Political Party Mapping in Lebanon Ahead of the 2018 Elections
UK ahead of elections: political uncertainties, long- …...UK Ahead of Elections, Second Quarter...
Transcript of UK ahead of elections: political uncertainties, long- …...UK Ahead of Elections, Second Quarter...
Second Quarter 2015
UK ahead of elections: political uncertainties, long-term challenges
UK Ahead of Elections, Second Quarter 2015
Main messages
Page 2
1
2
All parties are polling well short of a majority
The mix of fiscal and monetary policy could not be very different under
alternative governments…
… and will progressively tighten over the next parliament
Strong but slowing growth in 2015-16, but increasing concerns on the impact
of political uncertainties on activity
Several issues will shape the UK economy in the long term: The status in
EU, policies to increase productivity growth and competitiveness and policy
towards immigration
3
4
5
UK Ahead of Elections, Second Quarter 2015
Section 1
Election prospects
Section 2
Economic prospects and policy proposals
Section 3
Long term issues and policies
Index
Page 3
UK Ahead of Elections, Second Quarter 2015
Page 4
All parties are polling well short of a majority
Parliament election forecast: Projected number of seats, low and high Source: www.electionforecast.co.uk; 6 May 2015
281266
52
268
17
326
0
50
100
150
200
250
300
350
Conse
rvative
s
La
bo
ur
SN
P
Lib
era
l D
em
ocra
ts
DU
P
Oth
er
0
10
20
30
40
50
60
70
Labour Conservatives
With no possible two party coallition LibDem only
SNP only DUP or LibDem
LibDem or SNP Any one of three or more parties
Majority
Probability of governments after election Source: www.electionforecast.co.uk; 6 May 2015
Even natural coalitions (Con+LibDem or Lab+SNP) could fall short of a majority
A distinct possibility is minority government with bills passed on case-by-case basis
UK Ahead of Elections, Second Quarter 2015
Section 1
Election prospects
Section 2
Economic prospects and policy proposals
Section 3
Long term issues and policies
Index
Page 5
UK Ahead of Elections, Second Quarter 2015
Page 6
Drivers of growth
Slowdown in EM and China
Uncertainty on public policies
Low productivity
Sterling pound appreciation. Other CB’s monetary policy Oil price shock is positive as it is
mostly supply-driven
Strong labour market and consumer confidence
Eurozone momentum
Still supportive economic policies in 2015…
… but tighten tightening in coming years
UK Ahead of Elections, Second Quarter 2015
The economic momentum is easing somewhat
Page 7
Confidence indicators provide mixed signals (strong PMI’s, but EC confidence is slowing)
GDP growth in 1Q15 slows sharply to 0.3% QoQ, driven by weak services
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
Ma
r-1
0
Jun-1
0
Sep
-10
Dec-1
0
Ma
r-1
1
Jun-1
1
Sep
-11
Dec-1
1
Ma
r-1
2
Jun-1
2
Sep
-12
Dec-1
2
Ma
r-1
3
Jun-1
3
Sep
-13
Dec-1
3
Ma
r-1
4
Jun-1
4
Sep
-14
Dec-1
4
Ma
r-1
5
ESI Industry Consumer Services
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
Q2
-13
Q3
-13
Q4
-13
Q1
-14
Q2
-14
Q3
-14
Q4
-14
Q1
-15
Agriculture Production Construction Services GDP (% QoQ)
GDP contributions to the QoQ percentage change Source: ONS and BBVA Research
European Commission confidence survey (standardised) Source: Eurooean Commission and BBVA Research
UK Ahead of Elections, Second Quarter 2015
Strong job creation and incipient wage increases…
Page 8
Job creation relatively strong, with composition changes towards more
productive workers
Incipient signs of wage increases, and upward pressures in the pipeline
Earnings growth and vacancy ratio Vacancy ratio: number of unemployed people per vacancy Source: ONS and BBVA Research
