Nomura - Global Economic Outlook Monthly
description
Transcript of Nomura - Global Economic Outlook Monthly
Nomura | Global Economic Outlook Monthly 11 March 2013
Nomura Securities International Inc.
See Disclosure Appendix A-1 for the Analyst Certification and Other Important Disclosures
Global Economic Outlook Monthly
Economics Research | Global
No pressure 11 MARCH 2013
Amid growing signs that the world’s major economies have hit a speed bump, the US is looking increasingly like a bright spot, but is not without risks of its own.
COUNTRY AND REGIONAL ECONOMIC OUTLOOKS
Australia | The rebalancing of the economy is likely coming 4
Brazil | Accelerating inflation, delayed recovery 5
Canada | Growth exhaustion 6
China | Rising inflation and a weak recovery pose a policy dilemma 7
Euro area | ECB's recovery scenario could be challenged by lack of pass-through 8
Hong Kong | Hong Kong: Fiscal stimulus 9
Hungary | Unorthodox policy focus shifts to non-independent central bank 10
India | Politics trumps economics 11
Indonesia | Still a case to tighten 12
Japan | We forecast 0.9% y-o-y growth in 2013 13
Malaysia | All eyes on the elections 14
Mexico | 2013: The year of reforms 15
Philippines | In a virtuous cycle 16
Poland | NBP's limited cutting cycle is over - growth still outperforming 17
Singapore | A weak start to 2013 18
South Africa | Status quo means the brakes are still applied 19
South Korea | Growth momentum set to carry into Q1 20
Taiwan | External demand is key 21
Thailand | A positive start to 2013 22
Turkey | A healthy rebalancing 23
United Kingdom | Stagnant 24
United States | Lost in translation 25
Rest of EEMEA 26
Rest of Latin America 27
Global Economics
Contributor names can be found within the body of this report and on the back cover
This report can be accessed electronically via: www.nomura.com/research or on Bloomberg (NOMR)
Nomura | Global Economic Outlook Monthly 11 March 2013
2
Forecast Summary
Real GDP (% y-o-y) Consumer Prices (% y-o-y) Policy Rate (% end of period)
2012 2013 2014 2012 2013 2014 2012 2013 2014
Global 3.0 3.0 3.8 3.2 3.3 3.5 2.99 3.12 3.24
Developed 1.2 0.9 1.8 2.0 1.6 1.8 0.45 0.37 0.40
Emerging Markets 5.2 5.4 5.8 4.7 5.2 5.3 5.98 6.21 6.24
Americas 2.3 2.3 3.2 3.6 3.7 3.6 2.08 2.23 2.28
United States* 2.2 1.9 3.1 2.1 1.7 1.6 0.13 0.13 0.13
Canada 1.8 1.3 2.0 1.5 1.3 2.0 1.00 1.00 1.50
Latin America†† 2.6 3.4 3.8 8.0 9.6 9.1 7.48 8.00 7.83
Argentina 1.9 4.0 3.5 25.4 32.3 29.7 15.37 17.00 14.00
Brazil 0.9 3.5 3.2 5.8 5.9 5.5 7.25 8.25 8.00
Chile 5.4 5.5 5.0 1.5 3.3 3.0 5.00 5.25 5.25
Colombia 3.8 4.2 4.5 2.4 2.7 3.5 4.25 3.50 4.50
Mexico 3.9 3.5 4.5 4.1 3.4 3.5 4.50 4.00 4.50
Venezuela 5.5 -1.0 3.0 20.1 35.5 27.6 14.55 17.00 16.00
Asia/Pacif ic 5.4 5.3 5.8 3.0 3.6 4.1 4.66 4.90 4.95
Japan† 2.0 1.0 1.9 0.0 0.1 2.3 0.05 0.05 0.05
Australia 3.6 2.2 2.6 1.8 2.6 2.5 3.00 2.75 3.00
New Zealand 2.4 2.7 2.8 1.1 1.8 2.8 2.50 2.75 3.50
Asia ex Japan, Aust, NZ 6.2 6.2 6.6 3.7 4.2 4.5 5.65 5.90 5.90
China 7.8 7.7 7.5 2.6 3.5 4.0 6.00 6.50 6.50
Hong Kong*** 1.4 2.5 3.5 4.1 4.3 4.3 0.40 0.40 0.40
India** 5.1 5.2 6.6 7.5 7.1 6.8 8.00 7.50 7.00
Indonesia 6.2 6.1 6.2 4.3 5.2 5.1 5.75 6.25 6.75
Malaysia 5.6 4.3 4.6 1.7 2.4 2.5 3.00 3.50 4.00
Philippines 6.6 6.4 5.8 3.1 4.6 4.5 3.50 4.00 4.50
Singapore*** 1.3 2.4 4.2 4.6 3.9 3.6 0.38 0.48 0.50
South Korea 2.0 2.5 3.5 2.2 2.7 3.0 2.75 2.75 3.25
Taiw an 1.3 3.0 3.5 1.9 2.3 2.3 1.88 2.13 2.13
Thailand 6.4 4.5 5.0 3.0 3.2 3.1 2.75 2.75 3.25
Western Europe -0.4 -0.6 0.1 2.6 1.8 1.6 0.71 0.50 0.50
Euro area -0.5 -0.8 0.0 2.5 1.6 1.4 0.75 0.50 0.50
Austria 0.6 -0.1 0.8 2.6 2.3 1.9 0.75 0.50 0.50
France 0.0 -0.5 0.5 2.2 1.4 1.6 0.75 0.50 0.50
Germany 0.9 0.5 0.7 2.1 1.6 1.4 0.75 0.50 0.50
Greece -6.6 -5.5 -2.0 1.0 -0.1 -0.3 0.75 0.50 0.50
Ireland 0.6 0.8 1.3 1.9 0.3 0.6 0.75 0.50 0.50
Italy -2.2 -2.5 -1.3 3.3 1.7 1.3 0.75 0.50 0.50
Netherlands -0.9 -1.2 0.1 2.8 2.9 2.1 0.75 0.50 0.50
Portugal -3.2 -3.4 -0.2 2.8 0.4 0.3 0.75 0.50 0.50
Spain -1.4 -2.5 -1.5 2.4 1.9 1.1 0.75 0.50 0.50
United Kingdom 0.0 0.2 0.7 2.8 2.8 2.5 0.50 0.50 0.50
EEMEA 1.8 2.5 3.5 5.5 4.2 4.5 4.41 4.07 4.73
Czech Republic -1.7 0.0 1.4 3.3 1.8 1.6 0.05 0.05 1.00
Hungary -2.7 -0.5 0.9 5.7 4.0 5.4 5.75 4.00 4.00
Israel 2.5 3.0 3.5 1.7 2.6 2.7 1.75 1.75 2.50
Poland 2.2 1.9 3.0 3.7 1.4 2.9 4.25 3.25 4.50
Romania 0.3 0.6 1.5 3.3 3.4 3.2 5.25 5.25 6.00
South Africa 2.6 2.8 3.2 5.7 5.6 5.5 5.00 5.00 6.00
Turkey 3.0 4.5 5.5 8.9 6.7 6.3 5.50 5.50 5.50 Note: AAggregates are calculated using purchasing power parity (PPP) adjusted shares of world GDP (table covers about 84% of world GDP on a PPP basis); our forecasts incorporate assumptions on the future path of oil prices based on oil price futures, consensus forecasts and Nomura in-house analysis. The Brent oil price for 2012 was $112; currently, assumed Brent oil prices for 2013 and 2014 are $110 and $102, respectively. *The 2012 policy rate was the midpoint of the 0-0.25% target federal funds rate range; 2013 and 2014 policy rate forecasts are midpoints of the 0-0.25% target federal funds rate range. **Inflation refers to wholesale prices. ***For Hong Kong and Singapore, the policy rate refers to 3M Hibor and 3M Sibor, respectively. †The 2012 policy rate was the midpoint of the BOJ‟s 0-0.10% target unsecured overnight call rate range; 2013 and 2014 policy rate forecasts are midpoints of BOJ‟s 0-0.10% target unsecured overnight call rate range. ††CPI
forecasts for Latin America are year-on-year changes for Q4. The numbers in bold are actuals. The arrows signify changes from last month. Source: Nomura Global Economics.
Nomura | Global Economic Outlook Monthly 11 March 2013
3
Our View in a Nutshell (changes from last month highlighted)
United States
Fiscal policy remains a source of uncertainty for the outlook, but risks of a policy misstep have diminished.
We expect capital expenditures to accelerate in the second half of the year in response to lower uncertainty around the outlook.
Ample economic slack, apparent in the high rate of unemployment and unused capacity, should restrain inflation.
We expect the FOMC to continue its long-term asset purchases through the third quarter of 2013, and taper purchases thereafter.
A strengthening of the housing market should support investment, job creation, and aggregate demand.
The slowing pace of global growth and contractionary US fiscal policy are the key risks to growth.
Europe
Fiscal tightening, financial deleveraging and sovereign debt market tensions should lead to a deeper-than-expected recession.
OMT announcement reduced probability of Spain calling an ECCL imminently. Our baseline remains an ECCL will be called.
After a phase of relative calm, markets will likely test the backstop and pressure should rebuild around weak sovereigns.
GDP contraction, higher non-performing loans and rising debt trajectories remain the key euro area challenges.
Because we forecast a weak economic backdrop, we retain our bias for lower ECB rates (in June).
We expect inflation to be sticky in the UK, albeit back in the right ballpark, but to slip below target during 2013 in the euro area.
The BoE aggressively announced QE, liquidity and funding support in 2012. We see a bias toward doing more in 2013.
Japan
We expect an export recovery, driven by China's economic recovery to deliver positive growth in Q1 2013.
The export recovery should stimulate domestic demand and ensure the overall economy is in a stable growth phase in 2013.
We expect the BOJ to extend duration of APP-eligible JGBs to 5yr and to raise purchases by ~JPY10trn at its April meeting.
The main risks are yen appreciation, a worsening European debt problem and the US and China slowing.
Asia
Our focus is on overheating risks, but we are cognisant that a China slowdown could take the steam out of Asia’s economies.
China: GDP growth should stay strong in H1, but the debt build-up and rising inflation should thwart the recovery in H2.
Korea: We expect the BOK to stay on hold at 2.75% through 2013 as growth and inflation should rise modestly from a low base.
India: With the structural fiscal deficit still high, we expect weak growth, a high current account deficit and little room for rate
cuts.
Australia: With the peak in resource investment approaching, we believe the RBA will cut rates by 25bp in 2013.
Indonesia: An increasingly uncertain policy environment could lead to delays in reforms and sustained current account deficits.
EEMEA (Emerging Europe, Middle East and Africa) and Latin America
South Africa: A continuing political status quo should continue to hold the economy back.
Hungary: We view the central bank as having lost its independence and that a devaluation and unorthodox policy are on the way.
Poland: Should experience a strong recovery in H2. The rate-cutting cycle seems over, though the risk is skewed to one more.
Turkey: Rebalancing continues and is likely to pave the way for further upgrades.
Brazil: Supply-side constraints will cap growth at around trend, despite multiple rounds of stimulus measures.
Mexico: We expect the new government to embark on a series of important reforms in 2013.
Argentina‟s growth is set to recover modestly in 2013. Inflation and RER overvaluation to remain problematic.
Nomura | Global Economic Outlook Monthly 11 March 2013
4
Charles St-Arnaud +1 212 667 1986 [email protected]
Martin Whetton +61 2 8062 8611 [email protected]
Australia | Economic Outlook
The rebalancing of the economy is likely coming
Growth is likely to slow due to weaker business investment and the terms of trade. The RBA is
expected to cut the official rate by 25bp to stimulate the economy.
Activity: Growth slowed in H2 2012 as a result of the negative terms-of-trade shock from
weaker commodity prices, which has reduced business investment and gross domestic income.
We believe that with the peak in resource investment likely coming in the first half of 2013,
business investment growth will slow in 2013. However, with the previous RBA rate cuts making
their way through the economy, we believe that better household spending should spur dwelling
investment and offset some of the weakness. Moreover, better growth in China and the rest of
Asia in 2013 should provide some support to exports and commodity prices. With elections
announced for later this year, fiscal policy could be slightly supportive of growth until then, but
fiscal consolidation should return once the election has passed.
Inflation: CPI inflation in Q4 was weaker than expected, signaling that the second-round impact
of the carbon tax was not an issue. We expect inflation to remain close to the upper band of the
inflation target in the first half of 2013 before moderating in the second half of the year. A similar
profile is expected for the underlying measure. However, both measures should peak slightly
below 3%.
Policy: We expect a further 25bp reduction in the official rate in Q2, as the upside risk to
inflation did not materialize, with the hope this will ease the economic rebalancing from the
resource sector to the non-resource sector and to offset the headwind from the strong
Australian dollar. However, the exact timing of the cuts will depend on incoming data, especially
the release of Q1 CPI. If inflation moderates in Q1, the RBA could cut at the May meeting.
Risks: A strong currency and a sharp slowdown in China remain the main downside risks to the
outlook. On the flip side, improved risk sentiment, momentum in the housing sector, global trade
and renewed increases in commodity prices represent upside risks to growth and inflation.
Fig. 1: Details of the forecast
% q-o-q ar. 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 2012 2013 2014
Real GDP (% y-o-y) 4.4 3.7 3.1 3.1 2.4 2.2 2.0 2.0 3.6 2.1 2.3
Real GDP 5.0 2.6 2.6 2.4 1.8 1.8 2.0 2.4 3.6 2.1 2.3
Personal consumption 6.3 3.0 0.9 0.9 2.0 2.0 2.2 2.6 3.2 1.8 2.5
Private investment 21.5 12.6 6.4 -14.0 0.8 1.8 3.8 5.0 10.5 0.0 4.6
Business investment 30.3 18.0 7.2 -18.8 0.0 1.0 3.5 5.0 15.0 -1.1 4.6
Dw elling investment -6.8 -7.1 3.2 8.7 4.0 5.0 5.0 5.0 -4.5 4.4 4.5
Government expenditures 0.9 -0.1 -8.5 20.9 -0.2 -0.2 -0.2 -0.2 2.4 2.3 -0.2
Exports -2.6 7.7 6.4 14.0 7.0 7.0 7.0 7.0 6.3 8.2 7.0
Imports 6.8 1.9 1.4 2.6 2.0 3.3 4.6 5.3 6.8 2.8 5.1
Contributions to q-o-q GDP:
Domestic f inal sales 7.6 4.4 0.0 1.1 1.0 1.2 1.6 2.0 3.9 1.3 2.0
Inventories -0.6 -3.0 1.8 -0.6 0.0 0.0 -0.1 0.1 -0.2 -0.1 -0.1
Net trade -2.0 1.2 0.8 1.8 0.9 0.7 0.4 0.3 -0.1 1.0 0.4
Unemployment rate 5.2 5.2 5.3 5.4 5.4 5.5 5.5 5.5 5.2 5.5 5.4
Employment, 000 47 49 6 22 12 23 46 58 31 35 71
Consumer prices 1.6 1.2 2.0 2.2 2.7 2.9 2.1 2.5 1.8 2.6 2.5
Trimmed mean 2.3 2.0 2.4 2.3 2.5 2.6 2.4 2.5 2.3 2.5 2.5
Weighted median 2.3 2.1 2.3 2.3 2.5 2.6 2.5 2.5 2.3 2.5 2.5
Fiscal balance (% GDP) -2.0 -0.5 -0.2
Current account balance (% GDP) -4.1 -5.2 -5.5
RBA cash rate target 4.25 3.50 3.50 3.00 3.00 2.75 2.75 2.75 3.00 2.75 3.00
3-month bank bill 4.30 3.54 3.36 3.07 3.00 2.80 2.80 2.80 3.07 2.80 3.05
2-year government bond 3.47 2.46 2.48 2.65 2.85 2.80 2.85 2.70 2.65 2.70 3.10
5-year government bond 3.58 2.58 2.54 2.82 3.00 3.00 3.00 2.60 2.82 2.60 3.20
10-year government bond 4.08 3.04 2.91 3.27 3.40 3.40 3.10 3.20 3.27 3.20 3.60
AUD/USD 1.04 1.02 1.05 1.04 1.05 1.10 1.12 1.12 1.04 1.12 1.12 Notes: Quarterly real GDP and its contributions are seasonally adjusted annualized rates. CPI inflation includes the impact from, the carbon tax, but not the underlying measures. Interest rate and exchange rate forecasts are end of period. Numbers in bold are actual values. Table reflects data available as of 8 March 2013. Source: Australian Bureau of Statistics, Reserve Bank of Australia, Nomura Global Economics
Nomura | Global Economic Outlook Monthly 11 March 2013
5
Tony Volpon +1 212 667 2182 [email protected]
Brazil | Economic Outlook
Accelerating inflation, delayed recovery
Supply side constraints and a lack of business confidence are delaying a long-awaited recovery.
Meanwhile, various forms of demand-side stimuli should keep inflation elevated.
Activity: The economy grew merely 0.9% in 2012, the slowest pace over the past decade,
barring the crisis year of 2009. Investment fell more than 4% y-o-y, despite 525bp of cuts to the
Selic policy rate since Q3 2011 and various fiscal stimuli applied by the government. Looking
forward, we believe growth will likely rebound to 3.5% in 2013, as the global scenario turns
better and the lagged effects of monetary and fiscal stimuli gradually take effect.
Inflation: Consumer prices have been rising fast recently and inflation pressures should remain
high. This is on one hand due to very accommodative monetary policies, and on the other hand
as a result of policymakers‟ desire to reduce price levels through one-off tax and tariff cuts,
which will only boost income and further stimulate demand down the road without addressing
supply-side bottlenecks. Inflation hit at 6.3% in February, and we expect it to continue edging
up, possibly breaching the 6.5% target upper bound. Inflation should slow down a little bit in H2,
finishing the year at around 6%.
Policy: The priority of policymakers shifted from boosting growth to fighting inflation over the
past month or so. In January, the BCB expressed its desire to see a stronger currency in
fending off inflation; as a result, USDBRL broke the key 2.00 support level in late January and
has stayed below ever since. We expect the currency to gradually appreciate towards 1.90 by
year-end. In its March monetary policy communiqué, the BCB removed its “(rates) low for long”
language and stated explicitly that its next step will depend on macroeconomic scenarios.
