Presentation BBVA EAGLEs Annual Report 2013

Annual Report 2013

March 2013

BBVA EAGLEs Emerging and Growth Leading Economies 2013 The role of ‘emerging people’

2

EAGLEs Annual Report 2013

• The nine emerging countries which had been classified as EAGLEs last year remained this year after revising their long-term projections, namely: China, India, Indonesia, Brazil, Russia, Korea, Turkey, Mexico and Taiwan.

• The Nest group is formed by 14 countries, most of them in Asia and Latin America.

BBVA EAGLEs: a robust group

• EAGLEs & Nest succeeded again in managing a challenging external environment in 2012. Western central banks’ actions reinforced capital inflows and challenges for policy-makers in emerging markets (‘managing success’)

• The dependency on Western countries is still high. There is no room for complacency despite historical low vulnerability levels across the EAGLEs

EAGLEs & Nest key takeaways In 2012

• Big shifts are already underway for people in emerging countries. Investment and productivity gains are needed to face an aging population in some of them.

• Rapid urbanization, declining household size and a growing middle class will radically change consumption patterns in these countries.

The role of ‘emerging people’

Key messages about EAGLEs

3


A guide to the 2013 Report

1. EAGLEs and Nest key takeaways in 2012

• A challenging external environment

• How did EAGLEs and Nest fare?

2. New forecasts for the next decade

• Box: EAGLEs methodology and membership robustness

• Long-term vulnerability assessment

3. The role of ‘emerging people’ in sustainable growth

• Aging is not exclusive of developed economies

• Declining household size

• Migration to cities: rapid urbanization process

• The growing middle class: wealthier and wealthier

• New middle class not only to drive global consumption but to change composition

4


Summary

Section 1

A challenging external environment Section 2

BBVA EAGLEs in 2013: results for the 2012-2022 period

Section 3

Supporting factors for long-term growth: the role of ‘emerging’ people

5


BBVA US Financial Tension Index Source: BBVA Research

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

20

07

20

08

20

09

20

10

20

11

20

12

20

13

Capital inflows into EAGLEs countries (unweighted average in %GDP) (1980-2011) Source: BBVA Research and IMF

A challenging external environment

A challenging external environment: central banks succeeded supporting capital inflows to EM

-2

-1

0

1

2

3

4

5

6

7

8

9

80

82

84

86

88

90

92

94

96

98

00

02

04

06

08

10

12(e

)

FDI Portfolio Other investment

6


Public and private debt-to-GDP ratios (2012) Source: BBVA Research

Sovereign rating* for EAGLEs and Nest countries (end of period) (2000-2012) *Numerical average for Fitch, S&P and Moody’s ratings, rounded-up to zero decimals Source: BBVA Research and rating agencies


This creates some tensions but EAGLEs and Nest are now better prepared (‘new risk normal’)

0

20

40

60

80

100

120

140

160

Public debt Private debt:Households

Private debt:Non-final

corporations

External debt

G7 EAGLEs&Nest

7


G7, EAGLEs and Nest: GDP levels (net balance in percentage points) (0-100 range) Source: BBVA Research and Haver

GDP growth (unweighted average of %yoy change) Source: BBVA Research and Haver


Weakness in developed economies extended to EM in 2012 and the ‘level gap’ widened

60

70

80

90

100

110

120

130

140

150

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

(f)

G7 EAGLEs Nest

0

1

2

3

4

5

6

7

8

9

10

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2010 2011 2012

G7 EAGLEs Nest

8


Exports momentum 2010-2012 (sa %yoy moving average 3monts) Source: BBVA Research and CPB

EAGLEs and Nest: exports destination (% of total EAGLEs and Nest exports) Source: BBVA Research and CPB


Some signs of recovery in world trade are appearing and South-South trade dominates

-5

0

5

10

15

20

25

Q1

/10

Q2

/10

Q3

/10

Q4

/10

Q1

/11

Q2

/11

Q3

/11

Q4

/11

Q1

/12

Q2

/12

Q3

/12

Q4

/12

World exports Advanced Economies

Emerging Economies World exports (annual avg.)

20122000

EMU

42%

43%

15%25%

59%

16%

Other DMs EMs

9


Summary

Section 1


Section 2

BBVA EAGLEs in 2013: results for the 2012-2022 period Section 3

Supporting factors for long-term growth: the role of ‘emerging people’

10



Criteria for the 2012-2022 period: the new thresholds

G6 economies - average

G6 economies - minimum

NEST countries

EAGLEs

Rest of emerging economies candidates

446 bn USD

194 bn USD

Italy

G6 avg.

