World real GDP growth in 2010 - Milken Institute · in five years As of Q1 2011 Rank Country...
Transcript of World real GDP growth in 2010 - Milken Institute · in five years As of Q1 2011 Rank Country...
World real GDP growth in 2010Annual percent change
Source: International Monetary Fund.
10% or more
6-10%
3-6%
0-3%Less than 0%No data
World real GDP growth in 2011Annual percent change
Source: International Monetary Fund.
10% or more
6-10%
3-6%
0-3%Less than 0%No data
Solid recovery
World real GDP grew by 5 percent in 2010
-6
-4
-2
0
2
4
6
8
10
1980 1985 1990 1995 2000 2005 2010 2015
Emerging and developing economies
Advanced economies
World
Real GDP growth, percent
Source: World Economic Outlook, International Monetary Fund, April 2011 update.
World output forecasts Percent change from previous year
2010 2011F 2012F
World 5.0 4.4 4.5
Advanced economies 3.0 2.4 2.6
United States 2.8 2.8 2.9
Japan 3.9 1.4 2.1
United Kingdom 1.3 1.7 2.3
Euro area 1.7 1.6 1.8
Emerging and developing economies 7.3 6.5 6.5
Brazil 7.5 4.5 4.1
China 10.3 9.6 9.5
India 10.4 8.2 7.8
Russia 4.0 4.8 4.5Source: World Economic Outlook, International Monetary Fund, April 2011.
Inflation risk ahead?Percent change in consumer prices (year-to-year)
0
1
2
3
4
5
6
7
8
9
10
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Emerging and developing economies
Advanced economies
World
Percent
Source: World Economic Outlook, International Monetary Fund, April 2010 update.
Inflation pressure rising in emerging countries
-2
0
2
4
6
8
10
12
14
16
18
2007 2008 2009 2010 2011
% change in consumer price index, 3-month rolling average
Brazil
China
IndiaRussia
Source: OECD, Milken Institute.
Inflation pressure rising in emerging countries
-2
0
2
4
6
8
10
12
14
16
18
2007 2008 2009 2010 2011
% change in consumer price index, 3-month rolling average
Brazil
China
IndiaRussia
Source: OECD, Milken Institute.
Emerging countries have tightened monetary policy
in fear of inflation
Target interest rates of central banks
0
2
4
6
8
10
12
14
16
2008 2009 2010 2011
Policy interest rates, percent
China
Brazil
India
India
Source: Bloomberg.
Implied volatility: U.S. vs. emerging markets
0
10
20
30
40
50
60
70
80
90
2004 2005 2006 2007 2008 2009 2010 2011
Chicago Board OptionsExchange Volatility
Index (VIX)
Implied volatility, percent
JPMorganEmerging MarketVolatility
Index (VXY)
Source: Bloomberg.
End of the era of cheap capital?Consensus forecasts: Central bank rates will increase in the next 12 months
0.0
0.5
1.0
1.5
2.0
2.5
Q1 10
Q2 10
Q3 10
Q4 10
Q1 11
Q2 11
Q3 11
Q4 11
Q1 12
Q2 12
Percent
U.K.
U.S.
Eurozone
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Q1 10
Q2 10
Q3 10
Q4 10
Q1 11
Q2 11
Q3 11
Q4 11
Q1 12
Q2 12
Percent
Russia
China
Brazil
India
Source: Bloomberg.
Global imbalances on the rise againProjections after 2010
Sources: International Monetary Fund, Milken Institute.
Note: Discrepancies are not plotted.
-4
-3
-2
-1
0
1
2
3
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
U.S.
China
Emerging Asia
Oil exporting countries
Rest of world
Percent of world GDP
Performance of emerging bond marketsTotal return of JPMorgan EMBI Global indexes
Sources: DataStream, Milken Institute.
-1.7
22.4
-14.2
20.9
-6.7
17.3
-10.2
17.2
-11.1
16.7
-20
-15
-10
-5
0
5
10
15
20
25
2008 2009 to Q1 2011
Middle East Europe
Asia Africa
Latin America
Annualized total return, percent
The persistence of sovereign defaults
Argentina Ecuador Paraguay Uruguay Venezuela
• 1830
• 1890
• 1915
• 1930s
• 1982
• 2001
• 1832
• 1868
• 1911
• 1914
• 1931
• 1982
• 1999
• 2008
• 1827
• 1874
• 1892
• 1920
• 1932
• 1986
• 2003
• 1876
• 1891
• 1915
• 1933
• 1983
• 2003
• 1832
• 1878
• 1892
• 1898
• 1932
• 1998
Sovereign defaults in selected countries, 1824 to 2008
Sources: Sturzenegger and Zettelmayer (2006), Moody‘s, Milken Institute.