Employment (% QoQ) Source: Eurooean Commission and BBVA Research
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14
Employees Full-time Employees Part-time
Self-employed Full-time Self-employed Part-time
Total Employment
-4
-3
-2
-1
0
1
2
-4
-2
0
2
4
6
8
Ja
n-0
5
Jun-0
5
No
v-0
5
Ap
r-0
6
Se
p-0
6
Fe
b-0
7
Ju
l-0
7
De
c-0
7
Ma
y-0
8
Oct-
08
Ma
r-0
9
Au
g-0
9
Ja
n-1
0
Ju
n-1
0
No
v-1
0
Apr-
11
Se
p-1
1
Fe
b-1
2
Ju
l-1
2
De
c-1
2
Ma
y-1
3
Oct-
13
Ma
r-1
4
Au
g-1
4
Jan-1
5
Average weekly earnings private sector (3m/y)
Vacancy ration (annual difference inverted, RHS)
UK Ahead of Elections, Second Quarter 2015
… along with very low inflation that should boost household’s real incomes
Page 9
Sharp decline in inflation due to the fall in oil prices and the appreciation of the pound
Households’ diposable income is increasing, while strong confidence results
in a low saving ratio
Households’ disposable income and savings Source: ONS and BBVA Research
Inflation and its components (y-o-y) Source: ONS and BBVA Research
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
Jan-1
4
Fe
b-1
4
Ma
r-1
4
Apr-
14
Ma
y-14
Jun-1
4
Jul-1
4
Aug
-14
Sep
-14
Oct-
14
Nov-1
4
Dec-1
4
Jan-1
5
Fe
b-1
5
Ma
r-1
5
Energy Unprocessed food
Services Nonenergy industrial goods
Processed food Other
0
2
4
6
8
10
12
14
-3
-2
-1
0
1
2
3
4
5
Q1
-05
Q3
-05
Q1
-06
Q3
-06
Q1
-07
Q3
-07
Q1
-08
Q3
-08
Q1
-09
Q3
-09
Q1
-10
Q3
-10
Q1
-11
Q3
-11
Q1
-12
Q3
-12
Q1
-13
Q3
-13
Q1
-14
Q3
-14
Real household disposable income (% YoY)
Saving ratio (%, RHS)
2-quarters m. average real HH disposable income
UK Ahead of Elections, Second Quarter 2015
Productivity remains very low, increasing BoE’s concerns about future price pressures
Page 10
Produtivity fails to take off… … while spare capacity is being absorbed
Output and unemployment gap (%) Source: OECD
Productivity (% YoY) Source: ONS and BBVA Research
-8
-6
-4
-2
0
2
4
6
Q1
-96
Q4
-96
Q3
-97
Q2
-98
Q1
-99
Q4
-99
Q3
-00
Q2
-01
Q1
-02
Q4
-02
Q3
-03
Q2
-04
Q1
-05
Q4
-05
Q3
-06
Q2
-07
Q1
-08
Q4
-08
Q3
-09
Q2
-10
Q1
-11
Q4
-11
Q3
-12
Q2
-13
Q1
-14
Q4
-14
Prodution
Employment (inverted sign)
Productivity
Average productity before 2008 crisis
-5
-4
-3
-2
-1
0
1
2
3
4
5
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
Output gap Unemployment gap
UK Ahead of Elections, Second Quarter 2015
Demand prospects, reducing spare capacity, along with easing financial conditions should boost investment
Page 11
Capacity utilization above historical average, while new orders increase
Very low interest rates support credit demand, but deleveraging continues
-60
-50
-40
-30
-20
-10
0
10
20
30
70
75
80
85
Ma
r-0
7
Aug
-07
Jan-0
8
Jun-0
8
Nov-0
8
Apr-
09
Sep
-09
Fe
b-1
0
Jul-1
0
Dec-1
0
Ma
y-11
Oct-
11
Ma
r-1
2
Aug
-12
Jan-1
3
Jun-1
3
Nov-1
3
Apr-
14
Sep
-14
Fe
b-1
5
Capacity utilization New orders (RHS)
350
370
390
410
430
450
470
490
-15
-10
-5
0
5
10
15
20
Sep
-11
Nov-1
1
Jan-1
2
Ma
r-1
2
Ma
y-12
Jul-1
2
Sep
-12
Nov-1
2
Jan-1
3
Ma
r-1
3
Ma
y-13
Jul-1
3
Sep
-13
Nov-1
3
Jan-1
4
Ma
r-1
4
Ma
y-14
Jul-1
4
Sep
-14
Nov-1
4
Jan-1
5
Lending (sa, % 3m/3m) Repayments (sa, % 3m/3m)
Stock credit (GBP bn, RHS)
Capacity utilization and new orders Source: European Commission and BBVA Research
Non-financial corporations: lending, repayments and credit stock Source: BoE and BBVA Research
UK Ahead of Elections, Second Quarter 2015
Export prospects improve despite the sharp appreciation of the pound
Page 12
The eurozone recovery more than offsets slowing growth in emerging countries
Real appreciation of the pound despite depreciation vs de the USD