Before reading the March BCB minutes (released March 14), we still believe the BCB will start
raising Selic in H2, delivering no more than 100bp of hikes. However, the higher than expected
February inflation considerably raises the likelihood of an early hike, in either April or May.
Risks: Labor markets remain very tight in Brazil, adding substantial pressure to service prices
and keeping headline inflation elevated. Any further supply shocks will complicate an already
tricky inflation outlook in a year when growth is expected to be only around potential.
In the medium term, Brazil faces the challenge to reorient its growth model from a consumption-
driven one to a more investment-driven one. Without enough political will to tackle this
challenge, especially when it comes to lowering labor costs and boosting private investment in
infrastructure, we expect potential growth to further decelerate over the coming years.
Details of the forecast
% y-o-y change unless noted 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 2012 2013 2014
Real GDP 0.8 0.5 0.9 1.4 2.3 3.5 4.0 4.4 0.9 3.5 3.2
Personal consumption 2.5 2.4 3.4 3.9 4.2 5.3 5.3 4.6 3.1 4.7 4.1
Fixed investment -2.1 -3.7 -5.6 -4.5 -0.2 4.3 7.0 8.3 -4.0 4.8 4.6
Government expenditure 3.4 3.1 3.2 3.1 2.3 0.6 3.2 4.4 3.2 2.7 2.4
Exports 6.6 -2.5 -3.2 2.1 3.0 7.1 8.0 4.0 0.5 3.6 4.5
Imports 6.3 1.6 -6.4 0.4 2.9 4.7 9.0 8.5 0.2 8.1 7.7
Contributions to GDP growth (pp)
Industry -0.4 0.1 0.2 0.3 0.6 0.8 1.0 1.1 0.2 0.8 0.8
Agriculture 0.0 0.0 0.0 0.1 0.1 0.2 0.2 0.2 0.0 0.2 0.2
Services 0.9 0.3 0.5 0.8 1.3 2.0 2.3 2.5 0.5 2.0 1.8
IPCA (consumer prices) 5.2 4.9 5.3 5.8 6.5 6.2 6.0 5.9 5.8 5.9 5.5
IGPM (wholesale prices) 3.2 5.1 8.1 7.8 7.3 7.0 6.8 6.5 7.8 6.2 5.5
Trade balance (US$ billion) 29 24 22 19 18 17 16 15 19 15 15
Current account (% GDP) -2.4 -2.7 -2.7
Primary fiscal balance (% GDP) 2.4 2.0 1.7 2.0 2.0 2.0 2.0
Gross government debt (% GDP) 55.2 55.0 59.3 55.1 55.1 54.0 53.0
Selic % 9.75 8.50 7.50 7.25 7.25 7.25 7.75 8.25 7.25 8.25 8.00
USDBRL 1.83 2.01 2.03 2.05 1.96 1.94 1.92 1.90 2.05 1.90 1.90 Notes: Annual forecasts for GDP and its components are year-over-year average growth rates. Annual CPI forecasts are year-on-year changes for Q4. Trade data are a 12-month sum. Interest rate and currency forecasts are end of period. Contributions to GDP growth do not include taxes. Numbers in bold are actual values, others forecast. Table reflects data available as of 8 March 2013. Source: Nomura Global Economics.
Nomura | Global Economic Outlook Monthly 11 March 2013
6
Charles St-Arnaud +1 212 667 1986 [email protected]
Canada | Economic Outlook
Growth exhaustion
Growth to remain below potential in 2013, as the expected rebound in investment and exports is
likely to be weak and the oil differential cause a drag on growth
Activity: After some weak growth in H2 of 2012 due to a large drag from net exports and
inventories, we expect growth in Q1 showed a small improvement but should remain below
potential. For 2013, we expect growth to be below 2% most of the year. We expect personal
spending growth to moderate as households gradually reduce their debt burdens and as income
growth remains slow; however, while business investment in machinery and equipment is
expected to pick up, the improvement will likely be small. A rebound in global growth is
expected, with stronger growth in China and the US supporting exports, but this will mainly
affect growth in H2. Moreover, growth in the US could remain weak due to the impact of the
sequester. The continued discount on Canadian oil prices should be negative on the terms of
trade and act as a headwind on growth by reducing corporate profits, and investment tax
revenues.
Inflation: With an increasing amount of spare capacity, inflation remains weak and we think
inflationary pressures are likely to remain contained. We expect headline inflation to increase
gradually, but should end 2013 slightly below the BoC‟s 2% target. Core inflation should also
follow a similar pattern.
Policy: With considerable monetary stimulus in place, but growth remaining weak, we expect
the BoC to remain on hold until mid-2014. However, we believe that the BoC is unlikely to cut
rates as monetary policy is less efficient and the BoC worries it could reignite household debt
accumulation. On fiscal policy, weaker tax revenues due to slower growth and lower commodity
prices and inflexibility on the timing for reaching budget balance will mean some spending cuts.
Risks: We think the threat from a weak US economy due to fiscal policy remains the biggest
negative risk to the Canadian economy. On the upside, domestic demand could prove to be
more resilient than expected, and the US economy could perform better than expected.
Fig. 1: Details of the forecast
% 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 2012 2013 2014
Real GDP 1.2 1.9 0.7 0.6 1.4 1.4 1.7 2.1 1.8 1.3 2.0
Personal consumption 2.2 0.5 2.8 2.7 2.0 2.0 2.0 2.0 1.9 2.1 1.9
Non residential f ixed invest 8.1 8.3 -0.4 4.4 2.0 2.0 3.2 3.5 6.2 2.8 3.9
Residential f ixed invest 14.4 0.6 -2.4 0.8 0.0 0.0 0.0 3.0 5.8 0.1 3.2
Government expenditures -1.1 2.3 -1.5 2.5 0.3 0.3 0.3 0.3 -0.5 0.6 0.3
Exports -3.3 1.1 -7.3 1.2 2.3 2.3 3.8 5.0 1.6 1.1 4.7
Imports 5.1 2.3 2.1 -1.0 2.2 2.2 3.1 3.9 2.9 1.8 3.9
Contributions to GDP:
Domestic f inal sales 2.6 1.8 0.9 2.7 1.4 1.4 1.5 1.7 2.0 1.7 1.7
Inventories 1.2 0.5 2.8 -2.8 0.0 0.0 0.0 0.0 0.2 -0.2 0.0
Net trade -2.7 -0.4 -2.9 0.7 0.0 0.0 0.2 0.4 -0.4 -0.2 0.3
Unemployment rate 7.4 7.3 7.3 7.2 7.3 7.4 7.5 7.5 7.3 7.4 7.3
Employment, 000 36 113 26 103 20 30 40 60 69 38 63
Consumer prices 2.3 1.6 1.2 0.9 0.6 1.1 1.7 1.7 1.5 1.3 2.0
Core CPI 2.1 2.0 1.5 1.2 1.0 1.0 1.4 1.5 1.7 1.2 2.0
Fiscal balance (% GDP) -3.8 -3.0 -2.2
Current account balance (% GDP) -3.4 -3.7 -3.7
Overnight target rate 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.50
3-month T-Bill 0.91 0.87 0.97 0.92 1.00 1.00 1.00 1.00 0.92 1.00 1.60
2-year government bond 1.20 1.03 1.07 1.14 1.00 1.00 1.00 1.20 1.14 1.20 1.90
5-year government bond 1.57 1.21 1.31 1.37 1.30 1.30 1.50 1.70 1.37 1.70 2.40
10-year government bond 2.11 1.74 1.73 1.80 1.90 1.90 2.00 2.20 1.80 2.20 2.80
USD/CAD 1.00 1.02 0.98 0.99 1.05 1.07 1.08 1.10 0.99 1.10 1.02 Notes: Quarterly real GDP and its contributions are seasonally adjusted annualized rates (saar). Inflation measures and calendar year GDP are year-over-year percent changes. Interest rate forecasts are end of period. Numbers in bold are actual values. Table reflects data available as of 8 March 2013. Source: Bank of Canada, Statistics Canada, Nomura Global Economics.
Nomura | Global Economic Outlook Monthly 11 March 2013
7
Zhiwei Zhang +852 2536 7433 [email protected]
Wendy Chen +86 21 6193 7237 [email protected]
China | Economic Outlook
Rising inflation and a weak recovery pose a policy dilemma
The government will likely keep policy unchanged in the short term.
Activity: Activity data were mostly weak in the first two months of 2013. Retail sales growth
slowed sharply to 12.3% y-o-y in the combined January/February period, from 15.2% in
December, while industrial production growth slowed to 9.9% from 10.3% y-o-y. Fixed asset
investment growth picked up to 21.2% y-o-y (ytd) in February from 20.6% in December, but to a
large extent was driven by real-estate investment which is likely to be only temporary due to
policy tightening in this sector. The official PMI surprisingly fell to 50.1 in February from 50.4 in
January and the HSBC PMI dropped to 50.4 after a jump to 52.3 in January. We see downside
risks to our forecast for GDP growth at 8.2% y-o-y in Q1.
Inflation: CPI Inflation rose to 3.2% y-o-y in February from 2.0% in January, due to rising food
prices and positive base effects. The government lowered its CPI inflation target to 3.5% in
2013 from 4.0% last year. At the National People‟s Congress (NPC), outgoing Premier Wen
Jiabo cited rising prices in food, labour and natural resources, imported inflation from QE in
major economies, and the need to reform energy prices as the primary drivers. This suggests to
us that further price hikes in energy and public utilities will be implemented in H1.
Policy: Monetary policy maintained a loose stance. Total social financing hit an all-time high of
RMB2.5trn in January and remained high in February. M2 growth jumped to 15.9% y-o-y in
January and was 15.2% in February, up from 13.8% in December. The government announced
tightening measures on the property market and set an M2 growth target for 2013 at 13% at the
NPC, down from 14% in 2012. In the short term we expect the government to keep policy
unchanged as both growth and inflation face uncertainty – but rising inflation will likely force
policy tightening in H2 2013.
Risks: We see three key risks to our forecast. The largest risk is policy uncertainty, as political
pressure could force the government to maintain its currently loose policy stance longer than we
expect. The second is inflation, which may rise more slowly than we expect and delay policy
tightening. The third is external demand, given the uncertain outlook of EU and US economies.
Details of the forecast
% y-o-y growth unless otherwise stated 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 2012 2013 2014
Real GDP 8.1 7.6 7.4 7.9 8.2 8.0 7.4 7.2 7.8 7.7 7.5
Consumer prices 3.8 2.9 1.9 2.1 2.5 3.0 3.6 4.8 2.6 3.5 4.0
Core CPI 1.5 1.3 1.5 1.5 2.0 2.1 2.4 2.1 1.5 2.2 2.0
Retail sales (nominal) 14.9 13.9 13.5 14.9 16.2 15.9 15.5 15.6 14.2 15.8 16.0
Fixed-asset investment (nominal, ytd) 20.9 20.4 20.5 20.6 21.0 21.2 21.3 22.0 20.6 22.0 20.0
Industrial production (real) 11.6 9.5 9.1 10.0 10.8 10.5 9.6 9.6 10.1 10.1 9.7
Exports (value) 7.6 10.4 4.4 9.5 3.0 4.0 6.0 6.0 7.9 4.9 6.0
Imports (value) 6.9 6.4 1.4 2.8 7.0 8.0 9.0 9.0 4.4 8.3 10.0
Trade surplus (US$bn) 0.2 68.4 79.2 83.4 -16.9 52.9 70.1 74.3 231.2 180.3 122.0
Current account (% of GDP) 2.6 1.0 -0.4
Fiscal balance (% of GDP) -1.6 -1.5 -1.6
New increased RMB loans (CNY trn) 8.2 9.0 9.0
1-yr bank lending rate (%) 6.56 6.31 6.00 6.00 6.00 6.00 6.25 6.50 6.00 6.50 6.5
1-yr bank deposit rate (%) 3.50 3.25 3.00 3.00 3.00 3.00 3.25 3.50 3.00 3.50 3.5
Reserve requirement ratio (%) 20.5 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 19.0
Exchange rate (CNY/USD) 6.31 6.32 6.34 6.29 6.22 6.18 6.16 6.15 6.29 6.15 6.14 Notes: Numbers in bold are actual values; others forecast. Interest rate and currency forecasts are end of period; other measures are period average. The CNY/USD forecast is for the fixing rate, not the spot rate. All forecasts are modal forecasts (i.e., the single most likely outcome). Table reflects data available as of 11 March 2013. Source: CEIC and Nomura Global Economics.
Nomura | Global Economic Outlook Monthly 11 March 2013
8
Nick Matthews +44 20 7102 5126 [email protected]
Jacques Cailloux +44 20 7102 2734 [email protected]
Stella Wang +44 20 7102 0599 [email protected]
Jacques Cailloux
+44 20 7102 2734 [email protected]
Nick Matthews
+44 20 7102 5126 [email protected]
Stella Wang
+44 20 7102 0599 [email protected]
Euro area | Economic Outlook
ECB continues to resist rate cut on recovery expectations
The ECB's recovery scenario could be challenged by lack of policy pass-through
Activity: Q4 GDP was 0.1pp weaker than we forecast at -0.6% q-o-q, though the forward-
looking survey data continue to suggest a slowing in the pace of contraction and we have
revised up our Q1 forecast to -0.1% q-o-q (see also Pace of contraction to slow in Q1, 14
February). Global trade has led to a short-term recovery, but a strong and sustained recovery is
needed to offset weak euro area domestic demand. Our baseline remains one of deep
recession in countries most under stress in 2013.
Inflation: The recent decline in oil prices has pushed our euro area headline inflation forecast
down to 1.6% this year (from 1.8%) and to 1.4% in 2014 (from 1.5%). The inflation outlook
remains characterised by contained core inflation due to weak domestic demand (the biggest
downside risk). The main upside risk remains further administered price/indirect tax increases.
Policy: The ECB was marginally more dovish in March as weaker projections led to a loss of
unanimity on rates, but not by enough to trigger a cut. Those against lower rates continue to put
faith in a recovery in the second half of the year, leaving us in data-dependent mode, although
we do not think the data will be weak enough for the ECB to cut in April. Furthermore, despite
the loss of unanimity, we see no other major signals that strongly suggest the ECB intends to
cut rates next month. Continued emphasis on medium-term expectations suggests these have
to change for the ECB to act, putting the spotlight on June‟s Eurosystem staff projections as the
next major evaluation of the outlook. We continue to expect the refi rate to be cut by 25bp at this
meeting (and most likely the corridor narrowed given the ongoing reluctance for negative rates).
Mr Draghi says the ECB will remain accommodative and in full allotment mode for as long as is
needed – a weak form of forward guidance – and a possible trade-off for those pushing for
lower rates (see Angst of the weak (Post ECB meeting), 7 March). We expect pressure on the
ECB to ease financing conditions to remain elevated, in both conventional and unconventional
terms because of the extraordinarily tight financing conditions in the periphery (see Italian SME
credit crunch: economic challenges and policy opportunities, 4 March).
Risks: The ECB‟s OMT has provided a powerful safety net for the periphery and prevented
Spain and Italy from losing market access. Markets have essentially bought on the promise of a
backstop. In our view, this will be another testing year for solidarity against a backdrop of weak
economic activity and lack of pass-through to lending rates in the periphery is a key policy
challenge. Downside risks to the outlook include significant political risks – including in Italy, see
Italian elections: Risk of ungovernability to be priced by the market, 26 February – and appetite
for structural reform in some countries. On the upside, the most significant risk is a loosening of
fiscal targets, in view of the importance of fiscal multipliers in our forecasts.
Details of the forecast
% 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 2012 2013 2014
Real GDP -0.3 -2.4 -0.6 -0.6 -0.2 -0.1 0.2 0.1 -0.5 -0.8 0.0
Household consumption -0.4 -1.6 -1.7 -1.5 -1.5 -1.5 -1.3 -1.3 -1.2 -1.5 -1.4
Fixed investment -3.2 -4.5 -5.6 -4.5 -3.9 -3.6 -3.0 -2.8 -4.0 -4.6 -3.2
Government consumption -0.5 -0.3 -0.8 -0.8 -0.8 -0.8 -0.4 -0.4 -0.1 -0.7 -0.5
Exports of goods and services 4.1 -3.6 0.6 1.6 2.6 2.6 3.1 2.7 2.8 1.1 2.7
Imports of goods and services 0.2 -3.6 -2.8 -2.1 -0.8 -0.4 0.6 0.7 -1.0 -1.8 0.2
Contributions to GDP:
Domestic f inal sales -0.9 -1.8 -2.2 -1.9 -1.7 -1.6 -1.3 -1.3 -1.5 -1.8 -1.4
Inventories -1.3 -0.4 0.0 -0.5 -0.1 0.1 0.2 0.3 -0.8 -0.4 0.2
Net trade 1.9 -0.2 1.6 1.7 1.6 1.5 1.3 1.0 1.7 1.3 1.3
Unemployment rate 11.5 11.7 11.9 12.0 12.1 12.2 12.3 12.3 11.4 12.1 12.3
Compensation per employee 1.8 1.4 1.0 0.8 0.4 0.3 0.3 0.5 1.7 0.6 0.6
Labour productivity 0.5 0.2 -0.1 0.1 -0.3 0.1 0.3 0.4 0.4 -0.1 0.5
Unit labour costs 1.6 1.4 1.3 1.0 0.7 0.2 0.0 0.1 1.5 0.8 0.1
Fiscal balance (% GDP) -3.3 -3.2 -3.0
Current account balance (% GDP) 1.2 0.4 0.8
Consumer prices 2.5 2.3 1.8 1.6 1.6 1.5 1.4 1.5 2.5 1.6 1.4
ECB main refi. rate 0.75 0.75 0.75 0.50 0.50 0.50 0.50 0.50 0.75 0.50 0.50
3-month rates 0.22 0.19 0.25 0.18 0.20 0.20 0.20 0.20 0.19 0.20 0.20
10-yr bund yields 1.41 1.30 1.32 1.35 1.48 1.60 1.64 1.68 1.30 1.60 1.75
$/euro 1.29 1.31 1.30 1.28 1.25 1.23 - - 1.31 1.23 - Notes: Quarterly real GDP and its contributions are seasonally adjusted annualised rates. Unemployment rate is a quarterly average as a percentage of the labour force. Compensation per employee, labour productivity, unit labour costs and inflation are y-o-y percent changes. Interest rate and exchange rate forecasts are end of period levels. Numbers in bold are actual values, others forecast. Table reflects data available as of 8 March 2013. Source: Eurostat, ECB, DataStream, Nomura Global Economics.
