BUSINESS WITH CONFIDENCE icaew.com Douglas McWilliams Chief Executive, Cebr ICAEW Economic Insight:...
-
Upload
owen-robbins -
Category
Documents
-
view
239 -
download
1
Transcript of BUSINESS WITH CONFIDENCE icaew.com Douglas McWilliams Chief Executive, Cebr ICAEW Economic Insight:...
BUSINESS WITH CONFIDENCE icaew.com
Douglas McWilliams
Chief Executive, Cebr
ICAEW Economic Insight: Greater ChinaLaunch event presentation
BUSINESS WITH CONFIDENCE icaew.com
Objectives
• To provide an update on the prospects for the world economy
• To share our latest thinking on the economic outlook for the People’s Republic of China
BUSINESS WITH CONFIDENCE icaew.com
Outline
• The world economy
• Oil and commodity prices
• The Chinese economy
• Implications for accountants
BUSINESS WITH CONFIDENCE icaew.com
The world’s greatest ever economic event
• The East grows, the West falls back
• The real price of primary commodities like energy, minerals and food rises – inflation becomes increasingly a commodity price based phenomenon
• Growth/commodity price cycles become endemic
• It’s a good time to be a capitalist – in the East you will benefit from growth, in the West from cheaper labour (actually this was a prediction of Karl Marx!)
• The terms of trade move against Western economies
• The world’s wealth is moving towards countries which traditionally have high savings ratios creating a glut of savings
BUSINESS WITH CONFIDENCE icaew.com
Cebr World Economic League Table (WELT) 2010
Countries ranked in order of GDP in $ at current market prices. The GDP data for 2010 is taken from the IMF World Economic Outlook. Forecasts for 2011 and 2020 are Cebr forecasts based on our global economic prospects forecasts
Rank Country $ GDP (billions) Rank Country $ GDP (billions)1 United States 14,527 16 Netherlands 7812 People's Republic of China 5,878 17 Turkey 7353 Japan 5,459 18 Indonesia 7074 Germany 3,286 19 Switzerland 5285 France 2,563 20 Poland 4696 United Kingdom 2,250 21 Belgium 4687 Brazil 2,090 22 Sweden 4598 Italy 2,055 23 Saudi Arabia 4489 India 1,632 24 Taiwan 43010 Russia 1,480 25 Norway 41311 Canada 1,577 26 Islamic Republic of Iran 40712 Spain 1,410 27 Austria 37713 Australia 1,237 28 Argentina 37014 Mexico 1,034 29 South Africa 36415 Korea 1,014 30 United Arab Emirates 302
BUSINESS WITH CONFIDENCE icaew.com
Cebr World Economic League Table (WELT) 2020Rank Country $ GDP (billions) Change from 2010 Rank Country $ GDP (billions) Change from 2010
1 United States 21,278 - 16 Mexico 1,822 22 People's Republic of China 17,888 - 17 Turkey 1,555 -3 Japan 7,630 - 18 Taiwan 1,072 64 Russia 4,584 7 19 Netherlands 1,065 -35 India 4,501 4 20 Sweden 1,010 26 Brazil 4,262 1 21 Saudi Arabia 917 27 Germany 4,187 -3 22 Poland 858 -28 United Kingdom 3,975 -4 23 Switzerland 855 -49 France 3,689 -2 24 Islamic Republic of Iran 789 210 Italy 2,678 -2 25 Thailand 778 711 Canada 2,432 -1 26 Belgium 708 -512 Korea 2,268 3 27 Argentina 663 113 Australia 2,092 - 28 South Africa 648 114 Indonesia 2,068 4 29 Norway 605 -415 Spain 1,969 -3 30 United Arab Emirates 572 -
BUSINESS WITH CONFIDENCE icaew.com
QE in the US has been augmented by US banks’ repatriation of capital
Source: Federal Reserve, European Central Bank
BUSINESS WITH CONFIDENCE icaew.com
The monetary merry-go-round
• The Fed has already had two bouts of official monetary easing, has conducted open market operations and has committed not to raise rates till end 2014
• The ECB has spent two tranches of around €500 billion each ‘creating banking liquidity’ which has stabilised the European economic situation
• The PBoC (People’s Bank of China) has cut its reserve requirement ratio twice (in November and on 24 Feb). The 24 Feb announcement is expected to allow increased lending of $64 billion
• The Bank of England has announced two further bouts of QE – the latest an additional £50 billion on Feb 8th
Meanwhile there is capital flight by non European banks from Europe only partly offset by European banks repatriating their own capital.
