Note: averages are the CAGR of 2020-2029Source: Swiss Re Institute
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China’s real GDP Growth Has Been Surprisingly Flat Recently With Alternative Indicators Show Growth Peaked in Q1 2017
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-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Difference in real GDP growth rate (sector-inflation based)Official real GDP growthReal GDP growth (sector-inflation based)Real GDP growth (PPI based)Real GDP growth (CPI based)
China’s real GDP growth by different measure of GDP deflator • There is a surprising lack of volatility in China’s official real GDP growth
– Nominal GDP growth was 10 times more volatile*
• Use of alternative deflators show more volatile real growth
– The deviation has been in general within 1ppt in terms of growth rate
– Real GDP growth rates calculated by different deflators are converging towards end 2018
• The recent deceleration of growth could be sharper than officially reported
– Ours, as well as other estimates, show growth that could be lower than official figures in 2015-16
– Currently, the difference in estimated and official growth rates is not much higher than in 2016
Source: NBS, calculated by SRI
Note: Following the value-added approach by NBS, quarterly GDP values by three sectors namely primary industry, secondary industry and tertiary Industry are used in the analysis.
* Based on standard deviation of growth rates between 1Q 2015 and 4Q 2018
, RHS
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Legal notice
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