Nomura | Global Economic Outlook Monthly 11 March 2013
9
Young Sun Kwon +852 2536 7430 [email protected]
Aman Mohunta +91 22 6617 5595 [email protected]
Hong Kong | Economic Outlook
Hong Kong: Fiscal stimulus
The 2013-14 budget focusses on increasing social welfare spending.
Activity: Real GDP growth increased to 2.6% y-o-y in Q4, led by a pick up in private
consumption and exports. Retail sales growth in volume terms also remained strong, at 10.4%
in January from 8.5% in December, while the PMI remained in the expansion zone at 51.2 in
February, albeit down from January. We expect private consumption to remain robust,
underpinned by a tight labor market, positive wealth effects from buoyant property prices and
increasing visitor numbers from mainland China. Further, domestic fixed asset investment
should remain strong, led by infrastructure works. We expect fiscal stimulus and a moderate
improvement in external demand to lift real GDP growth from 1.4% in 2012 to 2.5% in 2013.
Inflation: CPI inflation eased to 3.0% y-o-y in January from 3.8% in December, largely on base
effects created by the lunar new year holiday, and hence we expect a payback in February.
Thereafter, inflation should rise through 2013, driven by higher food, fuel and rent prices, only
partly offset by inflation-mitigating fiscal measures such as a temporary waiver of public housing
rent and electricity subsidies. We expect CPI inflation to rise from 4.1% in 2012 to 4.3% in 2013.
Policy: Hong Kong's FY13 (April 2013 to March 2014) fiscal policies are more expansionary
than in FY12. The government expects the fiscal balance to shift to a deficit of HKD4.9bn in
FY13 from a surplus of HKD64.9bn in FY12 due to increased expenditures. The budget includes
a reduction in taxes and an increase in the child allowance for low income families; a subsidy for
electricity; and two months‟ waiver of rent payments for public housing tenants. We also expect
the government to continue implementing more macroprudential property tightening measures,
such as hikes in the stamp duty if house prices continue to rise. Because of the USD/HKD peg,
Hong Kong is importing the super-loose monetary policy of the US, and it remains unclear
whether tighter macroprudential measures can provide a sufficient offset in the long run.
Risks: As a small, open economy and financial hub, Hong Kong is one of the most vulnerable
in Asia to weakness in the global economic outlook. An economic hard landing in China would
be especially detrimental through both trade and financial channels.
Details of the forecast
% y-o-y growth unless otherwise stated 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 2012 2013 2014
Real GDP (sa, % q-o-q, annualized) 1.5 -0.4 3.4 4.9 0.6 1.1 5.2 2.8
Real GDP 0.7 1.2 1.1 2.6 2.1 2.5 2.9 2.4 1.4 2.5 3.5
Private consumption 6.3 2.8 2.8 4.5 3.2 3.4 3.6 4.5 4.0 3.7 4.4
Government consumption 3.3 4.1 4.0 3.2 3.5 3.7 3.8 4.2 3.7 3.8 4.4
Gross fixed capital formation 12.5 5.7 8.3 6.0 5.8 5.8 5.7 5.8 9.1 5.8 6.1
Exports (goods & services) -3.6 0.3 3.0 5.0 4.5 5.0 5.0 5.5 1.3 5.0 7.2
Imports (goods & services) -1.6 0.9 3.8 6.4 5.1 5.5 6.2 6.9 2.5 6.0 7.7
Contributions to GDP (% points)
Domestic final sales 7.4 3.6 4.3 5.6 3.8 4.0 4.2 4.8 5.2 4.2 4.8
Inventories -1.7 -1.3 -1.0 -0.3 -0.5 -0.2 1.2 0.6 -1.1 0.3 -0.2
Net trade (goods & services) -4.4 -1.3 -1.6 -2.6 -1.1 -1.4 -2.3 -2.9 -2.5 -1.9 -1.2
Unemployment rate (sa, %) 3.3 3.3 3.5 3.3 3.4 3.4 3.4 3.4 3.4 3.4 3.2
Consumer prices 5.2 4.2 3.1 3.8 3.7 4.3 4.5 4.6 4.1 4.3 4.3
Exports -1.2 2.0 4.4 7.4 9.2 10.4 10.1 10.4 3.2 10.0 12.3
Imports 0.9 2.3 5.0 8.4 9.5 10.5 10.9 11.7 4.3 10.7 12.5
Trade balance (US$bn) -12.7 -15.9 -15.6 -17.4 -14.2 -17.6 -18.3 -21.0 -61.6 -71.2 -80.9
Current account balance (% of GDP) 1.5 -0.1 -0.7
Fiscal balance (% of GDP) 3.3 -0.2 -0.5
3-month Hibor (%) 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40
Exchange rate (HKD/USD) 7.76 7.76 7.75 7.75 7.75 7.75 7.75 7.75 7.75 7.75 7.75
Source: Numbers in bold are actual values; others forecast. Interest rate and currency forecasts are end of period; other measures are period average. All forecasts are modal forecasts (i.e., the single most likely outcome). Table reflects data available as of 7 March 2013. Source: CEIC and Nomura Global Economics.
Nomura | Global Economic Outlook Monthly 11 March 2013
10
Peter Attard Montalto +44 (0) 20 710 28440 [email protected]
Hungary | Economic Outlook
Unorthodox policy focus shifts to non-independent central bank
We expect the government's unorthodox approach to continue in 2013 with the
building of a state-owned retail banking sector and a new MNB governor adding risks.
Policy, fiscal and funding: The government has continued to fund itself domestically because
of excess liquidity and a lack of lending by banks, combined with inflows by foreigners still
seeing attractive carry. On external debt, a mixture of derivatives and cash management,
combined with swapping out of domestic issuance and drawing down of deposits, has meant
that funding has been fine and should remain so through to July. Governor Matolcsy wants an
FX devaluation to boost growth (even if the cabinet was split on the issue). In our view, he will
not hike rates to prevent one nor waste FX reserves on intervention when they will be needed
for clearing up the mess of a devaluation on bank and household balance sheets. There could
be a little verbal intervention to ensure the progression of the devaluation is orderly and timed
correctly (i.e. when it is ready with FX mortgage policies). Varga may take part in this verbal
intervention with his credibility. We expect FX issuance early this year to total around
EUR2.5bn. Adding to the recently suggested „residency bond‟ and retail issuance, and we think
this year‟s EUR7bn funding requirement can easily be met. Fiscal policy remains controlled, but
only because of repeated austerity packages, partly to reduce funding requirements and
remove the threat of EDP sanctions. However, we doubt such low deficit levels can be
sustained in the medium run. This situation is likely to be repeated again this year, with the
government‟s revenue assumptions based on growth nearly 1pp higher than our own.
Rates and inflation: We expect headline inflation to remain elevated until the end of 2014 on a
mixture of tax pass-through and pressure from wages and policy. That said, underlying core ex
VAT inflation should remain around the bottom edge of the target through the next two years
because of a lack of demand. EUR/HUF is not the key to rate moves, it is wider risk premia, in
our view. Hence our baseline has been for rate cuts to continue until after the market blows up
in EURHUF. Rates could go as low as 4.00%. We have pencilled in 4.50% as the end point, but
have stressed this was an irrelevant number and it is more about how they react vs
currency/risk premia. Since the appointment of Matolcsy as governor, there has been the
removal of independence and the centralisation of power under the governor. We think the
action is still to come – but as we have said before, it will be step by step – not a big bang.
Growth: We forecast growth in 2013 to remain in negative territory, and expect the economy to show no recovery for another year. Our key concern is potential growth declining over the past four years from 4.0% before the crisis, first to 2.5% by 2010, then 1.75% by this year, but perhaps as low as 1.0% by 2014 thanks to the government's latest austerity packages.
Figure 1. Details of the forecast Figure 2. Headline and core ex-VAT CPI.
2011 2012 2013 2014
Real GDP % y-o-y 1.7 -2.7 -0.5 0.9
Nominal GDP USD bn 140.2 155.7 134.0 136.6
Current account % GDP 1.4 2.5 1.5 1.0
Fiscal balance % GDP -6.2 -2.9 -3.2 -3.3
Structural balance -5.0 -6.5 -5.7 -4.0
CPI % y-o-y * 4.1 5.0 5.0 4.9
CPI % y-o-y ** 3.9 5.7 4.0 5.4
Core CPI ex VAT % y-o-y ** 2.6 2.0 2.7 3.7
Unemployment rate % 10.7 10.7 10.4 10.2
Reserves EUR bn *** 35.1 31.8 28.1 25.0
External debt % GDP*** 138.9 131.6 130.6 132.6
Public debt % GDP 82.8 78.6 79.2 79.0
MNB policy rate %* 7.00 5.75 4.00 4.00
EURHUF* 315 291 320 320
0
1
2
3
4
5
6
7
Jan-2011 Jan-2012 Jan-2013 Jan-2014
Tax
Non-core ex VAT
Core ex VAT
pp y-o-y
Notes: * End of period. ** Period average. Bold is actual data. *** Includes IMF/EU funds. Source: Nomura Global Economics
Nomura | Global Economic Outlook Monthly 11 March 2013
11
Sonal Varma +91 22 4037 4087 [email protected]
Aman Mohunta +91 22 6617 5595 [email protected]
India | Economic Outlook
Politics trumps economics
With the government likely to increase spending ahead of the elections in 2014, macro imbalances should continue and growth will likely disappoint.
Forecast change: We have revised our 2013 GDP growth forecast down to 5.2% (from 6.1%)
and our current account balance forecast down to -5.3% of GDP in 2013 (from -4.7%) and -
4.2% in 2014 (from -3.9%).
Activity: Sharp cutbacks in government spending and a slowdown in the financial sector
dragged down GDP growth to 4.5% y-o-y in Q4 2012. Although growth appears to have
bottomed, in the absence of any positive triggers in the near term we expect GDP growth to
remain below 5% in H1 2013, with a cyclical pick up from Q4 2013 due to increased
government spending ahead of the general election in 2014. However, new capex projects
remain moribund, and we see no pick up in sight. As a result, supply-side constraints remain
binding and suggest limited spare capacity to accommodate a significant pickup in demand
(without generating inflationary pressures and/or a widening trade deficit).
Inflation: Price pressures have eased and we expect WPI inflation to remain below 7% in Q1
2013 due to the lagged impact of a negative output gap, falling input costs and a delay in
updating the coal price index of the WPI basket. However, we expect WPI inflation to start rising
again in Q2 2013 due to higher food prices and the release of some fiscally suppressed inflation,
as subsidies and price controls are relaxed a little. INR depreciation is likely to intensify
inflationary pressures from Q3 2013. Further, double-digit CPI inflation suggests that underlying
pressures remain strong, notwithstanding the fall in WPI inflation.
Policy: The Reserve Bank of India (RBI) cut its repo rate by 25bp in January and we expect
another 25bp cut in May given the fall in WPI inflation. However, with inflation likely to rise again
from Q2 and a worsening current account deficit, we expect policy rates to remain on hold in H2
2013. The government achieved its fiscal deficit target of 5.2% of GDP in FY13, which is lower
than the revised target of 5.3%, and has budgeted for a fiscal deficit of 4.8% in FY14. However,
we expect the fiscal deficit to remain at 5.2% in FY14, as we believe the government is likely to
miss its revenue target, and the elections due in 2014 will limit its ability to cut expenditures.
Risks: A reversal of capital flows, a sharp rise in oil prices, a deeper and prolonged global
slowdown and weather-related shocks are the key downside risks. Lower commodity prices, a
stronger-than-expected global recovery and a quick investment revival are upside risks.
Details of the forecast
% y-o-y growth unless otherwise stated 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 2012 2013 2014
Real GDP (sa, % q-o-q, annualized) 5.9 5.3 6.0 2.5 1.7 9.0 8.1 5.4
Real GDP 5.3 5.5 5.3 4.5 4.7 4.8 5.2 6.0 5.1 5.2 6.6
Private consumption 9.7 2.0 2.0 4.6 4.0 4.7 4.9 5.2 4.5 4.7 5.3
Government consumption 7.6 8.3 8.0 1.9 2.0 5.5 6.5 8.0 6.2 5.5 6.2
Fixed investment 2.6 -4.6 -1.0 6.0 4.0 7.2 4.3 4.5 0.7 5.0 6.5
Exports (goods & services) 13.4 7.2 5.2 -2.1 1.5 4.5 6.5 8.6 5.8 5.2 10.3
Imports (goods & services) 24.3 3.9 13.8 -0.3 2.0 8.2 6.5 10.2 9.8 6.7 9.2
Contributions to GDP (% points)
Domestic final sales 2.5 4.4 5.5 2.3 12.0 6.6 6.0 7.2 3.6 8.0 7.1
Inventories -1.1 1.2 1.2 1.1 1.0 -0.1 0.0 0.1 0.6 0.3 0.2
Net trade 4.0 -0.2 -1.4 1.1 -8.3 -1.7 -0.8 -1.3 1.0 -3.1 -0.6
Wholesale price index 7.5 7.5 7.9 7.2 6.8 7.1 7.2 7.5 7.5 7.1 6.8
Consumer price index 8.6 10.2 9.9 10.1 10.7 9.8 9.6 9.1 9.7 9.8 8.1
Current account balance (% GDP) -4.9 -5.3 -4.2
Fiscal balance (% GDP) -5.2 -5.2 -5.0
Repo rate (%) 8.50 8.00 8.00 8.00 7.75 7.50 7.50 7.50 8.00 7.50 7.00
Reverse repo rate (%) 7.50 7.00 7.00 7.00 6.75 6.50 6.50 6.50 7.00 6.50 6.00
Cash reserve ratio (%) 4.75 4.75 4.50 4.25 4.25 4.25 4.25 4.25 4.25 4.25 4.75
10-year bond yield (%) 8.54 8.18 8.15 8.05 7.80 7.80 7.70 7.50 8.05 7.50 7.00
Exchange rate (INR/USD) 51.2 54.0 52.7 55.0 53.0 55.5 60.0 59.0 55.0 59.0 56.0
Notes: Numbers in bold are actual values; others forecast. Interest rate and currency forecasts are end of period; other measures are period average. CPI is with base year 2010. Fiscal deficit is for the central government and for fiscal year, e.g, 2012 is for the year ending March 2013. Table reflects data available as of 7 March 2013. Source: CEIC and Nomura Global Economics.
Nomura | Global Economic Outlook Monthly 11 March 2013
12
Euben Paracuelles +65 6433 6956 [email protected]
Lavanya Venkateswaran +91 22 3053 3053 [email protected]
Indonesia | Economic Outlook
Indonesia: Still a case to tighten
A combination of recent increases in inflation and persistently weak external balances makes a
compelling case for BI to hike rates.
Activity: Monthly indicators for January, including the consumer confidence index, motorcycle
and cement sales and strong import growth, suggest that consumption demand remained
strong. This, along with higher government spending ahead of the 2014 elections, supports our
2013 GDP growth forecast of 6.1% GDP. But the sustainability of growth is becoming more
worrisome. Merchandise exports improved in January, but we still see upside risks to our
current account deficit forecast of 1.9% of GDP this year, because of robust imports. Without
reducing fuel subsidies or tightening monetary policy, the risk is that domestic demand
increasingly outstrips supply.
Inflation and monetary policy: CPI inflation jumped to 5.3% y-o-y in February from 4.6% in
January, approaching the upper limit of Bank Indonesia‟s (BI) 3.5-5.5% target range. The
increase was largely due to higher food prices, as core inflation remained stable at 4.3%. We
continue to expect inflationary pressures to persist given the electricity tariff adjustments, the
lagged impact of IDR depreciation and elevated inflation expectations (see Asia Insights:
Indonesia: Inflation jumps in February, 1 March 2013). This, combined with persistently weak
external balances, bolsters the case for BI to act. Our base case calls for 50bp of policy rate
hikes in H2. Raising the FASBI rate (the lower bound of the interest rate corridor) can occur
sooner, which would be a signal that BI is moving toward a tightening bias.
Fiscal policy: Our recent trip to Jakarta confirmed the low likelihood of fuel subsidy cuts this
year (see Asia Insights: Indonesia: Postcard from Jakarta, 25 February 2013). That said, we
continue to expect the government to improve its execution on infrastructure spending and other
capital expenditures. Some positive signs of this include progress made on the development of
the Jakarta Mass Rapid Transit system. All told, we expect higher operating expenditures to
increase the 2013 deficit to 2.0% of GDP (versus the budgeted 1.65%).
Risks: The key risk we see is the implementation of more protectionist and populist policies
ahead of the elections, which could damage already-fragile investor sentiment and slow FDI
inflows. On the external front, weaker growth in the EU, US and China also pose downside risks.