BUSINESS WITH CONFIDENCE icaew.com
World growth is slowing but key risks are the Euro and impact of Middle East uncertainty
World real GDP, annual percentage change
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Source: IMF, Cebr analysis
BUSINESS WITH CONFIDENCE icaew.com
10
-3%
-2%
-1%
0%
1%
2%
3%
4%
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
US real GDP growth, annual change
United States economy shows resilience, but QE boost is unlikely to continue
Source: IMF, Cebr analysis
BUSINESS WITH CONFIDENCE icaew.com
Significant Eurozone downside risks remain
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Baseline scenario Downside scenario
Euro area real GDP, annual percentage change
Source: IMF, Cebr analysis
BUSINESS WITH CONFIDENCE icaew.com
Oil price may dip in 2012/13 as West ends monetary easing, but rise again in mid-decade
0
20
40
60
80
100
120
140
160
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
Average of Brent, WTI & Dubai Fateh crude oil spot price, $/barrel, average across calendar year
Source: Macrobond, Cebr analysis
BUSINESS WITH CONFIDENCE icaew.com
Commodity prices also to correct before recovering
75
100
125
150
175
200
225
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
IMF non-fuel commodity price index (2005=100)
Source: IMF, Cebr analysis
BUSINESS WITH CONFIDENCE icaew.com
Impact of possible Euro breakup on world trade (% world trade deviation from base where Euro does not break up)
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
1.2
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: CPB, Cebr analysis
BUSINESS WITH CONFIDENCE icaew.com
Exports have been an important driver for Chinese growth so far….Mainland China monthly exports and trade balance in US dollars
Source: China NBS, Cebr analysis
BUSINESS WITH CONFIDENCE icaew.com
…but the dependence on exports is reducing rapidlyContributions to economic growth by type of expenditure
Source: China NBS
BUSINESS WITH CONFIDENCE icaew.com
Investment growth, particularly in property, is likely to slowMainland China urban fixed asset investment, change YTD Y/Y
Source: China NBS
BUSINESS WITH CONFIDENCE icaew.com
We expect Chinese inflation to be below the 4% target for most of the next 18 monthsConsumer price index, total index, index excluding food and food only, annual percentage change
Source: China NBS
BUSINESS WITH CONFIDENCE icaew.com
Movement of the US dollar against renminbi since July 2005, annual percentage change
We expect that the renminbi will edge up against Western currencies
Source: Macrobond, Cebr analysis
BUSINESS WITH CONFIDENCE icaew.com
Hong Kong is now the top ranked international financial centre
2011 2010 2009 2008Hong Kong 1 4 5 8China 19 22 26 24Singapore 4 3 4 10US 2 1 3 1UK 3 2 1 2
World Economic Forum ranking of international financial centres
Source: World Economic Forum
BUSINESS WITH CONFIDENCE icaew.com
Growth will continue to be strong, if slightly more subdued than in the recent pastPeople’s Republic of China GDP growth forecasts
Source: Cebr analysis
BUSINESS WITH CONFIDENCE icaew.com
Implications for the accountancy profession
• World economy currently being boosted by monetary easing in US and Europe
• But further monetary easing is less likely• We expect downward pressure on inflation as monetary easing comes
to an end• Risks for the world economy are excess monetary growth leading to
inflation, Middle East tensions leading to spikes in oil price and Euro problems leading to a disorderly breakup
• Chinese growth is changing gear and becoming much more dependent on domestic demand
• Urban investment growth in property seems unlikely to keep growing• Chinese inflation has been kept low by availability of labour – as this
diminishes, will monetary policy have to become more counter-inflationary
• Mainland China is still on course to overtake the US and become the world’s largest economy