Incremental GDP between 2012 and 2022 measured in PPP-

adjusted 2012 USD

11



EAGLEs and Nest 2013: geographically balanced

China

India

Indonesia

Brazil

Russia

Korea

Turkey

Mexico

Taiwan

Egypt

Nigeria

Thailand

Colombia

Vietnam

Malaysia

Poland

Bangladesh

South Africa

Philippines

Peru

Argentina

Pakistan

Chile

EAGLEs Nest

12



China and India continue playing in another league

Incremental GDP between 2012 and 2022 (% share of world growth and bn USD for the 3 big players) Source: BBVA Research and IMF/WEO

1242815727

4756

129714092

5036

0

2500

5000

7500

10000

12500

15000

17500

20000

22500

25000

27500

China USA India

2012 2012-2022

EAGLEs57%

Nest10%

Other EMs3%

G717%

Other DMs5%

RoW8%

13



Other relevant players in Asia, as well as in Latin America and Europe

Incremental GDP between 2012 and 2022 and GDP level in 2012 [EAGLEs] (bn USD) (incremental GDP in y-axis and 2012 level below country labels) (bubbles are proportional to 2012 level) Source: BBVA Research and IMF/WEO

Indonesia1219 Brazil

2363Russia2520

Korea1618

Japan4623

Turkey1126

Germany3207 Mexico

1768UK

2335 Taiwan905

G6 avg.2620

300

400

500

600

700

800

900

1000

1100

1200

1300

14



And there are more candidates, some of them really close to the threshold

Incremental GDP between 2012 and 2022 and GDP level in 2012 [Nest] (bn USD) (incremental GDP in y-axis and 2012 level below country labels) (bubbles are proportional to 2012 level) Source: BBVA Research and IMF/WEO

G6 avg.2620

Egypt540

Nigeria453

Thail.655

Australia967

S.Arabia744

France2260

Canada1451

Colombia500

Vietnam322

Malaysia498

Poland806

Spain1415

Bang.307

S.Africa580

Philip.425

Iraq156

Peru328

Argentina745

Pakistan517

Iran1002

Chile322

G6 min.(Italy)1808

100

150

200

250

300

350

400

450

500

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A robust and “fair” approach: countries decide

Growth forecasts and thresholds over the 2012-2022 period (annual average growth in %) Source: BBVA Research, IMF/WEO, OECD and Consensus

0

1

2

3

4

5

6

7

8

9

10

India

Chin

a

Indonesi

a

Turk

ey

Taiw

an

Kore

a

Bra

zil

Russ

ia

Mexic

o

Vie

tnam

Bangla

desh

Nig

eri

a

Egypt

Peru

Colo

mbia

Phili

ppin

es

Thaila

nd

Mala

ysi

a

Chile

S.A

fric

a

Pakis

tan

Pola

nd

Arg

entina

Canada

UK

Germ

any

Fra

nce

Japan

Italy US

EAGLE Nest G6

BBVA To be an EAGLE To be a Nest IMF OECD Consensus

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Summary

Section 1


Section 2

BBVA EAGLEs in 2013: the changing map of world growth Section 3

Supporting factors for long-term growth: The role of Emerging People

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BBVA EAGLEs in 2013: the changing map of world growth

Emerging world to lead growth in the next decade

Contribution to GDP world growth (percentage points) (over PPP-adjusted 2012 USD) Source: BBVA Research and IMF/WEO

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

80s 90s 00s pre-crisis Global crisis 2012-2022

RoW G6 US Nest EAGLEs WORLD

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The Pacific connection: Asia and America

Incremental GDP between 2012 and 2022 by region (%) Source: BBVA Research and IMF/WEO

10.9

Latin America

Africa Australia

New Zealand

North America

Asia (ex.Japan)

Japan

7.5

6.8

4.9

Eastern Europe

56.4 1.7

1.0

6.4

Western Europe

Middle East

4.5

+

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Increasing South-South trade

EAGLEs and Nest export share by country groups Source: BBVA Research and IMF

EMU; 15,8

Other DMs; 58,8

EMs; 25,4

2000 EMU; 14,9

Other DMs; 43,5

EMs; 41,7

Jan-Sep/12

Summary

Section 1


Section 2


Section 3


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Aging is not exclusive of developed countries

Working-age population growth (1980-2040) (average annual % change) Source: BBVA Research and UN

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

WORLD G7 China&Korea Eastern Europe Asia exChina&Korea, LatAm, Turkey and Africa

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However, there are significant differences across countries

Population pyramids (2010) (% of total population) Source: BBVA Research and UN

China, Russia and Korea India, Indonesia, Brazil, Mexico & Turkey G7 countries

Female Male MaleFemale Female Male

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The population premium will still be relevant for most EMs

Stage of demographic transition referenced to working-age population Source: BBVA Research and UN