Details of the forecast
% y-o-y growth unless otherwise stated 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 2012 2013 2014
Real GDP (sa, % q-o-q, annualized)
Real GDP 6.3 6.4 6.2 6.1 6.1 6.2 6.0 6.0 6.2 6.1 6.2
Private consumption 4.9 5.2 5.6 5.4 5.5 5.8 5.7 5.5 5.3 5.6 5.6
Government consumption 6.4 8.6 -2.8 -3.3 7.0 8.0 10.0 10.0 1.2 9.0 7.0
Gross fixed capital formation 10.0 12.5 9.8 7.3 9.8 8.9 8.8 7.9 9.8 8.7 9.0
Exports (goods & services) 8.2 2.6 -2.6 0.5 6.0 6.0 7.0 9.0 2.0 7.0 10.0
Imports (goods & services) 8.9 11.3 -0.2 6.8 6.5 7.0 5.5 8.0 6.6 6.8 11.9
Contributions to GDP (% points)
Domestic final sales 5.5 6.5 5.2 4.5 5.7 6.0 6.1 6.1 6.0 5.3 6.0
Inventories 2.0 2.3 -0.1 3.1 -0.2 -0.3 0.0 0.5 1.8 0.0 -0.3
Net trade (goods & services) 0.6 -3.0 -1.2 -2.5 0.4 0.1 1.3 1.2 -1.5 0.7 0.2
Consumer prices 3.7 4.5 4.5 4.4 4.6 5.1 5.4 5.5 4.3 5.2 5.1
Exports (goods) 5.3 -8.2 -13.0 -7.9 7.0 9.0 8.0 9.0 -6.3 8.2 10.4
Imports (goods) 21.6 9.7 -0.3 4.6 6.0 7.0 8.0 10.5 8.3 7.9 12.0
Trade balance (US$bn) 1.7 -2.1 0.6 -2.7 1.6 -1.1 2.7 -3.5 -2.4 -0.3 -0.9
Current account balance (% of GDP) -1.4 -3.5 -2.4 -3.6 -1.2 -2.0 -1.3 -3.2 -2.7 -1.9 -1.7
Fiscal Balance (% of GDP) -1.8 -2.0 -2.2
Bank Indonesia rate (%) 5.75 5.75 5.75 5.75 5.75 5.75 6.25 6.25 5.75 6.25 6.75
Exchange rate (IDR/USD) 9146 9433 9591 9790 9900 10000 9900 9900 9790 9900 9700
Notes: Numbers in bold are actual values; others forecast. Interest rate and currency forecasts are end of period; other measures are period average. All forecasts are modal (i.e., the single most likely outcome). Table reflects data available as of 7 March 2013. Source: CEIC and Nomura Global Economics.
Nomura | Global Economic Outlook Monthly 11 March 2013
13
Shuichi Obata +81 3 6703 1295 [email protected]
Japan | Economic Outlook
We forecast 0.9% y-o-y growth in 2013
We expect stronger exports and the Abe administration’s emergency stimulus package to result
in real GDP growth of 0.9% y-o-y in 2013.
Forecast change: We revised up our real GDP growth forecasts from 0.7% to 1.0% for 2013
and from 1.3% to 1.9% for 2014.
Activity and fiscal policy: The Japanese economy fell into recession around last April.
However, we think the economy bottomed out in Q4 2012 and began a recovery phase,
supported by the recovery in Chinese domestic demand. We expect Japan's export recovery to
become stronger because China‟s economic recovery is boosting trade within Northeast Asia
and the yen continues to weaken against most currencies, including the Korean won. This
should have a knock-on effect for domestic demand and lead to a typical export-led recovery in
the Japanese economy. In terms of fiscal policy, the Abe administration has boosted public
works spending substantially via its emergency stimulus package and the FY13 budget. These
stimulus measures should also help support the economy.
Inflation and monetary policy: On 22 January the Bank of Japan (BOJ) announced the
introduction of a 2% price stability target and a move to an open-ended asset purchase program
from 2014. At the same time, the Japanese government and the BOJ issued a joint statement
saying that the Council on Economic and Fiscal Policy (CEFP) will examine monetary policy,
price movements and price forecasts every three months. We expect the new BOJ governor
and two deputy governors to take over on 20 March. All these points indicate that the BOJ's
policy stance is likely to loosen substantially from April. We expect additional easing measures
to be discussed at the policy board meeting on 3–4 April. However, because there is little time
between the inauguration of the new governor and deputy governors and this meeting, our main
scenario is that the policy board will decide to extend the maturity of JGBs targeted by its asset
purchasing program from around three years to around five and expand the program by
JPY10trn, as it should be easy for the incoming policy board members to form a consensus with
the current members on these measures.
Risks: External factors continue to represent the main risks to the economy. These include an
expansion and/or a prolonging of the risks associated with Euro government debt and a decline
in confidence in US economic policy, both of which would probably have a negative impact on
the economy via, higher volatility, a stronger yen strengthening and a fall in share prices.
Details of the forecast
% 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 2012 2013 2014
Real GDP 6.1 -0.9 -3.7 0.2 1.7 2.5 3.0 3.7 2.0 1.0 1.9
Private consumption 5.0 -0.1 -1.9 2.0 1.6 0.4 1.2 2.1 2.4 0.9 1.2
Private non res fixed invest -9.5 -0.3 -12.5 -5.7 2.6 4.6 6.6 6.5 2.1 -0.3 6.0
Residential fixed invest -6.5 9.1 6.8 14.9 5.7 3.7 5.0 6.9 2.9 7.3 -0.2
Government consumption 6.3 1.7 1.6 2.7 1.4 1.4 1.2 1.2 2.7 1.6 1.2
Public investment 38.4 27.1 10.7 7.2 6.1 7.9 13.4 11.2 12.5 9.9 -3.3
Exports 14.2 0.2 -19.0 -14.0 2.2 6.7 6.4 7.1 -0.3 -2.4 7.3
Imports 8.6 6.8 -1.9 -9.0 3.5 5.4 4.4 5.5 5.3 1.2 5.3
Contributions to GDP: Domestic final sales 4.1 1.9 -1.7 1.8 1.7 1.6 2.5 3.1 2.9 1.4 1.5
Inventories 1.2 -1.6 0.8 -0.8 0.2 0.7 0.2 0.3 0.0 0.1 0.0
Net trade 0.8 -1.2 -2.8 -0.8 -0.2 0.2 0.3 0.3 -0.9 -0.5 0.4
Unemployment rate 4.5 4.4 4.3 4.2 4.2 4.1 4.0 3.9 4.3 4.1 3.9
Consumer prices 0.3 0.2 -0.4 -0.2 -0.3 0.0 0.4 0.5 0.0 0.1 2.3
Core CPI 0.1 0.0 -0.2 -0.1 -0.1 0.0 0.2 0.4 -0.1 0.1 2.3
Fiscal balance (fiscal yr, % GDP) -9.0 -9.1 -7.5
Current account balance (% GDP) 1.0 0.8 1.0
Unsecured overnight call rate 0-0.10 0-0.10 0-0.10 0-0.10 0-0.10 0-0.10 0-0.10 0-0.10 0-0.10 0-0.10 0-0.10
JGB 5-year yield 0.32 0.22 0.19 0.19 0.12 0.16 0.25 0.44 0.19 0.44 0.63
JGB 10-year yield 0.99 0.83 0.77 0.80 0.74 0.81 0.95 1.14 0.80 1.14 1.33
JPY/USD 82.9 79.8 78.0 86.8 93.0 95.0 93.0 93.0 86.8 93.0 100.0 Note: Quarterly real GDP and its contributions are seasonally adjusted annualized rates. Unemployment rate is as a percentage of the labor force. Inflation measures and CY GDP are y-o-y percent changes. Interest rate forecasts are end of period. Fiscal balances are for fiscal year and based on general account. Table reflects data available as of 8 March. All forecasts are modal forecasts (i.e., the single most likely outcome). Numbers in bold are actual values, others forecast. Source: Cabinet Office, Ministry of Finance, Statistics Bureau, BOJ, and Nomura Global Economics.
Nomura | Global Economic Outlook Monthly 11 March 2013
14
Euben Paracuelles +65 6433 6956 [email protected]
Lavanya Venkateswaran +91 22 3053 3053 [email protected]
Malaysia | Economic Outlook
Malaysia: All eyes on the elections
GDP growth remained robust in 2012 and the momentum is likely to continue this year, but a lot
is dependent upon the outcome of the upcoming elections.
Activity: The economy grew by 6.4% y-o-y in Q4 2012 from 5.3% in Q3, driven by strong
domestic demand, namely from private consumption and investment spending. This took full-
year GDP growth to a robust 5.6% in 2012 (5.1% in 2011). The outlook for this year rests on the
upcoming general elections, which we think will likely be held in April. For now, we maintain our
forecast for 2013 GDP growth to average 4.3%, given the need for the government to move
quickly to fiscal consolidation after the election to avoid exceeding its self-imposed debt limit.
However, admittedly there are upside risks given the strong economic momentum.
Inflation and monetary policy: January CPI inflation rose by 1.3% y-o-y from 1.2% in
December, largely driven by higher food prices. We estimate core inflation also rose by 1.4%
y-o-y from 1.3% in December, consistent with the strength in domestic demand. We maintain
our forecast for CPI inflation to average 2.4% y-o-y in 2013. Furthermore, the uptick in January
inflation justifies Bank Negara Malaysia‟s (BNM) slightly more hawkish stance at its 31 January
meeting. As such, we continue to expect BNM to hike the policy rate by 50bp in H2 to 3.50% as
it looks to normalize rates to avoid not only inflation, but overheating pressures more generally.
Fiscal policy and political outlook: The government met its fiscal deficit target of 4.5% of
GDP in 2012, but the details continue to underscore the need for fiscal reforms. More positively,
our recent trip to Kuala Lumpur bolstered our confidence in the government‟s commitment to
reform. That said, we expect the fiscal impulse to remain positive until the elections, after which
spending cutbacks are likely. We continue to forecast a deficit of 4.5% of GDP versus the target
of 4%, given the political cycle. We expect the elections to be called between 6-20 April and our
baseline (assigned a 60% probability) remains for the incumbents to retain power, but with a
smaller majority (see Asia Insights: Postcard from Malaysia, 26 February 2013).
Risks: With exports at nearly 100% of GDP, a sharp drop in commodity prices and another
global recession are the biggest downside risks. A weaker-than-expected coalition or an
opposition victory would raise questions about the political transition and the reform agenda.
Details of the forecast
% y-o-y growth unless otherwise stated
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 2012 2013 2014
Real GDP 5.1 5.6 5.2 6.4 5.1 4.7 4.2 3.2 5.6 4.3 4.6
Private consumption 7.4 8.8 8.5 6.1 6.3 6.3 6.2 5.4 7.7 6.1 5.5
Government consumption 9.1 10.9 2.3 1.1 0.1 -3.0 -2.5 -1.1 5.0 -1.6 3.5
Gross fixed capital formation 16.2 26.1 22.7 14.9 12.3 12.0 12.1 12.9 19.9 12.4 6.8
Exports (goods & services) 2.8 2.1 -3.0 -1.5 0.3 1.1 2.2 3.5 0.1 1.8 7.2
Imports (goods & services) 6.8 8.1 4.4 -0.9 1.8 3.3 4.5 4.6 4.5 3.6 8.5
Contributions to GDP (% points)
Domestic final sales 8.3 11.8 9.8 6.9 6.3 6.2 6.2 5.9 9.2 6.2 5.2
Inventories -0.2 -1.2 2.2 0.2 0.2 0.3 -0.2 -2.1 0.3 -0.5 0.0
Net trade (goods & services) -3.1 -4.9 -6.8 -0.6 -1.3 -1.9 -1.8 -0.7 -3.8 -1.4 -0.6
Unemployment rate (%) 3.0 3.0 3.0 3.2 3.2 3.4 3.5 3.5 3.0 3.4 3.4
Consumer prices 2.3 1.7 1.4 1.3 2.1 2.6 2.5 2.7 1.7 2.4 2.5
Exports 3.3 -0.3 -4.7 0.6 4.6 7.3 6.9 5.6 -0.3 6.1 8.4
Imports 6.2 5.5 3.9 3.9 8.8 10.0 11.7 7.7 4.8 9.6 13.1
Merchandise trade balance (USD bn) 9.7 6.8 5.5 8.7 8.2 6.0 3.5 8.1 30.8 25.7 17.8
Current account balance (% of GDP) 8.0 4.1 4.0 9.4 4.8 4.4 3.3 4.9 6.4 4.7 4.2
Fiscal Balance (% of GDP) -4.5 -4.5 -4.2
Overnight policy rate (%) 3.00 3.00 3.00 3.00 3.00 3.00 3.25 3.50 3.00 3.50 4.00
Exchange rate (MYR/USD) 3.06 3.18 3.06 3.06 3.10 3.06 3.01 2.95 3.06 2.95 2.87
Note: Numbers in bold are actual values; others forecast. Interest rate and currency forecasts are end of period; other measures are period average. All forecasts are modal forecasts (i.e., the single most likely outcome). Table reflects data available as 7 March 2013. Source: CEIC and Nomura Global Economics.
Nomura | Global Economic Outlook Monthly 11 March 2013
15
Benito Berber +1 212 667 9503 [email protected]
Mexico | Economic Outlook
2013: The year of reforms
The new government will embark on a series of important reforms in 2013.
Activity: We forecast the economy to expand by 3.0-3.5% y-o-y in 2013. While the US
economy, the main trade partner of Mexico might remain weak, we expect Mexican domestic
aggregate demand to remain resilient. Other risks include a sharper than anticipated contraction
in the eurozone that drags down global growth. A fiscal reform to increase non-oil revenues and
an energy reform to increase private sector participation will be the main focus of attention in
2013. Authorities will likely approve these two key structural reforms that should enhance
potential growth and reduce vulnerabilities.
Inflation: For 2013 we expect most of the supply-side shocks to dissipate; therefore, we
forecast inflation to moderate from 3.6% in 2012 to 3.4-3.5% in 2013 and 2014. However, the
2014 forecast does not include the impact of the fiscal reform of imposing the VAT on food and
medicines from their current 0% rate. Since the fiscal reform will likely be presented to Congress
in September, at the earliest, we won‟t be able to re-calibrate the inflation forecast until then. If
authorities increase the VAT for food and medicines to 16%, which is the rate for other goods,
inflation would surpass 7.0% y-o-y. If authorities increase the VAT gradually, the impact on
inflation could be significantly lower.
Policy: After keeping the policy rate unchanged at 4.5% since July 2009, Banxico did a one-off
50bp rate cut to 4.0% in March 2013 on the argument that despite it sees an uptick in inflation in
short term, inflation should converge to 3% target in medium term, and inflation expectations
remain well anchored. Our medium-term view for the MXN remains sanguine due to the likely
approval of the structural reforms. We forecast that MXN will strengthen to 12.00 by 4Q 2013.
Risks: The main risk is a double-dip recession in the US economy, which seems unlikely. In
terms of inflation, we see the following risks to our call: (1) pass-through effects due to MXN
depreciation; (2) increases in gasoline prices; and the passage of the fiscal reform.
Details of the forecast
% y-o-y change unless noted 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 2012 2013 2014
Real GDP 4.9 4.4 3.2 3.2 2.9 3.6 3.2 3.1 3.9 3.5 4.5
Personal consumption 4.2 3.4 2.2 3.4 3.4 5.8 0.9 3.4 3.3 3.3 4.5
Fixed investment 8.6 6.2 4.8 6.4 2.3 3.6 3.2 3.2 6.5 3.1 4.0
Government expenditure 3.2 2.2 0.6 -4.5 -3.5 0.7 2.1 2.0 0.3 1.9 2.8
Exports 5.1 6.4 2.4 4.5 0.7 0.0 4.4 2.8 4.6 2.0 4.0
Imports 6.7 4.8 0.5 3.1 -1.5 0.3 2.3 3.9 3.6 1.3 3.5
Contributions to GDP (pp):
Industry 1.4 1.3 1.0 0.9 0.9 1.1 0.9 0.9 1.2 1.0 1.3
Agriculture 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.1 0.2
Services 3.1 2.8 2.1 2.0 1.9 2.3 2.0 2.0 2.5 2.2 2.9
CPI 3.73 4.34 4.77 3.57 3.55 3.50 3.45 3.40 4.11 3.40 3.50
Trade balance (US$ billion) 1.8 1.5 -4.1 -3.9 -3.8 -3.8 -3.8 -3.8 -4.7 -15.2 -15.0
Current account (% GDP) -1.5 -1.5 -1.5
Fiscal balance (% GDP) -2.2 -2.2 -2.2
Gross public debt (% GDP) 37.3 35.0 34.0
Overnight Rate % 4.50 4.50 4.50 4.50 4.00 4.00 4.00 4.00 4.50 4.00 4.50
USD/MXN 12.81 13.36 12.86 12.85 12.70 12.50 12.25 12.00 12.85 12.00 12.00 Notes: Annual forecasts for GDP and its components are year-over-year average growth rates. Annual CPI forecasts are year-over-year changes for Q4. Trade data are period sums. Interest rate and currency forecasts are end of period. Contributions to GDP do not include taxes. Numbers in bold are actual values, others forecast. Table reflects data available as of 11 March 2013. Source: Nomura Global Economics.
Nomura | Global Economic Outlook Monthly 11 March 2013
16
Euben Paracuelles +65 6433 6956 [email protected]
Lavanya Venkateswaran +91 22 3053 3053 [email protected]
Philippines | Economic Outlook
Philippines: In a virtuous cycle
Growth remains supported by improving governance. Monetary policy is neutral with
macroprudential tools remaining the preferred option for capital flow management.
Activity: Similar to 2012, we expect solid GDP growth of 6.4% y-o-y in 2013. Increased
government spending ahead of the elections in May in addition to the government‟s undeterred
focus to improve capital spending should continue to crowd in private investment and support
GDP growth. We believe the economy is in a virtuous cycle, with improving governance
bolstering consumer and business sentiment, which reinforces the administration‟s popularity,
helping support its push for further reforms.
Inflation and monetary policy: CPI inflation increased to 3.4% y-o-y in February from 3.0% in
January, driven by higher food prices that offset lower utilities prices. Core inflation also
increased to 3.8% y-o-y from 3.6% in January, consistent with the strength of domestic demand.
Headline inflation, however, remains comfortably within the 3-5% target range of Bangko
Sentral ng Pilipinas (BSP). On our recent trip to Manila, BSP indicated that it could afford to stay
on hold for some time, despite robust growth (Asia Insights: Postcard from the Philippines, 28
February 2013). In the interim, macroprudential tools remain the preferred option for managing
strong capital inflows. We maintain our view that headline inflation will average 4.6% y-o-y this
year. Our policy rate forecast is 50bp of hikes in H2, but with a rising potential growth rate and
BSP‟s current neutral stance, there are risks that these hikes are delayed.