Exchange rates Source: ONS and BBVA Research
Exports to EU and non-EU countries (% QoQ) Source: ONS and BBVA Research
-25
-20
-15
-10
-5
0
5
10
15
Q1
-05
Q3
-05
Q1
-06
Q3
-06
Q1
-07
Q3
-07
Q1
-08
Q3-0
8
Q1
-09
Q3
-09
Q1
-10
Q3
-10
Q1
-11
Q3
-11
Q1
-12
Q3
-12
Q1-1
3
Q3
-13
Q1
-14
Q3
-14
EU Non-EU Total
60
70
80
90
100
110
120
1.0
1.2
1.4
1.6
1.8
2.0
2.2
Ma
r-0
5
Au
g-0
5
Ja
n-0
6
Ju
n-0
6
No
v-0
6
Apr-
07
Se
p-0
7
Fe
b-0
8
Ju
l-0
8
De
c-0
8
Ma
y-0
9
Oct-
09
Ma
r-1
0
Au
g-1
0
Ja
n-1
1
Ju
n-1
1
No
v-1
1
Ap
r-1
2
Se
p-1
2
Fe
b-1
3
Jul-1
3
De
c-1
3
Ma
y-1
4
Oct-
14
Ma
r-1
5
EUR/GBP USD/GBP EER (RHS)
UK Ahead of Elections, Second Quarter 2015
Projections: Strong growth in 2015-16, but slowing due to lower support from fiscal and monetary policy
Page 13
2013 2014 2015 (f) 2016 (f)
Activity
REAL GDP (% YoY) 1.7 2.8 2.5 2.3
Private consumption 1.7 2.5 2.4 2.2
Public consumption -0.3 1.7 0.2 -0.4
Investment 3.4 7.8 4.5 5.6
Domestic demand (contr. %) 1.7 3.3 2.3 2.2
Exports 1.5 0.6 4.9 5.0
Imports 1.4 2.2 4.0 4.4
Net exports (contr. %) 0.0 -0.5 0.2 0.1
External sector
Current account balance (% GDP) -4.5 -5.5 -5.1 -4.8
Public finances
General Govt. Balance (% GDP) -5.7 -5.7 -4.4 -3.4
Prices
CPI, % avg. 2.6 1.5 0.3 1.7
Strong domestic demand will continue to be the main support for growth…
… while net exports will again make a small positive contribution
Domestic demand, the pace of inflation and the impact of Fed decisions on the
pound will determine the date of the first hike of BoE Bank Rate (we expect 1Q16)
Projections of main variables (%) Source: BBVA Research
UK Ahead of Elections, Second Quarter 2015
Page 14
Accommodative monetary policy, but a slow tightening cycle is in the pipeline
0
1
2
3
4
5
6
Jan-0
7
Jun-0
7
Nov-0
7
Apr-
08
Sep
-08
Fe
b-0
9
Jul-0
9
Dec-0
9
Ma
y-10
Oct-
10
Ma
r-1
1
Aug
-11
Jan-1
2
Jun-1
2
Nov-1
2
Apr-
13
Sep
-13
Fe
b-1
4
Jul-1
4
Dec-1
4
Ma
y-15
Oct-
15
Fed QE ECB QE BoE QE Fed ECB BoE
GBP200bn GBP75bn + GBP50bn + GBP50bn
Impact of asset
purchases of 1% of
GDP
US GDP: 0.1/ 0.6pp
US CPI: 0.3/0.6pp
UK GDP: 0.1/ 0.2pp
UK CPI: 0.1/0.3pp
* Full implementation Source: ECB , Weale et all. March 2015, and BBVA Research
QE as % of GDP
US: 24.4%
UK: 20.9%
Eurozone: 10.9%*
Monetary policy stance: offical interest rate and QE programmes Source: OECD and BBVA Research
QE size and its impact on growth and inflation
UK Ahead of Elections, Second Quarter 2015
Page 15
Soft and gradual fiscal consolidation after the strong fiscal impulse over the 2008 crisis
Fiscal impulse in 2008-9 and consolidation upto 2014 (pp) Source: OECD and BBVA Research
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Eurozone UK US
Impulse Consolidation
Cumulated GDP change (%) Source: Eurostat, ONS, BEA and BBVA Research
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
8
9
10
11
12
2008-09 2010-14
Eurozone UK US
UK Ahead of Elections, Second Quarter 2015
Page 16
All parties plan further austerity…
Conservative Labour LibDem
Fiscal rules Overall budget surplus by the
end of next parliament
Surplus on current budget
(excluding capital account) by the end
of next paliament
Surplus on cyclical-adjusted
current budget by 2017-18
Personal taxes
Raise personal tax free
allowance to £12,500 by 2020-21
and ensure no-one earning less
than £50,000 is paying tax at the
40% rate
Reintroduce 10% starting rate of
income tax
Increase top rate from 45% to 50%
Abolish married couple’s tax
allowance
Raise personal tax free
allovance to £12,500 by 2020-21
Increase capital gains tax
Wealth taxes
Raise inheritance tax threshold
to ensure inheritance tax only
payd by “rich”
