FINANCE A VÝKONNOST FIRIEM VO VEDE, VYUCE A PRAXE Global risks and challenges of the world economy Univerzita Tomáše Bati ve Zline Fakulta mamagementu a ekonomiky Medzinarodní vedecká konference 23.- 24. apríla 2015 Juraj Sipko
Introduction Global risks World economic outlook Fiscal, financial and social stability Geopolitical risk Challenges
Global risks
Slowing Chinese Economy Liquidity / credit crunch Asset price collapse Retrenchment from globalization Global imbalances and currency volatility Extreme consumer price volatility Extreme commodity price volatility Infectious diseases Chronic diseases Demographic challenges Water security Air pollution Extreme energy price volatility Economic disparity Climate change Migration Food security Fiscal crises Flooding Regulatory failures Threats from new technologies Biodiversity loss Illicit trade Fragile stress Terrorism Geopolitical conflict Corruption Organized crime Global governance failures Weapons of mass destruction Ocean governance Space security Critical information infrastructure breakdown Infrastructure fragility Online data and information security Storms and cyclones Earthquakes and volcanic eruptions Source: World Economic Forum, 2013
World Economic Outlook
World Economic Outlook (%) 6.0 5.0 5.0 4.6 4.3 4.7 4.0 3.5 3.4 3.7 3.0 2.4 2.4 2.0 1.0 1.4 1.8 0.0 2013 2014 2015 2016 Advanced economies Emerging market and developing economies World trade volume (goods and services) Source: World Economic Outlook, April 2015
7 G7 Current account of PB (% GDP) 10.0 8.0 6.0 4.0 2.0 6.0 4.0 7.1 4.9 6.0 6.0 5.9 2.9 2.9 4.0 6.3 2.1 7.4 1.0 7.0 0.7 6.2 5.8 1.0 1.1 5.0 1.4 0.0-2.0-4.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2019-2.9-2.4-2.5-2.6-2.8-2.6-3.0-3.0-6.0-5.8-5.0-4.7-8.0 France Great Britain Italy Canada USA Japan Germany Source: Bloomberg, Haver Analytics, IMF, EC, OECD
8 BRICS Current account (% GDP) 12.0 10.0 9.3 10.1 9.2 8.0 6.0 4.0 2.0 0.0-2.0-4.0-6.0-8.0 8.3 6.3 4.8 5.1 5.5 4.4 3.5 4.1 4.0 2.7 3.1 1.9 1.9 3.0 2.6 2.2 1.6 1.8 2.0 2006 2007 2008 2009 2010 2011-2.0 2012 2013 2014 2015 2019-2.3-5.3-4.0-5.2-5.8-5.7-5.6-4.6-7.0-7.2-10.0 Brazil India South Africa China RF Source: Bloomberg, Haver Analytics, IMF, EC, OECD
G7 Savings and investments (% GDP) 9 35.0 30.0 28.3 29.5 27.2 29.0 29.1 29.3 29.2 29.0 28.9 28.8 25.0 20.0 26.3 24.8 26.1 23.0 24.7 25.5 25.4 24.4 24.4 24.5 24.9 15.0 10.0 5.0 0.0 1992-99 2000-07 Average Average 2008 2009 2010 2011 2012 2013 2014 2015 2016-19 Average Savings Investments Source: Bloomberg, Haver Analytics, IMF, EC, OECD
EMCs Savings and investments (% GDP) 10 50.0 45.0 44.3 44.6 44.6 43.3 43.4 43.3 43.4 43.3 43.1 40.0 35.0 30.0 32.3 32.8 37.5 34.2 38.5 41.2 42.0 42.3 42.4 42.3 42.3 42.2 41.7 25.0 20.0 15.0 10.0 5.0 0.0 1992-99 2000-07 Average Average 2008 2009 2010 2011 2012 2013 2014 2015 2016-19 Average Savings Investments Source: Bloomberg, Haver Analytics, IMF, EC, OECD
Global foreign exchange reserves (March 2015 thousands of USD) 11 Industrial countries $3 778 499 000 Emerging markets $7 663 697 000 Source: Bloomberg, Haver Analytics, IMF, EC, OECD
12 G7 Foreign exchange reserves (March 2015 thousands of USD) Italy 127 013 200 Germany 172 120 400 France 152 360 USA 124 717 000 Great Britain 113 859 570 Canada 74 768 000 Japan 1 245 316 000 Source: Bloomberg, Haver Analytics, IMF, EC, OECD
BRICS Foreign exchange reserves (March 2015 thousands of USD) 13 South Africa $49 100 000 Brazil $362 547 400 RF $360 221 000 India $341 378 000 China $3 843 017 940 Source: Bloomberg, Haver Analytics, IMF, EC, OECD
14 Growing role of renminbi #5 #8 #14 Dec 2012 Feb 2013 Apr 2013 Jun 2013 Aug 2013 Oct 2013 Dec 2013 Feb 2014 Apr 2014 Jun 2014 Aug 2014 Oct 2014 Dec 2014 JPY CNY CAD AUD CHF HKD SGD Source: SWIFT, March 2015
Imperative for world economy? Financial stability Fiscal stability Social stability Geopolitical risks Sustainable and balanced economic growth Source: IMF
Fiscal, financial and social stability
Sectoral composition of debt 2008 (% of GDP) 202 108 67 75 101 114 52 96 188 85 136 47 80 118 115 75 28 37 108 84 81 77 56 44 40 110 81 73 101 96 76 62 78 66 47 84 18 12 33 11 13 10 54 96 30 42 60 69 60 66 66 32 16 10 40 5 Financial institutions Households Non-financial institutions Government Source: McKinsey Global Institute analysis, Bloomberg, Haver Analytics, IMF, EC, OECD