Fiscal policy: The fiscal deficit was 2.3% of GDP in 2012, undershooting the original projection
of 2.6%. But the details remain encouraging, as revenue collections are close to target and
capital spending has improved. For 2013, the government has proposed a fiscal deficit of 2.0%
of GDP that continues to focus on increasing capital outlays, especially infrastructure spending,
while higher revenue targets have also been set, which implies improved tax administration.
Risks: The main risk to our forecast is an external shock from the still-fragile European and US
economies. A slowdown in reforms and infrastructure spending could also hurt growth. We see
the election as a political non-event given the current popularity of the government.
Details of the forecast
% y-o-y growth unless otherwise stated 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 2012 2013 2014
Real GDP (sa, % q-o-q, annualized) 11.2 4.4 5.2 6.6 10.8 3.3 3.5 7.8
Real GDP 6.3 6.0 7.2 6.8 6.7 6.4 6.0 6.3 6.6 6.4 5.8
Private consumption 5.1 5.9 6.3 6.9 6.7 6.8 5.9 5.5 6.1 6.2 5.8
Government consumption 20.9 6.8 12.0 9.1 10.0 11.6 7.0 16.3 11.8 11.1 8.0
Gross fixed capital formation 3.9 11.8 9.0 10.6 10.9 10.8 15.5 15.4 8.7 13.2 14.5
Exports (goods & services) 10.9 8.3 6.7 9.1 6.8 7.0 7.4 5.4 8.7 6.7 9.0
Imports (goods & services) -3.2 10.3 4.9 4.6 16.4 11.2 16.2 12.0 4.2 13.9 13.0
Contribution to GDP growth (% points)
Domestic final sales 6.4 7.0 7.4 7.9 8.2 8.1 7.9 8.5 7.2 8.2 8.1
Inventories -7.2 -0.2 -1.2 -2.3 2.8 1.2 2.4 1.0 -2.6 1.6 0.0
Net trade (goods & services) 7.1 -0.8 1.0 1.2 -4.3 -2.1 -4.3 -3.1 2.0 -3.4 -2.3
Exports 4.8 10.5 6.2 9.1 6.8 7.0 7.4 5.4 7.6 6.7 9.0
Imports -1.5 2.2 0.8 6.4 17.4 12.2 17.2 13.0 1.9 15.0 13.0
Merchandise trade balance (USDbn) -2.6 -1.4 -2.0 -3.7 -4.5 -2.3 -3.6 -5.1 -9.7 -15.4 -19.6
Current account balance (USDbn) 1.1 3.0 3.1 1.1 -0.2 2.3 1.7 1.9 8.2 5.6 5.7
Current account balance (% of GDP) 2.0 4.8 5.1 1.5 -0.2 3.4 2.4 2.2 3.3 1.9 1.8
Fiscal balance (% of GDP)
-2.3 -2.6 -2.2
Consumer prices (2006=100) 3.1 2.9 3.5 3.0 3.5 4.4 4.9 5.4 3.1 4.6 4.5
Unemployment rate (sa, %) 6.9 7.0 6.8 7.0 6.8 6.8 6.5 6.5 6.9 6.7 6.5
Reverse repo rate (%) 4.00 4.00 3.75 3.50 3.50 3.50 3.75 4.00 3.50 4.00 4.50
Exchange rate (PHP/USD) 42.9 42.1 41.7 41.0 40.2 39.8 39.6 39.2 41.0 39.2 38.2
Notes: Numbers in bold are actual values; others forecast. Interest rate and currency forecasts are end of period; other measures are period average. All forecasts are modal forecasts (i.e., the single most likely outcome). Table reflects data available as of 7 March 2013. Source: CEIC and Nomura Global Economics.
Nomura | Global Economic Outlook Monthly 11 March 2013
17
Peter Attard Montalto +44 (0) 20 710 28440 [email protected]
Poland | Economic Outlook
NBP's limited cutting cycle is over - growth still outperforming
Although growth will probably be lower this year, we think the economy will bounce
back strongly in H2.
Growth: Poland will likely remain the strongest country in the region, growth will still probably be
lower in 2013 at 1.9% vs 2.2% last year for several reasons. First, the slowing pace of eurozone
structural fund investment will likely combine with domestic fiscal consolidation to drag growth
down by some 0.6pp, in our view. Consumption growth should also slow, particularly in H1
thanks to slightly lower credit growth and a stagnant labour market reducing the ability to draw
down net savings. However, the sentiment shock in the local economy has had a greater effect
on imports and inventories than the export shock. We see meaningful upside risks to growth
from the government's off-balance-sheet investment programme, which could add up to 0.5pp
to growth for next year and offset part of the structural fund drag in H2 of this year. Equally,
traditionally Poland has seen rapid recoveries in inventories and the labour market after external
shocks. We expect a bounce-back in 2014 growth to 3% owing to strong fundamentals and the
underlying balance sheets of households and corporates, banks that are not feeling the effects
of deleveraging, shale gas coming on-stream, and the effects from the investment programme.
Currency: We expect a stronger zloty due to the following factors: we believe the economy is in
better shape than the market understands, the balance of payments picture is improving
significantly, and Poland should remain a “bond-flow-magnet” due to its fiscal strength.
Rates and inflation: We see inflation falling swiftly to below the bottom end of target in the first
half of 2013, driven by non-core pressures falling away, and expect gas price cuts to be key.
However, over the medium run, as growth is likely to recover from H2 2013, we see inflation
rising to settle just below the top of target through much of 2014. After the surprise 50bp cut in
the last MPC meeting, our baseline is that rates are now on hold until H1 next year. A fast
bounce-back in CPI, however, or a marked move up in growth forecasts could mean an earlier
hike; a strong PLN and core CPI still low could mean later in that window. A further external
growth shock would mean a last cut was possible however – perhaps in May. Overall, the shock
at the last meeting was about expectations and communications, not about where rates are
now, highlighting communication issues from the MPC again.
Fiscal and politics: Prime Minister Tusk has announced ambitious budgetary and structural
reforms for the four years of this parliament – sufficient to achieve an upgrade later this year, in
our view. These reforms should take the deficit below 3.0% of GDP in 2013, though not as
targeted in 2012 because of lower growth. Growth matters the most. Aggressive pre-funding,
however, means credit risks remain low. We see off-balance sheet investments via BGK as key
to supporting growth this year and next, with lower growth increasing government resolve.
Figure 1. Details of the forecast Figure 2. Inflation outlook
2011 2012 2013 2014
Real GDP % y-o-y 4.3 2.2 1.9 3.0
Nominal GDP USD bn 513.6 594.6 588.5 622.0
Current account % GDP -4.9 -4.7 -3.5 -4.3
Fiscal balance % GDP -5.1 -3.4 -2.9 -2.7
CPI % y-o-y * 4.6 2.4 1.7 3.3
CPI % y-o-y ** 4.3 3.7 1.5 3.0
Core CPI ex VAT % y-o-y ** 1.7 1.9 1.7 2.8
Population mn 38.2 38.5 38.4 38.3
Unemployment rate % 12.5 10.5 12.8 12.2
Reserves EUR bn ** 74.3 82.5 85.0 90.0
External debt % GDP 62.7 53.2 48.2 45.9
Public debt % GDP 53.5 52.8 52.2 51.6
NBP policy rate %* 4.50 4.25 3.25 4.50
EURPLN* 4.47 4.08 3.90 3.75
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
Jan-2008 Jun-2009 Nov-2010 Apr-2012 Sep-2013
Headline Expectations Core% y-o-y
Notes: *End of period, **Period average, Bold is actual data. Source: Nomura Global Economics
Nomura | Global Economic Outlook Monthly 11 March 2013
18
Euben Paracuelles +65 6433 6956 [email protected]
Lavanya Venkateswaran +91 22 3053 3053 [email protected]
Euben Paracuelles +65 6433 6956 [email protected]
Lavanya Venkateswaran +91 22 3053 3053 [email protected]
Singapore | Economic Outlook
Singapore: A weak start to 2013
Production and export data surprised on the downside in January. The policy focus
remains on the restructuring agenda to raise productivity.
Forecast changes: Based on the larger budget surplus in FY12, we revise up our FY13 budget
estimate to a surplus of 1.0% of GDP from a deficit of 0.2% of GDP.
Activity: Q4 2012 GDP growth was revised up to 1.5% y-o-y from the flash estimate of 1.1%,
which takes full-year 2012 growth to 1.3%. Data for January indicate that the economy got off to
a weak start in 2013, with industrial production contracting by 0.4% y-o-y in January from growth
of 1.3% in December, despite favourable base effects led by electronics and biomedical output.
Non-oil domestic exports were also weak in January. Forward looking data remained mixed, as
the total manufacturing PMI fell below 50 in February, but the electronics PMI rose above 50.
For 2013, we have a subdued GDP growth forecast of 2.4%, as the government focuses more
on long-term restructuring to boost competitiveness than short-term counter-cyclical policies.
Inflation and monetary policy: CPI inflation eased to 3.6% y-o-y in January from 4.3% in
December, due to favourable base effects. Underlying inflation, which excludes accommodation
and private road transportation costs, also eased sharply to 1.2% y-o-y in January from 1.9%.
However, the easing in January will likely prove temporary given still-elevated transportation
and housing costs, rising wages and tight labour markets. We continue to forecast headline
inflation to average 3.9% y-o-y in 2013. Underlying inflation, according to the Monetary Authority
of Singapore (MAS) should also remain sticky at 1-3%. As such, we remain comfortable with our
view that the MAS will not alter its policy of a modest and gradual appreciation of the S$NEER
policy band at the next announcement in April.
Fiscal policy: The FY13 budget announced on 25 February continued to highlight the
government‟s commitment to raising productivity and restructuring the economy. The measures
announced include further restrictions on foreign workers, cash programs for industries to share
the burden of rising wages and additional help for the elderly. This fiscal balance is expected to
be in a smaller surplus of 0.7% of GDP in FY13 from an upwardly revised surplus of 1.1% in
FY12. Based on this, we now expect a higher surplus of 1.0% of GDP given historical revenue
outperformance. However, we still expect limited counter-cyclical support to growth.
Risks: With exports at 200% GDP, Singapore is the most vulnerable economy in Southeast
Asia to a major contraction in global GDP. Another risk is domestic overheating, fuelled by low
interest rates and capital inflows.
Details of the forecast
% y-o-y growth unless otherwise stated 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 2012 2013 2014
Real GDP (sa, % q-o-q, annualized) 1.3 2.4 4.2 1.3 12.0 -1.2 -4.2 4.7
Real GDP 2.2 3.7 3.5 2.2 2.5 2.2 2.3 2.7 1.3 2.4 4.2
Private consumption -3.6 0.6 4.0 -3.6 3.7 3.9 4.0 3.1 2.2 3.7 3.5
Government consumption 6.6 3.3 5.7 6.6 -0.9 -0.3 1.1 2.7 -3.6 0.6 4.0
Gross fixed capital formation 0.3 2.9 10.1 0.3 4.1 2.9 3.2 2.8 6.6 3.3 5.7
Exports (goods & services) 3.2 3.0 11.1 3.2 -1.4 0.9 5.4 6.7 0.3 2.9 10.1
Imports (goods & services)
-0.2 1.5 4.8 5.8 3.2 3.0 11.1
Contributions to GDP (% points) 2.0 2.2 3.1 2.0
Domestic final sales 4.9 -0.4 0.8 4.9 2.2 2.1 2.3 2.1 2.0 2.2 3.1
Inventories -5.6 0.6 0.8 -5.6 3.1 1.1 -2.9 -2.9 4.9 -0.4 0.8
Net trade (goods & services) 2.0 2.2 2.4 2.0 -2.9 -1.0 2.9 3.4 -5.6 0.6 0.8
Unemployment rate (sa, %) 4.6 3.9 3.6 4.6 2.2 2.2 2.1 2.1 2.0 2.2 2.4
Consumer prices 0.1 7.6 12.1 0.1 4.2 4.1 3.8 3.4 4.6 3.9 3.6
Exports 3.5 6.3 13.1 3.5 2.6 7.9 9.6 10.3 0.1 7.6 12.1
Imports 31.5 38.7 40.2 31.5 3.2 5.9 7.9 8.2 3.5 6.3 13.1
Merchandise trade balance (US$bn) 18.9 16.1 17.0 18.9 6.8 9.2 11.1 11.7 31.5 38.7 40.2
Current account balance (% of GDP) 1.1 1.0 0.4 1.1 15.3 12.0 18.5 18.5 18.9 16.1 17.0
Fiscal Balance (% of GDP) 0.38 0.48 0.50 0.38 1.1 1.0 0.4
3 month SIBOR (%) 1.22 1.19 1.17 1.22 0.38 0.48 0.48 0.48 0.38 0.48 0.50
Exchange rate (SGD/USD) 1.3 2.4 4.2 1.3 1.21 1.20 1.20 1.19 1.22 1.19 1.17
Notes: Numbers in bold are actual values; others forecast. Interest rate and currency forecasts are end of period; other measures are period average. All forecasts are modal forecasts (i.e., the single most likely outcome). Table reflects data available as of 7 March 2013. Source: CEIC and Nomura Global Economics.
Nomura | Global Economic Outlook Monthly 11 March 2013
19
Peter Attard Montalto +44 (0) 20 710 28440 [email protected]
South Africa | Economic Outlook
Status quo means the brakes are still applied
Despite President Zuma's re-election, we expect further downgrades, heightened
fiscal risks and a lack of real reform.
Growth: We see a very sluggish recovery in growth from 2.6% for 2012 to only 2.8% in 2013,
and then not even reaching potential growth in 2014, with only 3.2%. Negative pressures are
strong from Q3 2012 through the middle of 2013 owing to production lost in the mining sector
and second-round effects in up- and downstream industries and consumption. We believe
broader underlying consumption can be maintained to some extent because of credit growth
and large real wage increases. However, the negative drag from a widening trade deficit will
likely offset this. Risks are slightly to the upside if there is a softer landing in the eurozone.
Fiscal policy should be broadly neutral, while public sector investment‟s ability to add much to
growth beyond what it is already doing is limited by funding constraints.
Currency, inflation and rates: With the current account deficit set to remain over 6% of GDP
until mid-2013 the currency should remain weak overall and above 9.0 in USDZAR. At the same
time, funding remains okay despite the global backdrop, but not great because of domestic risk
factors. The SARB has also been surprisingly open about the fact it sees fair value around 8.50-
8.75 (something we think it would have disliked doing in the past) and that it will not intervene
on politically-led risk premia shocks. This strengthens our view that the currency will remain
weak. The underlying inflation dynamic is looking moderately bullish for this year once currency
pass-through and sizeable real wage increase effects pass. We think inflation could breach
target briefly mid-year before returning and staying in target until the end of the forecast horizon.
We see rates on hold for the next 14 months, but still think the MPC would take the opportunity
to cut if it could, it is just that there are currently too many barriers bar a growth shock.
Politics and fiscal: There is currently a breakdown in the traditional societal structures
surrounding labour, and strikes have occurred because of the links between union leadership,
the ANC and BEE funds. We see this re-emerging in the next wage round, which starts more
widely in the economy around Easter. We see the outcome of Manguang as a still ineffective
and deleterious policy in which potential growth is held back by state intervention – something
to be increased in the mining sector now. Although the ANC has backed the National
Development Plan, we remain sceptical that new ANC Deputy President Ramaphosa can make
a meaningful difference in implementation in the short to medium run. Overall, the 2013 budget
is mainly a “holding” one. Significant holes on both the revenue policy side and expenditure
policy side exist that will only be filled later in the year as a result of the National Treasury‟s
long-run and ever-delayed expenditure study and the tax commission. This is where we think
the true risks to the ratings, debt levels and issuance lie.
Figure 1. Details of the forecast Figure 2. Inflation outlook
2011 2012 2013 2014
Real GDP % y-o-y 3.5 2.6 2.8 3.2
Current account % GDP -3.8 -6.0 -6.0 -4.7
PSCE % y-o-y* 6.2 9.7 9.6 10.3
Fiscal balance % GDP -4.4 -5.0 -4.9 -4.6
FX reserves, gross USD bn* 48.9 50.7 50.5 50.6
CPI % y-o-y * 6.1 5.7 5.2 5.8
CPI % y-o-y ** 5.0 5.7 5.6 5.5
Manufacturing output % y-o-y 2.4 2.1 1.8 2.6
Retail sales output % y-o-y 5.7 2.3 2.6 4.6
SARB policy rate %* 5.50 5.00 5.00 6.00
EURZAR* 10.5 11.2 10.5 11.1
USDZAR* 8.09 8.47 8.50 9.00
4.8
5.0
5.2
5.4
5.6
5.8
6.0
6.2
6.4
6.6
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14
Headline - old
Headline - new
% y-o-y
Notes: PSCE – Private sector credit extensions. * End of period. ** Period average. Bold is actual data. Source: Nomura Global Economics
Source: Nomura Global Economics
Nomura | Global Economic Outlook Monthly 11 March 2013
20
Young Sun Kwon +852 2252 1370 [email protected]
South Korea | Economic Outlook
South Korea: Growth momentum set to carry into Q1
We expect the Bank of Korea to keep rates unchanged at 2.75% through 2013 as
GDP growth and CPI inflation should rise modestly from a low base.
Activity: January-February export data suggest that GDP growth is improving slightly. We
expect GDP growth to rise to 0.7% q-o-q in Q1 (from 0.4% in Q4), supported by inventory
restocking, fiscal front-loading and a modest foreign demand recovery. We view the
strengthening of KRW against JPY as a process of normalization, reflecting improvements in
global demand. The new government will likely increase social welfare spending, implement
some measures to boost the housing market and frontload 60% of its annual expenditure
budget to H1, which should support consumption and construction investment. However, we
expect business investment to remain weak as uncertainty surrounding the global outlook
remains elevated. Domestic demand should recover only slightly due to structural problems,
including a household debt overhang. We maintain our below-consensus forecast for GDP
growth of 2.5% in 2013.
