Emerging markets in the global crisis and beyond · 2009. 5. 14. · 2 Impact of the global crisis...
Transcript of Emerging markets in the global crisis and beyond · 2009. 5. 14. · 2 Impact of the global crisis...
Think Tank of Deutsche Bank Group
Emerging markets in the global crisis and beyond
May 5, 2009
Maria Laura Lanzeni
Head of Emerging Markets
Emerging markets outlook
Impact of the global crisis on emerging markets
Emerging markets & BRICs as global players
Agenda
Page 2M. Lanzeni, May 2009
1 EMs & BRICs as global players
EMs: Increasingly important in the world economy
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0
5
10
15
20
25
30
35
40
1993 1995 1997 1999 2001 2003 2005 2007
EM BRIC
EM share in world GDP%
Source: IMF
-3
-2
-1
0
1
2
3
4
5
6
2006 2007 2008 2009 2010
Advanced economies
Emerging and developing economies*
World real GDP growth% yoy
* includes Asian NIEs
Source: IMF WEO
1 EMs & BRICs as global players
EMs: Integrated in the world economy
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0
50
100
150
200
250
300
350
400
1993 1995 1997 1999 2001 2003 2005 2007
EM imports (goods and services)
EM exports (goods and services)
World trade
1993 = 100
Source: IMF
Outstanding EM trade growth
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
1999 2001 2003 2005 2007
Emerging and developing economies
Advanced economies
EMs account for about two-thirds
of global FX reservesUSD bn
Source: IMF COFER
1 EMs & BRICs as global players
EMs: Larger presence in global financial markets
Page 5M. Lanzeni, May 2009
BRICs vs developed markets over the past five years
18%3% 6%
0
5000
10000
15000
20000
25000
30000
35000
40000
Bank credit to the private sector
Bonds outstanding
Stock market cap
Germany Japan UK US BRIC
USD bn2003
Sources: IMF IFS, IHS Global Insight, Bloomberg, BIS
32% 8% 19%0
10000
20000
30000
40000
50000
60000
Bank credit to the private sector
Bonds outstanding
Stock market cap
xx2008
Sources: IMF IFS, IHS Global Insight, Bloomberg, BIS
1 EMs & BRICs as global players
BRICs: The emerging giants
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0
5
10
15
20
25
30
35
40
45
50
2003 2013
GDP Population
Source: IMF
BRIC story is about size% of world GDP and population
0
2
4
6
8
10
12
Brazil Russia India China
2003-2007 Medium term
Growth performance differsReal GDP growth, % yoy
Source: DB Research
1 EMs & BRICs as global players
There is more to EMs than BRICs
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0 1000 2000 3000 4000 5000
SA
ID
PL
TR
KR
MX
IN
BR
RU
CN
Top ten EMs by GDP 2008, USD bn
Sources: IMF, DB Research
0 10 20 30 40 50 60
PL
KR
TW
HU
CZ
SA
IL
HK
SG
AE
Top ten EMs by GDP per capitaUSD 000, 2008
Sources: IMF, DB Research
Emerging markets outlook
Impact of the global crisis on emerging markets
Emerging markets & BRICs as global players
Agenda
Page 8M. Lanzeni, May 2009
2 Impact of the global crisis on emerging markets
EM financial markets hit indiscriminately
Page 9M. Lanzeni, May 2009
80
90
100
110
120
130
140
150
160
170
180
2008 2009
KRW/USD RUB/USD PLN/EUR
BRL/USD MXN/USD INR/USD
Source: IHS Global Insight
Jan 08 = 100
Selected EM currencies
0
200
400
600
800
1000
04 05 06 07 08 09
Brazil Russia South Africa Turkey
Source: Deutsche Bank/Global Markets
Bp
Selected CDS spreads
2 Impact of the global crisis on emerging markets
Sudden stop in capital inflows
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-100
0
100
200
300
400
500
2006 2007 2008E 2009F
Direct investment, net Portfolio investment, net
Commercial banks, net Nonbanks, net
Net capital flows to the priv. sectorUSD bn
Source: IIF
0
500
1000
1500
2000
2500
100
200
300
400
500
600
2007 2008 2009
Russia Korea India China (right)
USD bn
Source: IMF
FX reserves
2 Impact of the global crisis on emerging markets
Trade flows collapsed ...
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-60
-40
-20
0
20
40
60
80
2008 2009
Brazil Russia China
Taiwan Israel Turkey
Exports% yoy
Sources: IHS Global Insight, CEIC, DB Research
-80
-60
-40
-20
0
20
40
60
80
2008 2009
Brazil Russia China
Taiwan Israel Turkey
Imports% yoy
Sources: IHS Global Insight, CEIC, DB Research
2 Impact of the global crisis on emerging markets
... as did domestic activity indicators
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-50
-40
-30
-20
-10
0
10
20
30
2008 2009
China Brazil Russia
Taiwan Turkey Israel
Industrial production% yoy
Sources: IHS Global Insight, CEIC, DB Research
-20
-10
0
10
20
30
40
2007 2008 2009
Brazil Russia China
Israel Korea Singapore
Retail sales% yoy
Sources: IHS Global Insight, CEIC, DB Research
2 Impact of the global crisis on emerging markets
GDP growth fell sharply in Q4 2008 and Q1 2009
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-10
-5
0
5
10
15
2006 2007 2008 2009
Brazil Russia India China Korea Mexico
Sources: IHS Global Insight, World Bank
% yoyReal GDP growth
Emerging markets outlook
Impact of the global crisis on emerging markets
Emerging markets & BRICs as global players
Agenda
Page 14M. Lanzeni, May 2009
3 EM outlook
Much depends on the US and EU outlook
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-6
-4
-2
0
2
4
6
2007 2008 2009 2010
World United States Euro area
Source: IMF WEO
Real GDP growth, % yoyIMF too pessimistic?