Total debt Cummulative GDP (%) 199 2000-07 2007-14 USD +57 trillion 40 Households 8.5 2.8 USD +55 trillion 142 33 56 Corporate 5.7 5.9 87 19 38 58 Government 5.8 9.3 26 33 22 20 37 45 Financial sector 9.4 2.9 2000 2007 2Q 2014 7.3 5.3 Total debt (% GDP) 246 269 286 Source: Haver analytics; National Sources; World Economic Outlook, IMF; BIS; McKinsey Global Institute analysis
Chinese debt Debt-to-GDP ratio (%) 282 38 Government Financial institutions 125 Non-financial corporate Households 158 20 121 8 72 55 83 42 23 7 24 65 2000 2007 2014 Total debt (USD trillion) 2.1 7.4 28.2 Source: MGI Country Debt database; McKinsey Global Institute analysis
Greece? 20
Amount owed (EUR billions) 21 Who the Greek debt is owed to (end of 2014) 350 317 300 250 200 194,8 150 100 69,2 50 27 26 0 IMF EU ECB Other Total Source: World Economic Outlook, April 2015
30 Greek s debt repayment timetable (Annual, EUR billions) 25 EFSF Eurozone governments EIB 20 ECB Private investors IMF Treasury bill holders 15 10 5 0 2015 2020 2025 2030 2035 2040 2045 2050 Source: Greece s Public Debt Management Agency, IMF, the Irish Statute Book, EC, 2015
Public Debt (% of GDP) General government gross debt (2007-20) 300 250 200 150 100 50 0 Czech Estonia Germany Greece Iceland Ireland Italy Japan Portugal Slovak Republic Republic 2007 2014 2020 Spain United States Source: World Economic Outlook, April 2015
Primary balance (% of GDP) General government overall balance (2007-20) 6.0 4.0 2.0 0.0-2.0 CZ EE DE GR IS IE IT JP PT SK ES US -4.0-6.0-8.0-10.0 2007 2014 2020 Source: World Economic Outlook, April 2015
Fiscal, financial and social stability
Global Financial Stability Emerging market risks Risks Credit risks April 2009 April 2010 April 2015 Macroeconomic risks Market and liquidity risks Monetary and financial Conditions Risk appetite Source: IMF
27 Exchange rate instability 20 10 0-10 -20-30 Bilateral exchange rate vs USD Real effective exchange rate -40-50 Russia Brazil Colombia Turkey Mexico Malaysia Chile South Africa Indonesia India China Source: OECD, April 2015
Growing role of financial derivatives (USD billion) 28 Source: Bank for International Settlements, 2015
Growing role of shadow banking 29 Source: Bank for International Settlements, 2015
Fiscal, financial and social stability
Thomas Piketty Capital in the 21 st Century
Income inequality (last 30 years) The dramatic increase in recent decades in the share of income going to the top 1 percent in many countries is due to a partial restoration of capital incomes and, more significantly, to very large increases in compensation for top executives Source: IMF, 2014
Executive pay versus income inequality Rising executive pay and a partial restoration of capital income behind increasing income inequality Source: IMF, 2014
Income inequality
Causes of social instability Social disturbance Riots Strikes Protests Inceased crime
Geopolitical risks
Challenges
Minulosť a budúcnosť
Risks of world economy (1) USA exit challenges Advanced economies Euro area Deflation, low inflation Japan Beyond the initial impulse Rebalancing AEs, EMEs Geopolitical risks? Source: IMF
Advanced economies policies (2) USA Credible fiscal consolidation plan Monetary policy restrictive monetary policy Eurozone Complete and implement regulatory reform Banking union Structural reforms Japan Credible medium-term fiscal consolidation plan Structural reforms Source: IMF
EMEs policies (3) Fiscal and monetary policies Fiscal Tightening Stronger monetary policy framework Structural reforms Addresses bottlenecks in infrastructure Reform fuel price subsidies Exchange rate Intervene in FOREX only if liquidity isues arise Enhance resilience with prudential policies (corporate leverage, fragile currency exposure) Source: IMF
Collective action (4) Global Growth and Stability Restoring confidence Global economy - uneven and uncertain Decisive action needed to adress crisis legacy and global imbalances - both Sustainable and balanced growth Increasing vigilance against external shocks Medium-term consolidation, structural reform, and balancing are necessary complements to short-term action Reducing geopolitical risks Collaborative action of all participants required Source: IMF
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