Global Economic Trends
Special Focus on Developing Countries
ChemOrbis Asia 6th Petrochemical Conference 10 June 2015, Kula Lumpur, Malaysia
Necmettin KAYMAZ Chief Project Director
Republic of Turkey Prime Ministry
Investment Support & Promotion Agency of Turkey (ISPAT)
AGENDA
Overview of Global Economy
Recent Developments’ Impact on Global Economy
Impact on Emerging & Developing Asian Economies
Investment Support & Promotion Agency of Turkey
International Network
Established in 2006 to increase & attract direct investment
Attached to the Prime Ministry & directly report to the PM
Private sector approach with public sector capabilities
ONE STOP SHOP approach
Providing extensive services:
Coordination with government agencies
Industry analysis and reports
Site selection
Facilitating legal procedures, such as:
- Company set-up;
- Incentive applications
- Work permits
Overview of Global Economy
Source: IMF
Global economy has been on constant growth since 1980 despite volatile growth rates and is expected to reach almost $150 trillion by 2020, up from $108 trillion in 2014..
Global economy expanded 3,4% in
2014 and is expected to grow
3,5% in 2015
forecast
0%
1%
2%
3%
4%
5%
6%
1980 1985 1990 1995 2000 2005 2010 2015 2020
World Economy, Real GDP Growth Rates (%)
2016-2020 3.9% CAGR
82
83
88
94
98
10
3 10
8 11
3 11
8 1
25
13
3 1
41
14
9
75
100
125
150
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
World GDP (PPP, $Trillion)
f o r e c a s t
100
150
200
250
300
350
400
1980 1985 1990 1995 2000 2005 2010 2015 2020
World Economy, Real GDP Index (1980=100)
Source: IMF
Emerging and developing markets have been and will continue to be the main source of global growth…
82,4
107,9
149,4
19,4
29,3
6,1
12,2
-10
10
30
50
70
90
110
130
150
2008 2009-2014 2014 2015-2020 2020
Emerging & Developing Economies Advanced Economies
World Economy, GDP at PPP ($ Trillion)
Over the next 6 years, world output will
increase $41,5 trillion, more than 70% of
growth will come from emerging & developing
economies
Source: IMF
Despite slowdown in China’s growth performance, it will continue to outperform advanced economies of the US and the EU and contribute to the global growth more…
82,4
107,9
149,4
7,8
10,6
US; 2,6
US; 5,1
EU; 1,6
EU; 4,5
13,6
21,3
2008 2009-2014 2014 2015-2020 2020
China US EU RoW
World Economy, GDP at PPP ($ Trillion)
Average Annual Real GDP Growth (%)
8,6
1,4
0,1
6,3
2,5 1,9
0
1
2
3
4
5
6
7
8
9
10
China US European Union
2009-2014
2015-2020
The rise of emerging & developing economies can be attributed to several dynamics; booming middle-class and increasing export…
Advanced Economies Emerging Economies
Population by GDP per capita and region (% of total population)
50
250
450
650
850
1050
1985 1990 1995 2000 2005 2010 2015 2020
Volume of Exports of Goods (Index: 1985=100) Emerging Economies
Advanced Economies
Source: BBVA Research, UN, WB, IMF
Source: IMF
Robust investment by emerging and developing economies has also driven global growth and will further support it, while advanced economies’ investment relative their GDP has been decreasing…
0
2
4
6
8
10
12
14
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020
Advanced Economies
Emerging & Developing Economies
Gross Fixed Capital Investment ($Trillion, current prices)
0%
30%
60%
90%
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020
Advanced Economies
Emerging & Developing Economies
Breakdown of World Gross Fixed Capital Investment (%)
22,0
32,0
15
20
25
30
35
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020
Advanced Economies
Emerging & Developing Economies
Gross Fixed Capital Investment (% of GDP)
Source: IMF
f o r e c a s t
25%
50%
75%
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
Emerging & Developing economies
Advanced economies
57%
43%
61%
39%
The rise developing world led the gravity of global economy to shift towards emerging & developing economies whose share in the world economy has been gradually increasing….