Inflation: A negative output gap and stable KRW should exert downward pressure on inflation,
but higher food prices, rising housing rent and public service fare hikes should push CPI
inflation up to 2.7% in 2013 from 2.2% in 2012, although it should remain below the midpoint of
the Bank of Korea‟s (BOK) new inflation target range of 2.5-3.5% for 2013-15.
Policy: We expect targeted micro stimulus measures on specific areas (e.g., property market)
rather than a broad-based easing of macro policy. We expect the BOK to keep rates at 2.75%
through 2013, as growth and inflation should increase modestly from a low base.
Risks: As a small, open economy, Korea is vulnerable to sudden changes in global economic
conditions, commodity prices and financial markets. That said, we would expect the BOK to cut
rates if one of the major downside risks to global growth (the US fiscal cliff; a renewed eurozone
sovereign crisis; a China hard landing) materialises, but none of these are part of our base case.
Domestically, the new government could formulate a supplementary budget in H1 2013 of as
much as KRW20trn (USD20bn or 1.5% of GDP), which provides an upside risk to our domestic
demand forecast.
Details of the forecast
% y-o-y growth unless otherwise stated 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 2012 2013 2014
Real GDP (sa, % q-o-q, annualized) 3.5 1.1 0.2 1.5 2.8 3.6 3.2 3.6
Real GDP (sa, % q-o-q) 0.9 0.3 0.1 0.4 0.7 0.9 0.8 0.9
Real GDP 2.8 2.3 1.5 1.5 1.4 2.0 2.8 3.3 2.0 2.5 3.5
Private consumption 1.6 1.1 1.6 2.8 2.4 2.6 2.3 2.1 1.8 2.3 2.3
Government consumption 4.4 3.6 3.1 3.1 0.7 2.0 2.3 4.1 3.6 2.3 4.1
Business investment 9.1 -3.5 -6.5 -5.1 -13.1 -5.6 1.2 5.1 -1.8 -3.4 7.7
Construction investment 2.1 -2.1 -0.2 -4.1 -0.7 0.7 1.6 4.1 -1.5 1.8 4.1
Exports (goods & services) 5.0 3.2 2.9 4.0 0.5 1.6 -0.2 2.5 3.7 1.1 4.8
Imports (goods & services) 4.6 0.5 1.1 3.1 -1.6 0.8 -0.1 2.5 2.3 0.4 5.2
Contributions to GDP growth (% points)
Domestic final sales 2.8 0.8 0.6 0.9 0.8 1.9 2.2 3.4 1.2 2.0 3.0
Inventories -0.1 0.1 -0.2 -0.1 -0.4 -0.3 0.6 -0.3 -0.1 0.1 0.2
Net trade (goods & services) 0.1 1.4 1.0 0.8 1.0 0.5 -0.1 0.3 0.9 0.4 0.3
Unemployment rate (sa, %) 3.4 3.3 3.1 3.0 3.2 3.2 3.2 3.2 3.2 3.2 3.2
Consumer prices 3.0 2.4 1.6 1.7 1.9 2.6 3.1 3.0 2.2 2.7 3.0
Current account balance (% of GDP) 3.8 2.8 2.2
Fiscal balance (% of GDP) 1.3 1.0 1.0
Fiscal balance ex-social security (% of GDP) -1.2 -1.3 -1.0
BOK official base rate (%) 3.25 3.25 3.00 2.75 2.75 2.75 2.75 2.75 2.75 2.75 3.25
3-year T-bond yield (%) 3.55 3.30 2.83 2.82 2.75 2.80 2.85 2.90 2.82 2.90 3.30
5-year T-bond yield (%) 3.69 3.42 2.93 2.97 2.80 2.85 2.90 3.00 2.97 3.00 3.40
Exchange rate (KRW/USD) 1133 1154 1118 1071 1065 1040 1035 1030 1071 1030 1030
Notes: Numbers in bold are actual values; others forecast. Interest rate and currency forecasts are end of period; other measures are period average. All forecasts are modal forecasts (i.e., the single most likely outcome). Table reflects data as of 7 March 2013. Source: Bank of Korea, CEIC and Nomura Global Economics.
Nomura | Global Economic Outlook Monthly 11 March 2013
21
Young Sun Kwon +852 2536 7430 [email protected]
Aman Mohunta +91 22 6617 5595 [email protected]
Taiwan | Economic Outlook
Taiwan: External demand is key
The economy should benefit from the up-cycle in global electronics demand and China
GDP, as well as improved cross-strait relations.
Activity and inflation: Real GDP gained strongly in Q4 2012, supported by a rebound in fixed
capital formation and exports. Private consumption also showed modest gains, while
government expenditure fell. Taiwan‟s growth is largely dependent on global demand,
especially from China, its largest export destination accounting for 27% of total exports in 2012.
We expect stronger demand from China and a gradual recovery in global electronics demand to
help lift GDP growth from 1.3% in 2012 to 3.0% in 2013. The government recently upgraded its
2013 GDP growth forecast from 3.15% to 3.53%, citing the benefits of demand for mobile
devices and electronics products. We expect CPI inflation to rise to 2.3% in 2013 from 1.9% in
2012 due to higher food prices and diminished spare capacity. However, given that electricity
tariff hikes will be implemented in multiple stages, inflation is unlikely to become a serious factor
for growth through our forecast horizon.
Cross-strait relations: A faster-than-expected liberalisation of trade and investment with China
would add upside risks to our growth forecasts. The latest developments in this area include
Taiwanese government plans to double the current limit on mainland Chinese institutions‟
securities investments in its market, while Taiwanese banks have (as of this month) started to
accept renminbi deposits.
Monetary policy: We expect the Central Bank of China (CBC) to hike the discount rate from
1.875% to 2.125% in H2 2013 as GDP growth and CPI inflation rise. We view this as a
normalisation of very loose monetary policy rather than a move to outright tightening.
Risks: Another deep recession in advanced economies would have a large impact on Taiwan‟s
open economy. Positive risks include a stronger-than-expected recovery in the global
electronics cycle and a faster-than-expected liberalisation of trade and investment with China.
Details of the forecast
% y-o-y growth unless otherwise stated 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 2012 2013 2014
Real GDP (sa, % q-o-q, annualized) 5.0 -0.1 3.9 7.3 1.3 0.5 4.6 3.6
Real GDP 0.6 -0.1 0.7 3.7 3.1 3.2 3.4 2.5 1.3 3.0 3.5
Private consumption 1.9 1.6 0.9 1.6 1.9 2.6 2.8 2.4 1.5 2.4 3.2
Government consumption 2.1 2.5 -0.7 -1.7 3.0 3.5 3.0 2.6 0.4 3.0 3.2
Gross fixed capital formation -10.2 -7.7 -0.9 1.3 7.0 5.0 4.0 3.5 -4.4 4.8 4.2
Exports (goods & services) -3.4 -2.5 2.3 4.0 2.8 3.4 3.6 2.2 0.1 3.0 3.3
Imports (goods & services) -7.2 -4.1 1.9 2.2 2.2 2.2 2.3 2.4 -1.9 2.3 3.5
Contributions to GDP growth (% points)
Domestic final sales -2.6 -1.1 -0.4 2.2 2.1 1.9 2.4 1.9 1.2 3.7 3.0
Inventories 1.5 0.5 0.5 -0.3 0.2 0.0 -0.4 0.3 0.0 -0.3 0.2
Net trade (goods & services) 1.7 0.5 0.6 1.8 0.8 1.3 1.4 0.4 1.1 1.0 0.5
Exports -4.0 -0.5 4.3 6.0 5.3 5.9 6.1 4.7 -2.3 5.5 6.3
Imports -5.9 0.3 6.3 6.6 3.7 3.7 3.8 3.9 -3.8 3.8 5.0
Merchandise trade balance (US$bn) 5.7 5.6 8.4 10.8 7.0 7.4 10.5 11.8 30.4 36.7 42.6
Current account balance (% of GDP) 9.6 9.6 9.9 12.7 6.9 7.4 9.2 10.0 10.5 8.4 7.9
Fiscal balance (% of GDP) -1.8 -1.9 -2.0
Consumer prices 1.3 1.6 2.9 1.8 2.1 2.2 2.5 2.5 1.9 2.3 2.3
Unemployment rate (%) 4.1 4.2 4.3 4.3 4.3 4.2 4.2 4.2 4.3 4.2 4.2
Discount rate (%) 1.88 1.88 1.88 1.88 1.88 1.88 2.00 2.13 1.88 2.13 2.13
Overnight call rate (%) 0.42 0.51 0.38 0.41 0.39 0.41 0.45 0.50 0.41 0.50 0.50
10-year T-bond (%) 1.28 1.23 1.19 1.17 1.15 1.20 1.28 1.30 1.17 1.30 1.35
Exchange rate (NTD/USD) 29.5 29.9 29.3 29.1 28.9 28.7 28.7 28.7 29.1 28.7 28.2
Notes: Numbers in bold are actual values; others forecast. Interest rate and currency forecasts are end of period; other measures are period average. All forecasts are modal forecasts (i.e., the single most likely outcome). Table reflects data available as of 7 March 2013. Source: CEIC and Nomura Global Economics.
Nomura | Global Economic Outlook Monthly 11 March 2013
22
Euben Paracuelles +65 6433 6956 [email protected]
Nuchjarin Panarode, CNS Thailand +662 638 5791 [email protected]
Thailand | Economic Outlook
Thailand: A positive start to 2013
Growth momentum remained strong in January and credit growth is on the rise, which
supports our forecast for the BOT to stay on hold despite political pressure to cut.
Activity: Although most economic indicators slowed on a year-on-year basis in January given
less favourable base effects, they remained strong seasonally adjusted month-on-month.
Business and consumer sentiment indices continued to suggest strong economic momentum,
while industrial production also picked up in January. In addition, exports rose in January, but
the trade deficit increased substantially on strong import growth. We do not see this is as a
cause for concern, however, since imports were partly driven by the volatile gold imports. We
therefore see upside risks to our 2013 GDP growth forecast of 4.5%.
Monetary policy and inflation: CPI inflation eased further to 3.2% y-o-y in February from 3.4%
in January, while core inflation was stable at 1.6% y-o-y, remaining within the Bank of Thailand‟s
(BOT) 0.5-3.0% target range. Inflation expectations were also stable at 3.6% in January.
However, credit growth (15.0% y-o-y in January from 14.2% in December) and outstanding
loans to households (17.4% y-o-y in Q3 2012 or 77.5% of GDP) continued to increase and may
be an increasing concern for the BOT. Thus, even though inflation remains low, we continue to
expect the BOT to keep the policy rate on hold at 2.75% at the 3 April meeting and for the rest
of the year.
Fiscal policy: Following the cabinet‟s approval, more details on the government‟s THB2trn
infrastructure investment plan and major transportation projects were released. These projects,
combined with the on-going water management projects for which the government is scheduled
to borrow THB340bn (3% of GDP) by June 2013, will likely increase public debt to 47-48% of
GDP by end-FY13, still well-below the debt ceiling of 60%. On our recent trip to Bangkok, we
discovered that the borrowing will be done on an incremental basis, and not all at once, which
suggests that the government is focused on maintaining financial flexibility and sustainability of
its debt (see Asia Insights: Postcard from Thailand, 1 March 2013).
Risks: The downside risks to our forecasts stem from a deepening of the euro area recession
and domestically, from increased political uncertainty over the constitutional amendment and
reconciliation bill. Slow progress on infrastructure plans could weaken investment sentiment.
Details of the forecast
% y-o-y growth unless otherwise stated 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 2012 2013 2014
Real GDP (sa, % q-o-q, annualized) 48.0 13.0 6.1 15.0 -14.5 13.9 7.6 15.4
Real GDP 0.4 4.4 3.1 18.9 4.2 4.4 4.8 4.8 6.4 4.5 5.0
Private consumption 2.9 5.3 6.0 12.2 7.4 6.7 3.5 1.7 6.6 4.8 3.8
Public consumption -0.2 7.4 10.0 12.1 4.5 -0.1 -3.1 0.2 7.4 0.1 -0.7
Gross fixed capital formation 5.2 10.2 15.5 23.5 9.5 8.7 3.7 12.0 13.3 8.4 10.8
Exports (goods & services) -3.2 1.1 -2.8 19.0 6.1 3.2 5.7 1.6 2.9 4.1 5.0
Imports (goods & services) 4.3 8.6 -1.8 14.7 4.2 2.1 6.6 0.3 6.1 3.4 5.0
Contribution to GDP growth (% points)
Domestic final sales 2.5 5.9 7.7 12.7 6.1 5.7 2.4 3.5 7.0 4.4 4.5
Inventories 2.9 2.8 -3.7 1.4 -2.7 -2.7 1.2 1.6 0.8 -0.6 -0.1
Net trade (goods & services) -4.7 -4.2 -1.1 4.9 2.0 1.1 0.2 0.8 -1.4 1.0 0.7
Exports -1.4 2.0 -3.8 21.1 3.8 3.0 6.4 2.3 3.1 5.0 6.9
Imports 10.4 9.2 -1.7 18.5 3.5 5.6 14.7 2.7 8.2 6.6 7.2
Merchandise trade balance (US$bn) -5.2 -5.0 -1.6 -6.1 -5.2 -6.7 -6.8 -4.2 -18.1 -23.0 -25.4
Current account balance (US$bn) 1.4 -2.3 2.7 0.9 -0.1 -3.4 -1.9 3.6 2.7 -1.8 -1.9
Current account balance (% of GDP) 1.6 -2.6 3.1 1.0 -0.1 -3.3 -1.8 3.3 0.7 -0.4 -0.4
Fiscal balance (% of GDP, fiscal year basis) -2.6 -3.2 -3.7
Consumer prices 3.4 2.5 2.9 3.2 3.3 3.4 3.1 3.0 3.0 3.2 3.1
Unemployment rate (sa, %) 0.7 0.9 0.6 0.5 0.9 0.8 0.6 0.6 0.7 0.7 0.7
Overnight repo rate (%) 3.00 3.00 3.00 2.75 2.75 2.75 2.75 2.75 2.75 2.75 3.25
Exchange rate (THB/USD) 30.8 31.8 30.8 30.6 29.5 29.3 29.2 29.1 30.6 29.1 28.6
Notes: Numbers in bold are actual values; others forecast. Interest rate and currency forecasts are end of period; other measures are period average. All forecasts are modal forecasts (i.e., the single most likely outcome). Table reflects data available as of 7 March 2013. Source: CEIC and Nomura Global Economics.
Nomura | Global Economic Outlook Monthly 11 March 2013
23
Olgay Buyukkayali +44 (0) 20 710 23242 [email protected]
Turkey | Economic Outlook
A healthy rebalancing
Tightening policy has helped to rebalance the economy. We expect the rebalancing to
lose its 2012 momentum, but the economy looks very healthy for 2013.
Activity: GDP growth looks likely to accelerate to 4.5% in 2013 after 3% growth in 2012. The
risks are now balanced, in our view. The recovery is a very healthy one, with no signs of
overheating, especially compared with the 2010 recovery. Private investment should remain
strong, while private consumption recovers. We do not expect net exports to flip into negative
territory similar to the previous episodes of global recovery.
Inflation: Turkey‟s inflation deteriorated at the expense of a strong fiscal stance in 2012. So far
it has been largely driven by factors beyond the TCMB‟s control, but it looks like the market‟s
working number for the next six months is now around 7.5% with some upside risks. An
improvement in the growth backdrop could lead to a deterioration in inflation expectations.
Policy: The TCMB cut policy rates by 25bp to 5.5% in December. Despite the relatively high
inflation recently, we do not expect a big reaction from the TCMB for several reasons. First, the
high CPI print was largely driven by one-off factors. Furthermore, we are less comfortable with
the core outlook and finally, Turkey has seen a recent growth pick-up (with loan growth, for
example), but not at an overheating stage.
Fiscal policy: Since H2 2011 fiscal policy has helped the monetary authorities, as the
government has used revenue outperformance as a cushion. The recently unveiled Medium
Term Programme (MTP) for 2013-15 suggests that the tight fiscal stance will continue and it
looks like the government intends to avoid running an “election budget” or any form of “election
spending”. While primary surplus estimates are not as ambitious as in the past six or seven
years, we still expect the debt-to-GDP ratio to fall towards the low-30% levels.
Rating outlook: Turkey is now rated investment grade by Fitch, and we expect it to receive an
investment grade rating this year from the other ratings agencies as well. We think rebalancing
and structural reforms are moving in the right direction.
Risks: Terms-of-trade shocks (higher oil prices) and sudden stops of capital inflows are the
main risks. In that scenario, inflation could rise again with unwarranted currency weakness
resulting in a sharp fall in consumer confidence. However, this is not our base case. We think
the risks of capital controls being implemented, on any rapid appreciation, are extremely low.
With EM inflows accelerating, the likelihood of sudden stops has declined. Tight lending
conditions are still weighing on credit demand.
Fig. 1: Details of the forecasts
2011 2012 2013 2014
Real GDP % y-o-y 8.5 3.0 4.5 5.5
Contributions to GDP by selected items
Private consumption 5.5 1.3 2.5 2.4
Private investments 4.7 -0.5 2.1 2.1
Net exports -1.7 2.0 1.0 0.2
CPI % y-o-y * 10.5 6.2 6.5 5.0
CPI % y-o-y ** 6.5 8.9 6.7 6.3
Budget balance % GDP -1.2 -2.4 -2.3 -2.0
Primary balance % GDP 1.6 0.6 1.0 1.2
Public debt % GDP 42.4 37.0 36.0 35.0
Current account % GDP -10.0 -7.0 -6.0 -6.0
TCMB policy rate %* 5.75 5.50 5.50 5.50
USDTRY* 1.89 1.78 1.70 1.75 Notes:* End of period. ** Period average. Bold is actual data. Source: Nomura Global Economics
Fig. 2: Fiscal policy very tight
2009
2010
2011
20122013
35
40
45
50
1 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8
Cyc. adj. primary balance (% GDP)
Gross debt (%GDP)
Source: Nomura Global Economics, IMF.