A map for world sovereign defaults
1932
1935
1932
1991
1991
19851983
2001
1812
18771892
19321981
1986
20041983
1983
1939
1972
2002
1932 2000
2008
19841982
2004
1984
2003
2003
‘87
1940
1932 1942
2002
1981
1982
1993
2000
Sovereign debt most likely to default
in five years As of Q1 2011
Rank Country
Five-year cumulative
probability of default
(%) Rank Country
Five-year cumulative
probability of default
(%)
1 Greece 57.7 6 Ukraine 27.7
2 Venezuela 51.8 7 Dubai 24.7
3 Ireland 43.0 8 Lebanon 21.9
4 Portugal 40.1 9 Iraq 21.1
5 Argentina 34.7 10 Egypt 21.1Source: CMA Global Sovereign Credit Risk Report.
Note: Ranked by five-year cumulative probability of default.
Capital raised: Developing Asia attracts
the most funding after the crisis
Europe31%
Developing Asia27%
Western Hemisphere
24%
Middle East and North
Africa14%
Sub-Saharan
Africa4%
2002-2006
Developing Asia45%
Western Hemisphere
23%
Europe19%
Middle East and North
Africa10%
Sub-Saharan
Africa3%
2010
Source: International Monetary Fund.
Emerging markets: Equity markets have
returned to pre-crisis level
0
25
50
75
100
125
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
US$ index, 2007=100
Latin America
Eastern Europe
Emerging Asia
Source: Bloomberg.
Emerging market bond yield spreadsAs of April 8, 2011
9.57
5.534.88 4.61 4.55 4.49 4.27 3.88 3.47 3.19
2.59
0.62 0.52 0.32 0.210
2
4
6
8
10
12
Percent
Sources: Bloomberg, Milken Institute.
The education gap across regions
Source: Robert Barro and Jong-Wha Lee (2010).
9.2
61.2
88.1
77.1
45.9
67.1
76.1
16.1
2.3
17.424.5
32.6
7.7 7.9
33.2
1.30
10
20
30
40
50
60
70
80
90
100
Advanced
countries
Developing
countries
Middle East
and North
Africa
Sub-Saharan
Africa
Latin
America
East Asia
and the
Pacific
South Asia Europe and
Central Asia
1950
2010
Population with no schooling, percent of population age 15 and over
Average years of schooling increased dramatically
for developing countries in the past 60 years
6.22
2.05
0.761.28
2.571.77
1.02
4.83
11.03
7.09 7.12
5.23
8.26 7.94
5.24
9.65
0
2
4
6
8
10
12
Advanced
countries
Developing
countries
Middle East
and North
Africa
Sub-Saharan
Africa
Latin
America
East Asia
and the
Pacific
South Asia Europe and
Central Asia
1950 2010Average years of schooling
Source: Robert Barro and Jong-Wha Lee (2010).
Return on human capital
Source: Robert Barro and Jong-Wha Lee (2010).
12.1%13.3%
7.8%6.6% 6.5%
10.3%11.3%
8.5%
0%
2%
4%
6%
8%
10%
12%
14%
World Advanced countries
Middle East and North
Africa
Sub-Saharan Africa
Latin America
East Asia and the Pacific
South Asia Europe and Central Asia
Rate of return on an additional year of schooling, percent
Investment rates have increased across
all emerging market regions since 2000
21.4
n.a.
20.318.5
28.8
14.6
n.a.
19.321.4
19.623.6
35.2
23.620.2
24.126.4
21.9
26.4
43.939.5
22.1
05
101520253035404550
Africa Eastern Europe
Latin America Emerging Asia
excluding China and
India
China India Other emerging countries
1970
2000
2008
Investment,percent of GDP
Source: McKinsey Global Institute.
Emerging countries vs. developed countries
Investment in infrastructure as a share of GDP, nominal values
3.5
0.5
1.1
1.9
5.7
0.8
1.8
3.1
0 1 2 3 4 5 6
Total infrastructure
Telecom
Utilities
Transportation
% GDP Emerging economies
3.6
0.7
1.4
1.5
2.8
0.5
1
1.3
0 1 2 3 4
Total infrastructure
Telecom
Utilities
Transportation 2008
1980
Developed economies
Source: McKinsey Global Institute; McKinsey Global Economic Growth Database.