Introduce a “mansion tax” on homes
valued above £2m (aiming to raise
£1.2bn)
Introduce a “mansion tax” on
homes valued above £2m,
collected through additional tax
layers (aiming to raise £1.7bn)
Corporate taxes Clapdown on tax avoidance
(aiming at raising £5bn)
Reverse cut in coportation tax from
21% to 20%. Use proceeds to reverse
rise in business rates planned for April
2015 and freeze rates in 2016
Clampdown on tax avoidance
(aiming at raising £6bn)
Government
spending
Raise £1.2bn through welfare
savings, meaning smaller
departamental cuts than those
currently assumed
Increase spending on the NHS Spend £8bn a year on NHS
Source: Oxford Economics
UK Ahead of Elections, Second Quarter 2015
Page 17
… especially next year to meet the fiscal mandate (zero deficit in 2017-18 or 2018-19); but at different paths
Public deficit plans including net investment (%GDP) Source: IFS and BBVA Research
Cyclically-adjusted current budget deficit plans Source: IFS and BBVA Research
-1
0
1
2
3
4
5
2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
Cons Lab LibDem SNP
-2
-1
0
1
2
3
4
5
Fiscalmandate
Cons Lab LibDem SNP
Cyclical-adjusted current bugdet deficit
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
UK Ahead of Elections, Second Quarter 2015
Page 18
Public debt reduction, as the commitment to the supplementary target puts a brake on investment spending
Public sector net debt (% of GDP) Source: IFS
0
10
20
30
40
50
60
70
80
90
100
20
07-0
8
20
08-0
9
20
09-1
0
20
10-1
1
20
11-1
2
20
12-1
3
20
13-1
4
20
14-1
5
20
15-1
6
20
16-1
7
20
17-1
8
20
18-1
9
20
19-2
0
20
20-2
1
20
21-2
2
20
22-2
3
20
23-2
4
20
24-2
5
20
25-2
6
20
26-2
7
20
27-2
8
20
28-2
9
20
29-3
0
20
30-3
1
Conservatives; 0% annual borrowing post 2019-20Labour; 1.4% annual borrowing post 2019-20LibDem; 1% annual borrowing post 2019-20SNP; 1.4% annual borrowing post 2019-20
Public sector net investment at around 1.5% of GDP under all parties’ plans
Differences stem from how to finance public investment, or Conservatives want
to have no borrowing at all
All-time low bond yields could be used to finance public investment (long-run effects)
UK Ahead of Elections, Second Quarter 2015
Section 1
Election prospects
Section 2
Economic prospects and policy proposals
Section 3
Long term issues and policies
Index
Page 19
UK Ahead of Elections, Second Quarter 2015
Page 20
Looking beyond the crisis: the recovery has been poor in productivity growth
GDP per working age population (2000=100) Source: IMF, OECD and BBVA Research
Growth of Labour productivity, real GDP and total hours worked, 1997-2014 Source: The Conference Board Total Economy Database and BBVA Research
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
97
-06
07
-12
20
11
20
12
20
13
20
14
97
-06
07
-12
20
11
20
12
20
13
20
14
97
-06
07
-12
20
11
20
12
20
13
20
14
Eurozone UK US
Labor productivity Total hours worked Real GDP
100
110
120
130
140
150
160
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
UK US Japan Germany
UK Ahead of Elections, Second Quarter 2015
Page 21
Imbalances have yet to be corrected: appreciated currency, high current account and public deficits
-4-3-2-1012345
Public Debt (% GDP)
Public Deficit (% GDP)
Private Debt (% GDP)
Change on private credit (%GDP)
Housing market
Unemployment RateCurrent Account (% GDP)
Net InternationalInvestment Position (%
GDP)
Real Effective ExchangeRate (%)
Market share loss
Unit Labour Costs growth
Year 2014
Mean EA
Reino Unido
Below limits
UK Ahead of Elections, Second Quarter 2015
Page 22
Conservative Labour LibDem
Employment
Create two million new jobs
in order to achieve full
employment.