Nomura | Global Economic Outlook Monthly 11 March 2013
24
Philip Rush +44 20 7102 9595 [email protected]
United Kingdom | Economic Outlook
Stagnant
Intensification of the euro area crisis remains a serious threat to the UK. The MPC’s
policy response is consistently aggressive, despite inflation’s persistent stickiness.
Activity: Underlying growth ground to a halt in 2011 and has bumped around broadly the same level of activity ever since. Renewed signs of cyclical growth momentum do not look any different to us than in the previous two mini-cycles. With fundamentals still bleak, we expect momentum to wane at still weak growth rates within the next few months (see UK Comment: The latest mini-cycle's mini-surge). Growth remains constrained by the ongoing domestic deleveraging and the challenging rebalancing act within the euro area. Moreover, the needed rebalancing is only being delayed by policy stimulus, which is shifting the pain from employment onto persistently poor productivity (see UK Theme: the moribund metastable equilibrium).
Inflation: Inflation has been boosted by a series of “one-off” shocks such as changes to VAT
and energy prices, but underlying inflation is still probably too strong. And there are further “one
offs” from tuition fees. We maintain our long-held view that there will not be a sustained fall
below the inflation target (see UK Theme: Inflation in a black hole). Weak productivity is pushing
up costs and the global environment is no longer disinflationary.
Policy: The MPC is responding aggressively to signs of weaker global growth and subdued
domestic demand. QE3 was brought to an end in November after buying £50bn, because the
MPC wanted to see if signs of recovery are sustained. Concerns about QE‟s effectiveness do
not prohibit its relaunch, but we still believe cutting rates would be counterproductive and other
schemes fail to address the true problem (see UK Theme: FLS fails to firefight monetary arson).
Part of demand's ongoing weakness is attributable to the economy's unavoidable but impeded
rebalancing and associated fiscal consolidation programme. We estimate fiscal policy will keep
subtracting about 1.0% from GDP growth. However, in order to balance the mandated current
structural balance within a reasonable horizon, we think the government will need to implement
more measures. That is because its current spending plans are conditioned on what we have
long considered to be an overly optimistic view of potential growth and thus revenues (see, for
example, UK Theme: Policymakers remake mistakes, 24 November 2011). As policy is not
responding to slippage, the debt-to-GDP (secondary) target has been broken and we expect
other ratings agencies to downgrade the UK (see UK Theme: Bending the fiscal rules).
Risks: Downside risks dominate our growth forecasts, creating the risk that the MPC delivers
even more easing, despite the risks being to the upside of our inflation forecasts.
Details of the forecast
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 2012 2013 2014
Real GDP -0.2 -0.4 0.9 -0.3 0.0 0.0 0.0 0.1 0.0 0.2 0.7
Private consumption 0.5 0.4 0.3 0.1 0.2 0.3 0.3 0.2 1.0 1.0 1.1
Government consumption 3.2 -1.1 0.8 0.6 -0.3 -0.3 -0.3 -0.4 3.0 -0.2 -1.5
Fixed investment 0.6 -0.5 -0.2 -0.4 -0.1 0.3 0.3 0.4 -0.3 -0.1 2.5
Exports of goods and services -1.7 -1.1 1.2 -1.5 1.1 0.9 0.9 1.0 -0.6 1.7 3.5
Imports of goods and services -0.1 1.7 -0.4 -1.2 1.1 1.3 1.2 0.9 1.8 2.2 3.1
Contributions to GDP:
Domestic f inal sales 1.1 -0.1 0.3 0.2 0.1 0.2 0.1 0.1 1.3 0.6 0.7
Net trade -0.5 -0.9 0.5 -0.1 0.0 -0.2 -0.1 0.0 -0.8 -0.2 0.1
Inventories -0.9 0.6 0.1 -0.4 0.0 0.0 -0.1 0.0 -0.5 -0.2 -0.1
Unemployment rate 8.2 8.0 7.8 7.8 7.7 7.6 7.6 7.5 7.9 7.6 7.2
Consumer prices (CPI) 3.5 2.8 2.4 2.7 2.7 3.0 2.9 2.6 2.8 2.8 2.5
Retail prices (RPI) 3.8 3.1 2.9 3.1 3.3 3.7 3.7 3.4 3.2 3.5 3.2
Announced size of the APF (£bn) 325 325 375 375 375 375 375 375 375 375 375
Official Bank rate 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50
3-month sterling libor 1.03 0.90 0.60 0.52 0.51 0.51 0.51 0.51 0.52 0.51 0.60
10-year gilt 2.20 1.73 1.73 1.83 2.00 2.05 2.20 2.20 1.83 2.20 3.35
£ per euro 0.83 0.81 0.80 0.81 0.82 0.81 0.80 0.78 0.81 0.78 tbc
$ per £ 1.60 1.56 1.62 1.61 1.59 1.58 1.56 1.58 1.61 1.58 tbc Notes: Quarterly figures are % q-o-q changes. Annual figures are % y-o-y changes. Inventories include statistical discrepancy. Inflation is % y-o-y. Interest rates and currencies are end-of-period levels. Numbers in bold are actual values; others forecast. Table reflects data available as of 11 January 2013. Source: ONS, Bank of England, Bloomberg, DataStream, Nomura Global Economics.
Nomura | Global Economic Outlook Monthly 11 March 2013
25
Lewis Alexander +1 212 667 9665 [email protected]
Ellen Zentner +1 212 667 9668 [email protected]
Aichi Amemiya +1 212 667 9347 [email protected]
Joseph Song +1 212 667 2415 [email protected]
Roiana Reid +1 212 298 4221 [email protected]
United States | Economic Outlook
Lost in translation
Labor market indicators are unlikely to sway the FOMC from its commitment to
provide extraordinarily easy policy even after the recovery strengthens.
Activity: In the 3 1/2 years since the Great Recession ended, real GDP has grown at a
lackluster 2.1% pace and is tracking close to that pace in Q1 2013.
Lower-income households are in the process of ratcheting down spending in response to a
higher tax burden, but aggregate demand is being held up by higher-income spenders reacting
to rising wealth from equities and real estate. Fiscal policy remains a source of uncertainty for
the outlook, but risks of a policy misstep have diminished. Our forecast for the US economy
assumes that half of the 1 March spending cuts will be implemented this year, but it is looking
more likely that the full sequester will remain in place. If so, our assumptions for government
spending will need to be revisited. Congress is working to complete a continuing resolution (CR)
before the 22 March Easter holiday break. The CR is expected to fund the federal government
through the end of this fiscal year (30 September).
Providing a buffer against fiscal headwinds, the housing recovery continues to deepen. Home
price increases are providing support for household confidence and we expect the wealth effect
from real estate to help support aggregate demand.
Inflation: Our forecast for consumer price inflation to remain below 2% for the forecast horizon
reflects the effects of a substantial output gap that has emerged from three years of sub-par
growth in the economy, and limited risks from commodity prices.
Policy: We expect the FOMC to maintain its current longer-term asset purchase program
through Q3 2013, and then begin to taper purchases as the recovery strengthens and outlook
improves convincingly. Upcoming negotiations in Washington over the reprogramming of
spending cuts and the budget are likely to prove very contentious.
Risks: Fiscal policy missteps and slower global growth remain the dominant risks to the
outlook.
Details of the forecast
% 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 2012 2013 2014
Real GDP 2.0 1.3 3.1 0.1 1.8 2.2 2.9 3.1 3.0 3.3 3.4 3.5 2.2 1.9 3.1
Personal consumption 2.4 1.5 1.6 2.1 1.4 1.6 2.7 2.8 2.9 2.8 3.0 3.0 1.9 1.8 2.8
Non residential f ixed invest 7.5 3.6 -1.8 9.7 0.1 2.1 5.2 5.5 4.5 6.9 5.5 5.9 7.7 3.2 5.3
Residential f ixed invest 20.6 8.4 13.6 17.4 18.0 17.0 15.7 18.5 13.6 14.3 12.7 7.5 12.1 16.3 14.5
Government expenditure -3.0 -0.7 3.9 -6.9 -0.6 -0.6 -1.0 -0.9 -0.5 -0.2 -0.1 0.7 -1.7 -1.3 -0.4
Exports 4.4 5.2 1.9 -3.9 5.4 2.3 3.7 5.6 5.9 4.4 4.4 4.5 3.3 2.4 4.8
Imports 3.1 2.8 -0.6 -4.5 5.0 2.4 2.8 3.7 4.1 2.9 3.0 2.3 2.4 1.5 3.3
Contributions to GDP:
Domestic f inal sales 2.3 1.5 2.0 1.4 1.3 1.6 2.7 2.9 2.8 3.1 3.1 3.1 2.1 1.8 3.0
Inventories -0.4 -0.5 0.7 -1.6 0.6 0.6 0.2 0.1 0.1 0.2 0.2 0.1 0.1 0.0 0.1
Net trade 0.1 0.2 0.4 0.2 -0.1 -0.1 0.0 0.1 0.1 0.1 0.1 0.2 0.0 0.1 0.0
Unemployment rate 8.3 8.2 8.0 7.8 7.8 7.7 7.6 7.5 7.4 7.2 7.1 7.0 8.1 7.7 7.2
Nonfarm payrolls, 000 262 108 152 201 175 150 175 175 175 180 180 200 181 169 184
Housing starts, 000 saar 715 736 774 901 950 1005 1050 1080 1130 1170 1200 1250 781 1021 1188
Consumer prices 2.8 1.9 1.7 1.9 1.7 1.9 1.8 1.6 1.7 1.6 1.5 1.5 2.1 1.7 1.6
Core CPI 2.2 2.3 2.0 1.9 1.9 1.7 1.8 1.8 1.7 1.7 1.8 1.9 2.1 1.8 1.8
Federal budget (% GDP) -7.0 -5.6 -4.2
Current account balance (% GDP) -3.0 -2.9 -2.6
Fed securities portfolio ($trn) 2.60 2.61 2.57 2.66 2.90 3.17 3.44 3.64 3.71 3.71 3.70 3.70 2.66 3.64 3.70
Fed funds target 0-0.25 0-0.25 0-0.25 0-0.25 0-0.25 0-0.25 0-0.25 0-0.25 0-0.25 0-0.25 0-0.25 0-0.25 0-0.25 0-0.25 0-0.25
3-month LIBOR 0.47 0.46 0.36 0.31 0.35 0.25 0.30 0.35 0.40 0.45 0.50 0.50 0.31 0.35 0.50
TSY 2-year note 0.33 0.33 0.23 0.26 0.20 0.25 0.30 0.35 0.45 0.55 0.60 0.65 0.26 0.35 0.65
TSY 5-year note 1.04 0.72 0.62 0.75 0.70 0.80 0.85 0.95 1.05 1.15 1.20 1.25 0.75 0.95 1.25
TSY 10-year note* 2.23 1.67 1.65 1.77 1.85 2.00 2.10 2.25 2.35 2.45 2.50 2.55 1.77 2.25 2.55
30-year mortgage 3.99 3.66 3.40 3.35 3.40 3.60 3.70 3.90 4.00 4.10 4.15 4.20 3.35 3.90 4.20 * The forecast range for 10y UST is as follows: 1Q13 = 1.80-2.15, 2Q13 = 1.90-2.25 Notes: Quarterly real GDP and its contributions are seasonally adjusted annualized rates. The unemployment rate is a quarterly average as a percentage of the labor force. Nonfarm payrolls are average monthly changes during the period. Inflation measures and calendar year GDP are year-over-year percent changes. Interest rate forecasts and the Fed's securities portfolio are end of period. Housing starts are period averages. Numbers in bold are actual values. Table reflects data available as of 8 March 2013. Source: Nomura
Nomura | Global Economic Outlook Monthly 11 March 2013
26
Peter Attard Montalto +44 (0) 20 710 28440 [email protected]
Olgay Buyukkayali +44 (0) 20 710 23242 [email protected]
Rest of EEMEA | Economic Outlook
Czech Republic: Postmodernism here we come
Although a technical recession may linger through to Q2, until sentiment improves
domestic demand growth will likely continue to underperform export growth.
2011 2012 2013 2014
Real GDP % y-o-y 1.7 -1.7 0.0 1.4
Nominal GDP USD bn 215.5 222.6 204.0 205.4
Current account % GDP -2.9 -2.5 -2.8 -3.2
Fiscal balance % GDP -4.0 -4.5 -4.0 -3.8
CPI % y-o-y * 2.4 2.4 1.7 1.4
CPI % y-o-y ** 1.9 3.3 1.8 1.6
Core CPI ex VAT % y-o-y ** 0.8 0.3 0.2 1.0
Population mn 10.5 10.4 10.4 10.3
Unemployment rate % 8.6 9.4 8.8 8.5
Reserves EUR bn ** 31.1 31.5 32.0 32.5
External debt % GDP 50.8 49.2 47.8 47.7
Public debt % GDP 43.8 45.2 47.0 46.6
CNB policy rate %* 0.75 0.05 0.05 1.00
EURCZK* 25.59 25.10 25.50 25.00
*End of period, **Period average, Bold is actual data
Growth should start to recover from Q2, led principally by consumption, because of a still healthy labour market, and then move slowly through to domestic investment. The external shock to the economy has so far been surprisingly muted and so it is the oscillations of imports on net trade that have been the issue. Fiscal drag should still be an issue, shaving some 0.2pp off GDP. Much of the shock, however, is sentiment driven.
An increasingly fractious and unstable coalition should make any stronger fiscal action or structural reforms unlikely. However, with steady access to domestic funding and low debt, it is questionable how much additional fiscal consolidation is needed for the medium-run path to remain credible.
Overall, we expect a largely lame duck government to keep things ticking over, but its ability to survive through to the 2014 election remains very much in doubt.
Underlying CPI inflation should stay soft until mid-H2, when it should start to normalise, though headline CPI inflation should fall back through next year. The risks to growth and CPI inflation in the next six months and as interest rates are in the lower bound means that if a sufficient external shock occurs in the eurozone, there could be CNB intervention. We think there may be brief non-level-targeting intervention in small size in Q2 if EURCZK falls to 25.0.
Source: CSO, CNB, Nomura Global Economics
Romania: Markets should concentrate on fiscal not politics
Twin deficits leave little room for supporting growth in a challenging external demand environment with domestic political and constitutional uncertainties not helping.
2011 2012 2013 2014
Real GDP % y-o-y 1.9 0.3 0.6 1.5
Current account % GDP -4.4 -3.7 -4.2 -4.5
Fiscal balance % GDP -5.5 -2.6 -2.1 -1.7
CPI % y-o-y * 3.1 5.0 3.4 3.2
CPI % y-o-y ** 5.8 3.3 3.4 3.2
External debt % GDP 72.3 70.0 72.0 71.8
Public debt % GDP 33.4 39.3 39.5 38.2
BNR policy rate %* 6.00 5.25 5.25 6.00
EURRON* 4.33 4.44 4.60 4.45
*End of period; **Period average; Bold is actual data
Markets are becoming concerned about the confluence of negative factors in Romania, such as Moody‟s lowering of the rating outlook to negative, IMF concerns over the elections in December moving Romania off-programme and the fire sales of assets to support increased public sector wages.
Romania is vulnerable to deleveraging forces, which could pose a serious risk to the balance of payments. Although the BNR has a contingency plan that may involve capital controls, the precautionary SBA with the IMF may need to be tapped if the situation deteriorates.
The high inflation we expected for 2012 did not materialise, so we now see rates unchanged for this year, with risks of cuts and still no hikes until 2014.
We are not convinced the new Victor Ponta-led coalition will stick to the IMF-backed austerity programme, which would likely see the party lose the next election.
Source: Ministry of statistics, Nomura Global Economics
Israel: Slower exports, slower growth, but no recession
Looser monetary policy should help Israel to recover.
2011 2012 2013 2014
Real GDP % y-o-y 4.8 2.5 3.0 3.5
CPI % y-o-y * 2.2 1.6 2.5 2.5
CPI % y-o-y ** 3.5 1.7 2.6 2.7
Budget balance % GDP -2.7 -3.3 -3.5 -3.0
Current account % GDP 0.3 -1.5 -1.0 -1.0
Policy rate %* 2.75 1.75 1.75 2.50
USDILS* 3.81 3.73 3.60 3.70
*End of period, **Period average, Bold is actual data
Israel‟s export-driven economy has outperformed the region in the post-crisis environment thanks to an aggressive monetary policy response resulting in healthy domestic demand. The economy is currently slowing in line with the global backdrop.
Inflationary pressures appear to have subsided and inflation expectations are well anchored. The electricity price hikes, however, may limit the extent of policy easing. With the policy rate at 1.75%, we see no further cuts unless the global economy deteriorates further.
Underlying final demand should not weaken greatly and the recovery in 2014 should result in measured rate hikes (75bp to 2.50% by year-end).
Source: BOI, Nomura Global Economics
Nomura | Global Economic Outlook Monthly 11 March 2013
27
Rest of Latin America | Economic Outlook
Argentina: Key mid-term elections coming
Electoral calculations are likely to drive economic policymaking yet again
2011 2012 2013 2014
Real GDP % y-o-y 8.9 2.0 4.0 3.5
Consumption % y-o-y 10.7 4.4 4.2 3.8
Gross Investment % y-o-y 16.6 -9.0 7.5 5.0
Exports % y-o-y 4.3 -6.0 6.7 5.0
Imports % y-o-y 17.8 -7.6 10.8 10.0
CPI % y-o-y * 9.5 10.2 10.2 10.2
CPI % y-o-y ** 21.8 26.4 32.3 29.7
Budget balance % GDP *** 0.3 -0.8 -2.0 -1.5
Current account % GDP 0.0 1.8 1.9 1.0
Policy Rate % 18.8 15.0 17.0 14.0
USDARS 4.29 4.88 6.00 7.20
* Official data, ** Private estimate, ***Primary budget balance, Bold is actual data
We expect the authorities to keep financing their growing fiscal deficits with monetary financing from the central bank. This will likely increase inflationary pressures. Despite more supportive trade flows, we do not expect a relaxation of draconian exchange controls.