Ruben Vardanian slides
Population growth Percent
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2007 2008 2009 2010 2011E
India
Brazil
China
Russia
Source: CIA 2010 World Factbook.
Birth and death ratesPro mille
0
5
10
15
20
25
Brazil India China Russia
Birth rate
Death rate
Source: CIA 2010 World Factbook.
Life expectancyYears
66.29
62 64 66 68 70 72 74 76
Russia
India
Brazil
China
Source: CIA 2010 World Factbook。
LiteracyPercent
99.40%
0% 20% 40% 60% 80% 100%
India
Brazil
China
Russia
Source: CIA 2010 World Factbook.
Quality of management schools
Source: Global Competitiveness Report 2007-2011.
Benchmark 2010 QATAR
Ran
kin
g
0
20
40
60
80
100
2007 2008 2009 2010
India
China
Brazil
Russia
Brain drain
30
40
50
60
70
80
90
2007 2008 2009 2010
India
China
Brazil
Russia
Source: Global Competitiveness Report 2007-2011.
Benchmark 2010 SWITZERLANDR
an
kin
g
Corporate spending on R&D
20
25
30
35
40
45
50
55
2007 2008 2009 2010
China
Brazil
India
Russia
Source: Global Competitiveness Report 2007-2011.
Benchmark 2010 SWEDEN
Ran
kin
g
Government spending on R&DPercent of GDP
1.1%
0%
1%
2%
3%
4%
Source: OECD, 2010.
Peter Dattels slides
less than 0
0 to 3
3 to 6
more than 6
no data
Average projected real GDP growth during 2011-2012(percent)
4.3
4.7
9.6
8.0
2.81.7
1.7
The two-speed global recovery posses challenges
Source: International Monetary Fund.
Will capital flowing into EMs create imbalances?
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
1994 1996 1998 2000 2002 2004 2006 2008 2010
Z score
Capital flows
Real credit
Real equity prices
Asiancrisis
Russiacrisis
Start ofglobal
financialcrisis
Lehmancollapse
Source: International Monetary Fund.
EM banks expand lending while corporates
releverageReal credit and GDP growth(2008-10, in percent)
0
4
8
12
16
20Real credit growth
Real GDP growth
BRIC Countries: Debt-to-Equity
Ratios of the Corporate Sector (2005 = 100, Russia on right scale)
50
100
150
200
250
300
50
75
100
125
150
175
200
2005 2006 2007 2008 2009 2010e
Brazil: a) 182, b) 60
India: a)106, b) 21
Russia: a) 54, b) 21
China: a)108, b) 24
a) D/E ratio 2010, in percent
b) D/E ratio 2010, percentage points above average
1994-2009
Source: International Monetary Fund.
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
South Africa
Russia Mexico Indonesia Chile India Brazil Malaysia China
2011 projected output gap
Emerging Economies
(percent of potential GDP)
Source: International Monetary Fund.
*Real policy rate is defined as current policy rate (Mar. 2011) minus 1-year ahead consensus inflation expectation normalized by its 5-year average (2005-10);
percentage points.
EM monetary policy: Falling behind the curve?
Country flags represent the real policy rate*
Advanced Economies
More structural policies
needed -- > Cleaning
• Banks:
• Mainly in Europe
• Transparency, Capital, Restructuring/Resolution
• Sovereigns:
• Most AEs
• Fiscal consolidation
• Households:
• Mainly in U.S., some European
• Reducing debt burdens
Emerging Markets
More macroeconomic policies
needed -- > Leaning
• Limit overheating and buildup of
financial risks:
• Tighten macro policies
• Use macro prudential/capital flow measures
• Absorb/channel inflows:
• Broaden and deepen local capital markets
Rebalancing the policy mix between AEs an EMs
Advanced Economies
More structural policies
needed -- > Cleaning
• Banks:
• Mainly in Europe
• Transparency, Capital, Restructuring/Resolution
• Sovereigns:
• Most AEs
• Fiscal consolidation
• Households:
• Mainly in U.S., some European
• Reducing debt burdens
More structural policies
needed -- > Legacy issues
Emerging Markets
More macroeconomic policies
needed -- > Leaning
• Limit overheating and buildup of
financial risks:
• Tighten macro policies
• Use macro prudential/capital flow measures
• Absorb/channel inflows:
• Broaden and deepen local capital markets
More macroeconomic policies
needed -- > Cyclical/growth challenges
Rebalancing the policy mix between AEs an EMs