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