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

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75

19

80

19

85

19

90

19

95

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00

20

05

20

10

20

15

20

20

20

25

20

30

20

35

20

40

20

45

20

50

20

55

20

60

20

65

20

70

20

75

20

80

20

85

20

90

20

95

21

00Expect

ed a

nnual ch

ange o

f w

ork

ing a

ge p

opula

tion

betw

een 2

01

0 a

nd 2

02

0 (

%)

Approximate year when the share of population aged 15-64 years reaches a peak

Germany

Japan

Italy

France

US

UK

Ukraine

RussiaPoland

Korea

CanadaArgentina

China

Thailand

ChileVietnam

WORLD Brazil

Malaysia

Indonesia

MexicoColombia

TurkeyPeru

Bangladesh

India

Egypt

S.Africa

Pakistan

Philippines

Nigeria

24



The reduction in the household size will soften the effects of aging

Income per capita and household size (c.2000) Source: BBVA Research, IMF, UN and WB

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

Fin

land

Norw

ay

United K

ingdom

Cze

ch R

epublic

Canada

Italy

Bulg

ari

a

Slo

vak R

epublic

Irela

nd

Cro

atia

Slo

venia

Chile

Bosn

ia a

nd…

Georg

ia

FYR

Mace

donia

Bots

wana

Jam

aic

a

Beliz

e

Turk

ey

Bangla

desh

Uganda

Chad

Cam

ero

on

India

Bahra

in

Yem

en

World Household size

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2

3

4

5

6

7

8

6 7 8 9 10 11 12

House

hold

siz

e

Real PPP-adjusted GDP per capita (in logs)

25



EM population is moving to cities… very fast

Population according to residence area (millions of people) Source: BBVA Research and UN

Developed economies Emerging economies

0

100

200

300

400

500

600

700

800

900

1000

1100

1200

1300

1400

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

Rural Urban

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500

1000

1500

2000

2500

3000

3500

4000

4500

5000

5500

6000

6500

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

Rural Urban

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Percentage Urban0-25% 1-5 million

5-10 million10 million or more

25-50%50-75%75-100%

City population


With an increasing number of urban agglomerations

Percentage of urban population and agglomerations by size class (2025) Source: BBVA Research and UN

Percentage Urban0-25% 1-5 million

5-10 million10 million or more

25-50%50-75%75-100%

City population

27



Emerging middle class already in ‘fast track mode’ since the beginning of this century

Population according to GDP per capita range* in EAGLEs and Nest countries (millions of people and % share) **Affluent are over 40,000 PPP-adjusted 2010 USD per year, High Middle Class between 25,000 and 40,000, Medium Middle Class 15,000-25,000, Low Middle Class 5,000-15,000, Low Income 1,000-5,000 and Poor below 1,000. Source: BBVA Research

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

20

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20

20

Poor Low Income

Low Middle Class Medium Middle Class

High Middle Class Affluent

Slow Motion Fast Track

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

20

18

20

20

Poor Low IncomeLow Middle Class Medium Middle ClassHigh Middle Class Affluent

Slow Motion Fast Track

28



EM middle classes will change consumption patterns… significantly

Consumption patterns and income transition* in EMs (% of CPI basket and GDP per capita) *Low-income include countries with GDP per capita between 2,000 and 8,000 PPP-adjusted 2010 USD (up to 9 in log terms), medium-income comprise the income range between 8,000 and 22,000 USD (between 9 and 10 in log terms) and high-income countries are those above 22,000 USD. Source: BBVA Research and Haver

0

5

10

15

20

25

30

35

40

45

Food

Alc

.&Tobacc

o

Clo

th.&

Footw

.

Housi

ng

Equip

ment

Health

Tra

nsp

ort

Com

m.

Recr

.&C

ulture

Educa

tion

Rest

.&H

ote

ls

Mis

c.

Low-income Medium-income High-income (OECD) 7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

7.0 7.5 8.0 8.5 9.0 9.5 10.0 10.5 11.0

20

20

2010

Korea

China

Poland

Russia/Chile

Bangl.Pakistan

Nigeria

Philipp.

IndiaVietnam

Indonesia Egypt

Ukraine

Argent./MalaysiaTurkey

Mexico

Brazil/PeruThail./Colomb./S.Africa

Low-income

Medium-income

High income

High income

Med.-income

29



Some industries to benefit from booming demand… generating some challenges

World markets according to annual growth of the car fleet between 2010 and 2020 Source: BBVA Research

0% ≥8% 4% 2% 6%

30


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Presentation BBVA EAGLEs Annual Report 2013

Economy & Finance

Transcript of Presentation BBVA EAGLEs Annual Report 2013