SHIFT HAPPENSWORLD ECONOMIC OUTLOOK 2012

Ángel Cabrera

Thunderbird School of Global Management

@CabreraAngel

IMF September Forecast for 2012

• Advanced economies• +1.9% (-0.7% from

June)

• Emerging economies• +6.1% (-0.3% from

June)

• World• +4.0% (-0.5% from

June)

IMF September Forecast for 2012

• United States• +1.8% (-0.9% from

June)

• Euro Area• +1.1% (-0.6% from

June)

• Japan• +2.3% (-0.6% from

June)

Emerging Markets GDP Growth

1990 2010 2030E

24% 22%15%

24%19%

11%

10%

7%

4%

9%

9%

8%

19%

15%

18%

14%28%

44%

Developed Emerging

1.9%

3.3%

1.6%

4.1%

1.6%

6.1%

Average Real GDP per Capita

2010-2030E CAGR

World 3.6%

$39T $73T $180T

N.A. W. Europe Asia Dev. Asia EmergingCEEMEALatin America

Source: Citi Investment Research & Analysis report “Global Growth Generators,” February 2011.Note: Asia Developed is comprised of Japan, Australia and New Zealand.

Composition of World Real GDP

EM:52%

EM:42%

EM:70%

Rise of Emerging Markets Trade Flows

19901992

19941996

19982000

20022004

20062008

20%

25%

30%

35%

40%

45%

50%

Exports/Imports EM Trade as a % of Total World Trade

19901992

19941996

19982000

20022004

20062008

80%

85%

90%

95%

100%

105%

110%

115%

Emerging Markets

Developed Markets

Source: UN Conference on Trade and Development (UNCTAD) Handbook of Statistics 2010.

2009

2009

(1) Calculated using purchase power parity exchange rates. Source: Citi Investment Research & Analysis report “Global Growth Generators,” February 2011 and Pricewaterhouse Coopers, “UK Economic Outlook,” November 2009.

G7 vs. E7

• U.S., Japan, Germany, U.K., France, Italy and Canada

• China, India, Brazil, Russia, Mexico, Indonesia and Turkey

G7 vs E7

Source: PWC.com

What world do you prefer• Option A: We grow at 2% while others grow at 1%

• Option B: We grow at 3% while others grow at 6%

SHOULD WE WORRY?

0% 1% 2% 3% 4% 5% 6% 7% 8% 9%0%

20%

40%

60%

80%

100%

120%

140%

Source: Citi, Economist Intelligence Unit.

Pu

bli

c D

ebt

2010

(%

GD

P)

Average GDP Growth 2010-2014 (%)

UnitedStates

Developed

Emerging

Australia

Brazil

China

India

IndonesiaKorea

Mexico

Russia

Saudi Arabia

South Africa

Turkey

200%

Argentina

CanadaFrance

Germany

Italy

Japan

NetherlandsSpain

UnitedKingdom

Emerging Markets Driving Global GDP Growth

Europanic

• Interbank markets sign trouble

• A run on Italian and Spanish debt can make Lehman Brothers seem trivial

Europanic

Summary

• Explosive mix:• Slow recovery, even recession

in developed economies• Increased fiscal and financial

uncertainty

• Rebalancing necessary• Internal: from public to private

demand. • External: from advanced

economy to developing economy demand

• Worries about sovereign bonds, translated into worries about banks holding that debt

Areas of attention• Fiscal consolidation

• Not too fast or it will kill • Not too slow or it will feed uncertainty• Just right!

• Manage looming crisis• Support weak links that can trigger domino effect: european

sovereign debt, banks, ease housing troubles

• Rebalance global trade• Learn new acronyms

• E7• E2E

GLOBAL BUSINESS DIALOGUE - NOV 10-11Thunderbird School of Global Management

@Thunderbird