Provide three million new
apprenticeship positions.
Improve tax competitiveness.
Create one million “green”
jobs by 2030.
Raise national minimum wage
to £8 per hour.
Ban “exploitative” zero hours
contracts. Create more public
sector apprenticeships.
Expand apprenticeships and
develop national colleges for
vocational skills.
EU Hold referendum on Britain’s
renegotiated EU membership
by end of 2017
Enhance the UK’s influence in
a reformed Europe.
Reform of the EU bugdet, and
a shift away from agriculture
spending.
Remain in the EU.
Hold an in/out referendum if
there is a plan for “material
transfer of sovereignty” from
the UK.
Immigration
Migrants to wait four years
before they can claim certain
benefits or social housing.
No out-of-work benefits for
migrants or child benefit for
dependants living outside UK
Negotiate reform of EU
freedom of movement rules.
Reintroduce exit checks to
count cross-border flows.
Longer waiting periods for
out-of-work benefits.
Make welfare system more
contribution based.
Stop Child Benefit from being
sent abroad
Restore full entry and exit
border checks.
End indefinite detention for
immigration purposes.
Phase out child benefit for
children living outside the UK
Different policies on three key long-term issues
Source: Commerzbank
UK Ahead of Elections, Second Quarter 2015
Page 23
The EU referendum threatens to change the relationship with Europe (and the rest of world)
Exports share by region Source: ONS and BBVA Research
55.044.4
5.8
6.9
4.1
4.8
0
10
20
30
40
50
60
70
80
90
100
1998-00 2011-13
EA EU-EA
Western Europe - EU North America
Other OECD countries Oil exporting countries
Rest of the world
The EU remains as the main trading partner
UK Ahead of Elections, Second Quarter 2015
Page 24
In a context of loss competitiveness
Current account (% of GDP) Source: ONS and BBVA Research
-6
-5
-4
-3
-2
-1
0
1
2
3
4
19
70
19
74
19
78
19
82
19
86
19
90
19
94
19
98
20
02
20
06
20
10
20
14
Trade goods and services Income
Transfers Current account
FR
UK
CAN
JP
IT
USA
FINSWE
GR
DEN
PT
AT
IRL
GER
SP
NL
-30
-20
-10
0
10
20
30
-45 -40 -35 -30 -25 -20 -15 -10 -5 0
Ch
an
ge in
rela
tive e
xp
ort
pri
ces
Change in world export market share
World export shares and REERs (% 1999-2011) Source: Correa-López and Doménech (2012)
The UK has lost a large market share over the fisrt decade of the century
The current account has deteriorated recently due to the reversal of the income
account
UK Ahead of Elections, Second Quarter 2015
Page 25
Reversing open attitude towards immigration would reduce potential output growth
Projected population (% YoY) Source: Eurostat and BBVA Research
-0.2
-0.1
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
19
61
-70
19
71
-80
19
81
-90
19
91
-00
20
01
-10
20
11
-20
20
21
-30
20
31
-40
20
41
-50
20
51
-60
20
61
-70
20
71
-80
Observed Main scenario No migration
More than a half (54%) of the increase of population in 1991-2012 was due to the
direct contribution of migration
Any declines in the wages and employment of UK-born workers in the
short run can be offset by rising wages and employment in the long run
The fiscal impact of migration in 2007-2009 was positive (+0.46% of GDP, according to
the OECD, above the average)
Source: The Migration Observatory at the University of Oxford and OECD
Second Quarter 2015
UK ahead of elections: political uncertainties, long-term challenges