The Outlook for the Global Economy and World Trade Capital Link Greek Shipping Forum 2014 Nick Kounis Head Macro Research Athens 24 February
A string of disappointing US data recently ABN AMRO US Economic Surprise Index 1.0 0.5 0.0-0.5-1.0 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Source: Bloomberg, ABN AMRO Group Economics 2
Extreme weather most likely to blame 3
Impact of weather usually temporary Average during hurricanes (Andrew, Katrina & Sandy), 0 = month of impact 54.5 54.0 53.5 53.0 52.5 52.0 51.5-2 -1 0 1 2 3 4 85 80 75 70 65 ISM manufacturing Consumer Confidence (rhs) Source: ABN AMRO Group Economics, Thomson Reuters Datastream 4
DM private sector balance sheets back in health US assets minus liabilities % GDP, 100 = long-term average 125 120 115 110 105 100 95 90 85 80 99 01 03 05 07 09 11 13 Companies Households Source: Thomson Reuters Datastream 5
DM fiscal consolidation is fading fast Budget cuts, % GDP 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0-0.2-0.4 H1 10 H2 H1 11 H2 H1 12 H2 H1 13 H2 H1 14 H2 Eurozone US Source: ABN AMRO Group Economics 6
Advanced economy capex lift - US NFIB small business actual capital expenditures, % 70 65 60 55 50 45 40 04 05 06 07 08 09 10 11 12 13 Source: Thomson Reuters Datastream 7
Eurozone bank deleveraging Financial institution assets, % yoy 20 15 10 5 0-5 -10 99 01 03 05 07 09 11 13 Source: Thomson Reuters Datastream 8
Competitiveness adjustment in the eurozone Unit labour cost index, 2006 = 100 120 115 110 105 100 95 06 07 08 09 10 11 12 13 GR SP PT EZ Source: Thomson Reuters Datastream 9
Advanced economy demand will boost EM % Asian exports to major destinations 50 40 30 20 10 0 US EZ LA E Europe Source: Thomson Reuters Datastream 10
EM exports starting to move higher Index 200 180 160 140 120 100 80 05 06 07 08 09 10 11 12 13 Emerging Asia CEE Latin America Emerging economies Source: Thomson Reuters Datastream 11
China s economy settling at a new growth trend GDP, % 16 14 12 10 8 6 4 Q1 2000 Q1 2003 Q1 2006 Q1 2009 Q1 2012 % qoq annualised % yoy Source: Thomson Reuters Datastream 12
China s great transformation from this 13
to this 14
Risks from excessive leverage in China Credit to GDP, % 140 135 130 125 120 115 110 105 100 2007 2008 2009 2010 2011 2012 2013 Source: Global Insight
China attempting to manage orderly deleveraging Total aggregate financing, 3M mav. % yoy 250 200 150 100 50 0-50 -100-150 04 05 06 07 08 09 10 11 12 13 Source: Thomson Reuters Datastream
China: key indicators point to resilience Electricity production, % yoy 30 25 20 15 10 5 0-5 -10 07 09 11 13 Source: Thomson Reuters Datastream
Risk: large capital inflows to EM last few years $ bn 1400 1200 1000 800 600 400 200 0 1995 2000 2005 2010 2015 FDI Equity portfolio inv Commercial banks Nonbank creditors Official flows Source: Thomson Reuters Datastream 18
EM currency weakness concentrated Spot performance since December FOMC, % 2 1 0-1 -2-3 -4-5 -6-7 IDR CNY INR CZK SGD PLN THB KRW EM TWD MXN BRL HUF CLP RUB ZAR TRY Source: Bloomberg, ABN AMRO Group Economics 19
Positive EM fundamentals: external balance % GDP 5 4 3 2 1 0-1 -2 95 97 99 01 03 05 07 09 11 13 Current account balance External indebtedness 45 40 35 30 25 20 Source: IIF, ABN AMRO Group Economics 20
Positive EM fundamentals: FX reserves FX reserves to short-term external debt 6 5 4 3 2 1 0 1980 1985 1990 1995 2000 2005 2010 Emerging Asia CEE Latin America Source: IIF, ABN AMRO Group Economics 21
Our views in numbers economy and markets Economic outlook 2013 2014 2015 Global GDP 2.8 3.7 3.8 US 1.9 3.5 3.8 Eurozone -0.4 1.3 1.8 China 7.7 7.5 7.0 World trade 2.5 6.0 6.0 Rates and FX Spot 2014 2015 USD 3-M Libor rate 0.24 0.30 1.70 US 10-Y Treasury yield 2.75 3.50 4.10 EUR/USD 1.37 1.20 1.15 22 Source: ABN AMRO Group Economics
Oil: rise in demand this year, but also supply Million barrels of oil per day 94 93 92 91 90 89 88 87 86 2011 2012 2013 2014 Demand Supply Source: IEA, ABN AMRO Group Economics 23
Iron ore: structurally slower demand growth % yoy 60 50 40 30 20 10 0 04 05 06 07 08 09 10 11 12 13 14 250 200 150 100 50 0-50 -100 China real estate investment (lhs) Imports of iron ore (rhs) Source: Thomson Reuters Datastream 24
Our views in numbers - commodities Metals (USD/tonne) Spot 3M 2014 2015 Steel (HRC) 579 570 560 540 Iron Ore 125 130 128 115 Coking Coal 126 133 135 130 Energy ($) Spot 3M 2014 2015 Brent oil 110 105 100 95 WTI 103 100 95 90 Natural Gas 5.9 4.00 4.25 4.75 25 Source: ABN AMRO Group Economics
Important information Please go to https://insights.abnamro.nl/en for all our economics and markets research The views and opinions expressed in this document may be subject to change at any given time. Individuals are advised to seek professional guidance prior to making any investments. This material is provided to you for information purposes only and should not be construed as an advice nor as an invitation or offer to buy or sell securities or other financial instruments. Before investing in any product of ABN AMRO Bank N.V., you should obtain information on various financial and other risks and any possible restrictions that you and your investments activities may encounter under applicable laws and regulations. If, after reading the presentation, you consider investing in a product, you are advised to discuss such an investment with your relationship manager or personal advisor and check whether this product considering the risks involved- is appropriate within your investment activities. The value of your investments may fluctuate. Past performance is no guarantee for future returns. ABN AMRO Bank N.V. has taken all reasonable care to ensure that the information contained in this document is correct but does not accept liability for any misprints. ABN AMRO Bank N.V. reserves the right to make amendments to this material. 26