3 EM outlook
Commodity prices and financing conditions are key
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-50
0
50
100
150
200
250
300
PL UA TR ZA MX KR CO BR RU IN CN
Sources: IHS Global Insight, DB Research
2009 EFR* as % FX reserves
CEE has high financing needs
* EFR = C/A deficit + ext. debt maturing over the next 12 months
0
20
40
60
80
100
120
-6
-4
-2
0
2
4
6
8
10
12
14
2000 2002 2004 2006 2008F 2010F
RUS (left) UAE (left)
SAU (left) Oil price (WTI, right)
Sources: DB Research, IHS Global Insight
% yoy (GDP growth), USD per barrel (Oil price)
Oil prices and GDP growth
3 EM outlook
EM governments have announced “anti-crisis” packages
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0
2
4
6
8
10
12
14
16
18
AE CN RU KW KZ HK MY BR SA SG VN TH CO KR TR TW PH IN CL CZ MX PL EG ID AR PE
Announced stimulus packages% of 2008 GDP
Source: DB Research
3 EM outlook
EM central banks in easing mode
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0
2
4
6
8
10
12
14
16
18
Jan 08 Mar 08 May 08 Jul 08 Sep 08 Nov 08 Jan 09 Mar 09
Brazil Chile Korea Israel Turkey
Policy interest rates% yoy
Sources: National central banks, IHS Global Insight, DB Research
3 EM outlook
Asia to remain fastest growing region
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-4
-2
0
2
4
6
8
10
12
2003 2004 2005 2006 2007 2008E 2009F 2010F
Asia-10 EE LatAm-7 MENA Africa-10
% yoy
Source: DB Research
Real GDP growth by region
3 EM outlook
China, India lead the BRICs
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-6
-4
-2
0
2
4
6
8
BR RU IN CN
% yoy
Source: DB Research
2009F Real GDP growth
0
1
2
3
4
5
6
7
8
9
BR RU IN CN
% yoy
Source: DB Research
2010F Real GDP growth
3 EM outlook
Eastern Europe: External adjustment the hard way
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-10
0
10
20
30
40
50
60
70
KZ RO UA LV
Avg 2006-2007 Avg 2008-2009
Credit to the private sector% yoy
Sources: National central banks, DB Research
-8
-6
-4
-2
0
2
4
6
8
10
12
14
KZ RO UA LV
Avg 2006-07 Avg 2008-09
Real GDP growth% yoy
Source: DB Research
3 EM outlook
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Light at the end of the tunnel? (I)
0
20
40
60
80
100
120
0
10
20
30
40
50
60
70
Jul 08 Okt 08 Jan 09 Apr 09
EMU PMI
US consumer confidence
China PMI (manuf.)
Korea consumer sentiment (right)
Sentiment indicators keep hope aliveIndices
0
100
200
300
400
500
0
200
400
600
800
1000
1200
1400
2008 2009
EM (right) World (left)
Sources: Bloomberg, Global Markets
Stock markets stabilise for nowMorgan Stanley Capital International
Indices, 1988 = 100
3 EM outlook
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Light at the end of the tunnel? (II)
M. Lanzeni, May 2009
0
2
4
6
8
10
12
14
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2008 2009
Value (USD m, left) No. of deals (right)
EM sovereign bond issuance has picked up
Source: Dealogic
3 EM outlook
Helping hand: IMF (and other official) lending is back
Page 24M. Lanzeni, May 2009
Deeper-than-expected global recession
Protracted US/EU bank liquidity and solvency concerns
Increased protectionism
• World Bank reported 89 new trade-restricting measures by G20 countries
since October 2008, 23 of which since London G20 Summit in April
Domestic policy mistakes that prolong slump
EM banking sectors under strain
Political and social risks
3 EM outlook
What are the risks for the emerging markets?
Page 25M. Lanzeni, May 2009
3 EM outlook
Medium-term outlook for the emerging markets
Page 26M. Lanzeni, May 2009
On average, EM growth will continue to outperform
• But trend growth will be lower than in the boom years 2003-2007
“Investment story ” intact
• Demographics, increasing openness, investment needs (infrastructure), low
banking & capital markets penetration, increased macroeconomic stability,
rise of middle class, commodities wealth
• Large markets most attractive; smaller economies may seek regional
integration (e.g. ASEAN)
Self-insurance policies (FX reserves) not likely to change soon
• Despite IMF support, risks of high external financing needs and FX exposure
laid bare by crisis
The EM consumer will gain in importance
• But improvement in governance & institutions is a precondition
Page 27M. Lanzeni, May 2009
Thank you!
Emerging Markets at DB Research
Visit us at www.dbresearch.com
Page 28M. Lanzeni, May 2009
Page 29M. Lanzeni, May 2009
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