Breakdown of World Economy, GDP at PPP, %
Recent Developments’ Impact
on
Global Economy
World economy will be affected by several developments…
Source: IMF
Source: IMF
The sharp fall in oil prices will spur global growth, but not enough to offset other
negative factors..
Source: IMF
Oil prices have drastically decreased in recent months and are expected to rebound over the next couple of years..
58
74
0
10
20
30
40
50
60
70
80
90
100
110
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Annual Oil Price* (US$ per barrel) F o r e c a s t
Source: IMF, *Crude Oil (petroleum), simple average of three spot prices; Dated Brent, West Texas Intermediate, and the Dubai Fateh
The drastic fall in oil prices can be attributed to several factors…
Oil prices may rise soon due to increase in global energy demand, partly in response to lower prices, as well as possible supply disruptions caused by escalated geopolitical tensions in oil producing countries..
Fall in Oil Prices
Oversupply
Weak Demand
Increasing US Oil Production (shale oil)
Increasing Iraq & Libya oil production
No decrease in OPEC’s oil production
Energy efficiency in developed countries
Weak economic recovery in Japan & EU
Economic slowdown in China
Appreciation in $ due to expected FED’s decision to increase interest rates
Competition for market share by producers
Potential rise in Iranian oil exports
Appreciation in US$
The main consequences of falling oil prices may vary from country to country…
Main Consequences of Falling Oil Prices
For Oil Importers
Increasing Income Consumption
Low Inflation Low interest rates
Decreasing input cost Investment
For Oil Exporters
Decreasing Exports Revenues
Decreasing budgetary revenues
Increasing cost of oil production
GDP Growth
GDP Contraction
The falling oil prices will have both negative and positive impact on economies across the world with varying degrees according to the level of their dependency on oil…
Energy dependency, Oil imports/exports* as % of GDP 2010-13 average
Source: UNCTAD, The Economist *Including petroleum products such as refined oil or kerosene, †Net imports/exports of less than 0.1% of GDP
Source: Oxford Economics / Haver Analytics
The impact of falling oil prices on global GDP growth could be somewhere between 0.4% and 0.7%...
The low oil prices will have positive and negative impacts on various sectors across the world..
STRONG
NEGATIVE
MILD
NEGATIVE
NO
EFFECT
MILD
PORSITIVE
MODERATE
POSITIVE
STRONG
POSITIVE
Building Materials
(Proppant) Aerospace
Refining &
marketing
Paper/Forest
products Autos Airlines
Exploration &
Production
Regulated
utilities & power
producers (Europe)
Regulated
utilities & power
producers (Asia)
Regulated
utilities & power
producers (US)
Building Materials
(ex proppant) Protein / Food
Oilfield Services Gaming (Asia) Gaming (US) Chemicals Shipping
Steel
(oil country
tubular goods)
Steel
(ex oil country
tubular goods)
Mining
(Base Metals &
Coal)
Consumer
Durables
Lodging Cruise
Manufacturing Restaurants
Surface
Transportation
Homebuilding
(US)
Theme Parks
(US) Retail
Overall impact of low oil prices on global corporate sectors
Source: Moody’s Investors Service
Impact on Emerging & Developing Asian Economies
Lower oil prices may have a positive impact on most of Asian economies, bringing windfall gains in increasing real purchasing power of consumers…
Energy dependency: Oil imports/exports* as % of GDP 2010-2013 average
Oil Price Windfall: Impact on the Oil
Trade Balance in 2015 (% of GDP)
Country Oil Price Windfall
Australia 0.2
Vietnam 0.4
Malaysia 0.7
New Zealand 0.9
China 0.9
Indonesia 1.1
Japan 1.4
Philippines 1.8
Singapore 1.9
India 2.0
Taiwan* 2.1
Korea 2.7
Hong Kong , SAR 2.8
Thailand 5.0
Asia (simple average) 1.7
Asia (weighted average) 1.4 Source: UNCTAD, The Economist *Including petroleum products such as refined oil or kerosene, †Net imports/exports of less than 0.1% of GDP
Source: IMF staff estimates,*Taiwan Province of China Note: Based on 2014 oil trade balance, assuming unchanged quantities and the April 2015 WEO oil price projections for 2015.
Asia’s demographic dynamics will continue to support economic activity in Asia against the ageing population in advanced economies over the next two decades..
Source: UN Note: Advanced Economies are USA, Europe, Japan, Australia and New Zealand; Asia excluding Japan
4 3 2 1 0 1 2 3 4
0-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85-89
90+
Female Male
%
Age Group
Asia in 2035
4 3 2 1 0 1 2 3 4
0-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85-89
90+
Female Male
%
Age Group
Advanced World in 2035
65+ 13%
65+ 24%
Source: BBVA Research, UN, WB, IMF
The middle-class revolution in Asia will also support economic activity in the region, triggering more consumption in many areas…
Emerging Asia Change of population (mn) by GDP per capita & region (2000 to 2025f)
Emerging Asia is the largest contributor to the reshaping of the world’s income distribution with a new middle class of 2,7 billion living there
Export-oriented emerging & developing Asia will also benefit from increased economic activity in advanced economies as they are major import sources to the advanced world..
147
129
100
105
110
115
120
125
130
135
140
145
150
2014 2015 2016 2017 2018 2019 2020
Estimated Volume of Exports and Imports of Goods (Index: 2014 = 100)
Source: IMF, Eurostat, International Trade Center *Taiwan Province of China
Emerging & Developing Asia; 29,5%
Japan; 5,7%
Korea; 3,0%
Taiwan*; 1,7%
RoW; 60,1%
Major Sources of US Imports 2014
Emerging & Developing Asia; 36,7%
Korea; 4,2%
Taiwan*; 3,0%
RoW; 56,1%
Major Sources of Japan’s Imports 2014
Emerging & Developing Asia; 26,4%
Japan; 3,2%
Korea; 2,3%
Taiwan*; 1,4%
RoW; 66,7%
Major Sources of EU Imports 2014
Emerging & Developing Asian economies, led by China, are expected to invest robustly over the next five years..
Source: IMF
2,9 3,3
4,0
4,9 5,4
5,9 6,2
6,6 7,0
7,5
8,1
8,7
9,3
0
1
2
3
4
5
6
7
8
9
10
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
China Other Emerging & Developing Asia
Gross Fixed Capital Investment ($Trillion, current prices)
Source: IMF Note: Bangladesh, Bhutan, Brunei Darussalam, Cambodia, China, Fiji, India, Indonesia, Kiribati, Lao P.D.R., Malaysia, Maldives, Marshall Islands, Micronesia, Mongolia, Myanmar, Nepal, Palau, Papua New Guinea, Philippines, Samoa, Solomon Islands, Sri Lanka, Thailand, Timor-Leste, Tonga, Tuvalu, Vanuatu, Vietnam
Thanks to global and regional dynamics, emerging & developing Asia will continue to lead global growth; over the next couple of years, almost half of global growth will come from emerging & developing Asia..
100
150
200
250
300
350
400
450
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
201
1
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
Real GDP Growth (Index: 2000=100)
49,0
107,9
149,4
23,6
19,7
35,3
21,8
2000 2001-2014 2014 2015-2020 2020
Emerging & Developing Asia RoW
World Economy, GDP at PPP ($ Trillion)
Source: BBVA Research, IMF and Quah D., 2011, “The Global Economy’s Shifting Centre of Gravity”.
Growth dynamics across the world will shift world’s economic center of gravity from the Atlantic to the Asia-Pacific region..
THANK YOU