Argentina‟s economic recovery in 2013, a key electoral year, is likely to be lackluster. As such, the authorities are likely to resort to their usual recipe: Expansionary fiscal and monetary policies.
Increasing RER overvaluation to put further strain on output ex commodities and automobile production to Brazil.
Source: BCRA, Indec, MECON, Nomura
Colombia: Growth around trend
We expect GDP to grow below potential in 2013
2011 2012 2013 2014
Real GDP % y-o-y 5.9 3.8 4.2 4.5
Consumption % y-o-y 5.8 4.5 4.6 4.5
Gross Investment % y-o-y 16.6 9.0 4.2 9.7
Exports % y-o-y 11.4 7.0 6.5 9.5
Imports % y-o-y 21.5 9.0 7.0 8.5
CPI % y-o-y * 3.7 2.4 2.7 3.5
CPI % y-o-y ** 3.4 2.8 2.6 3.5
Budget balance % GDP -2.1 -1.8 -2.0 -2.3
Current account % GDP -3.0 -3.5 -3.0 -3.0
Policy Rate % * 4.75 4.25 3.50 4.50
USDCOP * 1938.50 1767.00 1800.00 1780.00
* End of period, ** Period average, Bold is actual data
Q3 2012 growth surprised on the downside (2.1%y-o-y). This disappointing growth reopened a negative output gap. We expect the economy to grow at 4.2% in 2013.
Both headline and core inflation are surprising on the downside. Currently both are located at the lower end of the Central Bank target (2.0%). We expect inflation and inflation expectations to remain well anchored below the 3.0% target.
We expect an additional 50bp interest rate cut to 3.5% in the first half of 2013 and for authorities to continue intervening in the FX market to curb COP appreciation. The monetary policy outlook for the second half of 2013 will depend on how fast the output gap is closing and on the response of credit and housing prices growth to the previous rates cut.
Source: CSOP, NBP, Nomura
Chile: Better external conditions bring upward pressure
We expect domestic demand to remain robust and small hike in H2.
2011 2012 2013 2014
Real GDP % y-o-y 6.0 5.4 5.5 5.0
Consumption % y-o-y 8.8 5.8 6.0 5.5
Gross Investment % y-o-y 17.6 10.5 10.0 7.0
Exports % y-o-y 4.6 3.1 5.0 5.0
Imports % y-o-y 14.4 4.6 9.0 8.0
CPI % y-o-y * 4.4 1.5 3.3 3.0
CPI % y-o-y ** 3.3 3.0 3.2 3.0
Budget balance % GDP 1.5 1.0 1.0 1.0
Current account % GDP -1.3 -3.0 -3.0 -2.0
Policy Rate % * 5.25 5.00 5.25 5.25
USDCLP * 519.55 479.00 460.00 450.00
* End of period, ** Period average, Bold is actual data
Chile has been growing robustly in 2012, with retail and construction sectors propping up internal demand. As external growth gradually improves, we expect the Chilean economy to expand even faster in 2013.
Inflation is currently below target (3%) and expectations are well-anchored. Yet upside risks are notable in the medium-term, given the tight labor market, strong wage hikes and Chile‟s high exposure to oil price shocks.
As global uncertainties clear up, the central bank will increasingly focus on the domestic front to determine the next move, as the monetary policy rate (TPM) is currently around neutrality. We expect a small hiking cycle in H2 2013, taking TPM to 5.25% by year-end.
The presidential election on November 17 will be the most important political event next year. Incumbent Piñera is constitutionally barred from seeking immediate reelection and no firm candidate has emerged yet.
Source: Haver, Bloomberg, Nomura
Tony Volpon
+1 212 667 2182
Benito Berber +1 212 667 9503
George Lei +1 212 667 9947
Nomura | Global Economic Outlook Monthly 11 March 2013
28
Disclosure Appendix A-1
ANALYST CERTIFICATIONS
Each research analyst identified herein certifies that all of the views expressed in this report by such analyst accurately reflect his or her personal views about the subject securities and issuers. In addition, each research analyst identified on the cover page hereof hereby certifies that no part of his or her compensation was, is, or will be, directly or indirectly related to the specific recommendations or views that he or she has expressed in this research report, nor is it tied to any specific investment banking transactions performed by Nomura Securities International, Inc., Nomura International plc or any other Nomura Group company.
Issuer Specific Regulatory Disclosures The term \"Nomura Group\" used herein refers to Nomura Holdings, Inc. or any of its affiliates or subsidiaries, and may refer to one or more Nomura Group companies.
Issuer Disclosures
REPUBLIC OF HUNGARY A1,A2,A3,A6,A10
FEDERATIVE REPUBLIC OF BRAZIL A1,A2
A1 Nomura Securities International, Inc has received compensation for non-investment banking products or services from the issuer in the past 12 months.
A2 Nomura Securities International, Inc had a non-investment banking securities related services client relationship with the issuer during the past 12 months.
A3 Nomura Securities International, Inc had a non-securities related services client relationship with the issuer during the past 12 months.
A6 The Nomura Group expects to receive or intends to seek compensation for investment banking services from the issuer in the next three months.
A10 The Nomura Group is a registered market maker in the securities / related derivatives of the issuer.
Important Disclosures Online availability of research and conflict-of-interest disclosures Nomura research is available on www.nomuranow.com/research, Bloomberg, Capital IQ, Factset, MarkitHub, Reuters and ThomsonOne. Important disclosures may be read at http://go.nomuranow.com/research/globalresearchportal/pages/disclosures/disclosures.aspx or requested from Nomura Securities International, Inc., on 1-877-865-5752. If you have any difficulties with the website, please email [email protected] for help. The analysts responsible for preparing this report have received compensation based upon various factors including the firm's total revenues, a portion of which is generated by Investment Banking activities. Unless otherwise noted, the non-US analysts listed at the front of this report are not registered/qualified as research analysts under FINRA/NYSE rules, may not be associated persons of NSI, and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account. Nomura Global Financial Products Inc. (“NGFP”) Nomura Derivative Products Inc. (“NDPI”) and Nomura International plc. (“NIplc”) are registered with the Commodities Futures Trading Commission and the National Futures Association (NFA) as swap dealers. NGFP, NDPI, and NIplc are generally engaged in the trading of swaps and other derivative products, any of which may be the subject of this report. ADDITIONAL DISCLOSURES REQUIRED IN THE U.S. Principal Trading: Nomura Securities International, Inc and its affiliates will usually trade as principal in the fixed income securities (or in related derivatives) that are the subject of this research report. Analyst Interactions with other Nomura Securities International, Inc. Personnel: The fixed income research analysts of Nomura Securities International, Inc and its affiliates regularly interact with sales and trading desk personnel in connection with obtaining liquidity and pricing information for their respective coverage universe.
Valuation Methodology - Fixed Income Nomura‟s Fixed Income Strategists express views on the price of securities and financial markets by providing trade recommendations. These can be relative value recommendations, directional trade recommendations, asset allocation recommendations, or a mixture of all three. The analysis which is embedded in a trade recommendation would include, but not be limited to: • Fundamental analysis regarding whether a security‟s‟ price deviates from its underlying macro- or micro-economic fundamentals. • Quantitative analysis of price variations. • Technical factors such as regulatory changes, changes to risk appetite in the market, unexpected rating actions, primary market activity and supply/ demand considerations. The timeframe for a trade recommendation is variable. Tactical ideas have a short timeframe, typically less than three months. Strategic trade ideas have a longer timeframe of typically more than three months. Disclaimers This document contains material that has been prepared by the Nomura entity identified at the top or bottom of page 1 herein, if any, and/or, with the sole or joint contributions of one or more Nomura entities whose employees and their respective affiliations are specified on page 1 herein or
Nomura | Global Economic Outlook Monthly 11 March 2013
29
identified elsewhere in the document. The term "Nomura Group" used herein refers to Nomura Holdings, Inc. or any of its affiliates or subsidiaries and may refer to one or more Nomura Group companies including: Nomura Securities Co., Ltd. ('NSC') Tokyo, Japan; Nomura International plc ('NIplc'), UK; Nomura Securities International, Inc. ('NSI'), New York, US; Nomura International (Hong Kong) Ltd. („NIHK‟), Hong Kong; Nomura Financial Investment (Korea) Co., Ltd. („NFIK‟), Korea (Information on Nomura analysts registered with the Korea Financial Investment Association ('KOFIA') can be found on the KOFIA Intranet at http://dis.kofia.or.kr); Nomura Singapore Ltd. („NSL‟), Singapore (Registration number 197201440E, regulated by the Monetary Authority of Singapore); Nomura Australia Ltd. („NAL‟), Australia (ABN 48 003 032 513), regulated by the Australian Securities and Investment Commission ('ASIC') and holder of an Australian financial services licence number 246412; P.T. Nomura Indonesia („PTNI‟), Indonesia; Nomura Securities Malaysia Sdn. Bhd. („NSM‟), Malaysia; NIHK, Taipei Branch („NITB‟), Taiwan; Nomura Financial Advisory and Securities (India) Private Limited („NFASL‟), Mumbai, India (Registered Address: Ceejay House, Level 11, Plot F, Shivsagar Estate, Dr. Annie Besant Road, Worli, Mumbai- 400 018, India; Tel: +91 22 4037 4037, Fax: +91 22 4037 4111; SEBI Registration No: BSE INB011299030, NSE INB231299034, INF231299034, INE 231299034, MCX: INE261299034); NIplc, Madrid Branch („NIplc, Madrid‟) and NIplc, Italian Branch („NIplc, Italy‟). „CNS Thailand‟ next to an analyst‟s name on the front page of a research report indicates that the analyst is employed by Capital Nomura Securities Public Company Limited („CNS‟) to provide research assistance services to NSL under a Research Assistance Agreement. CNS is not a Nomura entity. THIS MATERIAL IS: (I) FOR YOUR PRIVATE INFORMATION, AND WE ARE NOT SOLICITING ANY ACTION BASED UPON IT; (II) NOT TO BE CONSTRUED AS AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE ILLEGAL; AND (III) BASED UPON INFORMATION FROM SOURCES THAT WE CONSIDER RELIABLE, BUT HAS NOT BEEN INDEPENDENTLY VERIFIED BY NOMURA GROUP. Nomura Group does not warrant or represent that the document is accurate, complete, reliable, fit for any particular purpose or merchantable and does not accept liability for any act (or decision not to act) resulting from use of this document and related data. To the maximum extent permissible all warranties and other assurances by Nomura group are hereby excluded and Nomura Group shall have no liability for the use, misuse, or distribution of this information. Opinions or estimates expressed are current opinions as of the original publication date appearing on this material and the information, including the opinions and estimates contained herein, are subject to change without notice. Nomura Group is under no duty to update this document. Any comments or statements made herein are those of the author(s) and may differ from views held by other parties within Nomura Group. Clients should consider whether any advice or recommendation in this report is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. Nomura Group does not provide tax advice. Nomura Group, and/or its officers, directors and employees, may, to the extent permitted by applicable law and/or regulation, deal as principal, agent, or otherwise, or have long or short positions in, or buy or sell, the securities, commodities or instruments, or options or other derivative instruments based thereon, of issuers or securities mentioned herein. Nomura Group companies may also act as market maker or liquidity provider (as defined within Financial Services Authority („FSA‟) rules in the UK) in the financial instruments of the issuer. Where the activity of market maker is carried out in accordance with the definition given to it by specific laws and regulations of the US or other jurisdictions, this will be separately disclosed within the specific issuer disclosures. This document may contain information obtained from third parties, including ratings from credit ratings agencies such as Standard & Poor‟s. Reproduction and distribution of third party content in any form is prohibited except with the prior written permission of the related third party. Third party content providers do not guarantee the accuracy, completeness, timeliness or availability of any information, including ratings, and are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such content. Third party content providers give no express or implied warranties, including, but not limited to, any warranties of merchantability or fitness for a particular purpose or use. Third party content providers shall not be liable for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including lost income or profits and opportunity costs) in connection with any use of their content, including ratings. Credit ratings are statements of opinions and are not statements of fact or recommendations to purchase hold or sell securities. They do not address the suitability of securities or the suitability of securities for investment purposes, and should not be relied on as investment advice. Any MSCI sourced information in this document is the exclusive property of MSCI Inc. („MSCI‟). Without prior written permission of MSCI, this information and any other MSCI intellectual property may not be reproduced, re-disseminated or used to create any financial products, including any indices. This information is provided on an "as is" basis. The user assumes the entire risk of any use made of this information. MSCI, its affiliates and any third party involved in, or related to, computing or compiling the information hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. MSCI and the MSCI indexes are services marks of MSCI and its affiliates. Investors should consider this document as only a single factor in making their investment decision and, as such, the report should not be viewed as identifying or suggesting all risks, direct or indirect, that may be associated with any investment decision. Nomura Group produces a number of different types of research product including, among others, fundamental analysis, quantitative analysis and short term trading ideas; recommendations contained in one type of research product may differ from recommendations contained in other types of research product, whether as a result of differing time horizons, methodologies or otherwise. Nomura Group publishes research product in a number of different ways including the posting of product on Nomura Group portals and/or distribution directly to clients. Different groups of clients may receive different products and services from the research department depending on their individual requirements. Clients outside of the US may access the Nomura Research Trading Ideas platform (Retina) at http://go.nomuranow.com/equities/tradingideas/retina/ Figures presented herein may refer to past performance or simulations based on past performance which are not reliable indicators of future performance. Where the information contains an indication of future performance, such forecasts may not be a reliable indicator of future performance. Moreover, simulations are based on models and simplifying assumptions which may oversimplify and not reflect the future distribution of returns. Certain securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of, or income derived from, the investment. The securities described herein may not have been registered under the US Securities Act of 1933 (the „1933 Act‟), and, in such case, may not be offered or sold in the US or to US persons unless they have been registered under the 1933 Act, or except in compliance with an exemption from the registration requirements of the 1933 Act. Unless governing law permits otherwise, any transaction should be executed via a Nomura entity in your home jurisdiction. This document has been approved for distribution in the UK and European Economic Area as investment research by NIplc, which is authorized and regulated by the FSA and is a member of the London Stock Exchange. It does not constitute a personal recommendation, as defined by the FSA, or take into account the particular investment objectives, financial situations, or needs of individual investors. It is intended only for investors who are 'eligible counterparties' or 'professional clients' as defined by the FSA, and may not, therefore, be redistributed to retail clients as defined by the FSA. This document has been approved by NIHK, which is regulated by the Hong Kong Securities and Futures Commission, for distribution in Hong Kong by NIHK. This document has been approved for distribution in Australia by NAL, which is authorized and regulated in Australia by the ASIC. This document has also been approved for distribution in Malaysia by NSM. In Singapore, this document has been distributed by NSL. NSL accepts legal responsibility for the content of this document, where it concerns securities, futures and foreign exchange, issued by their foreign affiliates in respect of recipients who are not accredited, expert or institutional investors as defined by the Securities and Futures Act (Chapter 289). Recipients of this document in Singapore should contact NSL in respect of matters arising from, or in connection with, this document. Unless prohibited by the provisions of Regulation S of the 1933 Act, this material is distributed in the US, by NSI, a US-registered broker-dealer, which accepts responsibility for its contents in accordance with the provisions of Rule 15a-6, under the US Securities Exchange Act of 1934. This document has not been approved for distribution in the Kingdom of Saudi Arabia („Saudi Arabia‟) or to clients other than 'professional clients' in the United Arab Emirates („UAE‟) by Nomura Saudi Arabia, NIplc or any other member of Nomura Group, as the case may be. Neither this
Nomura | Global Economic Outlook Monthly 11 March 2013
30
document nor any copy thereof may be taken or transmitted or distributed, directly or indirectly, by any person other than those authorised to do so into Saudi Arabia or in the UAE or to any person located in Saudi Arabia or to clients other than 'professional clients' in the UAE. By accepting to receive this document, you represent that you are not located in Saudi Arabia or that you are a 'professional client' in the UAE and agree to comply with these restrictions. Any failure to comply with these restrictions may constitute a violation of the laws of the UAE or Saudi Arabia. NO PART OF THIS MATERIAL MAY BE (I) COPIED, PHOTOCOPIED, OR DUPLICATED IN ANY FORM, BY ANY MEANS; OR (II) REDISTRIBUTED WITHOUT THE PRIOR WRITTEN CONSENT OF A MEMBER OF NOMURA GROUP. If this document has been distributed by electronic transmission, such as e-mail, then such transmission cannot be guaranteed to be secure or error-free as information could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. The sender therefore does not accept liability for any errors or omissions in the contents of this document, which may arise as a result of electronic transmission. If verification is required, please request a hard-copy version. Disclaimers required in Japan Investors in the financial products offered by Nomura Securities may incur fees and commissions specific to those products (for example, transactions involving Japanese equities are subject to a sales commission of up to 1.365% (tax included) of the transaction amount or a commission of ¥2,730 (tax included) for transactions of ¥200,000 or less, while transactions involving investment trusts are subject to various fees, such as commissions at the time of purchase and asset management fees (trust fees), specific to each investment trust). In addition, all products carry the risk of losses owing to price fluctuations or other factors. Fees and risks vary by product. Please thoroughly read the written materials provided, such as documents delivered before making a contract, listed securities documents, or prospectuses. Transactions involving Japanese equities (including Japanese REITs, Japanese ETFs, and Japanese ETNs) are subject to a sales commission of up to 1.365% (tax included) of the transaction amount (or a commission of ¥2,730 (tax included) for transactions of ¥200,000 or less). When Japanese equities are purchased via OTC transactions (including offerings), only the purchase price shall be paid, with no sales commission charged. However, Nomura Securities may charge a separate fee for OTC transactions, as agreed with the customer. Japanese equities carry the risk of losses owing to price fluctuations. Japanese REITs carry the risk of losses owing to fluctuations in price and/or earnings of underlying real estate. Japanese ETFs carry the risk of losses owing to fluctuations in the underlying indexes or other benchmarks. Transactions involving foreign equities are subject to a domestic sales commission of up to 0.9975% (tax included) of the transaction amount (which equals the local transaction amount plus local fees and taxes in the case of a purchase or the local transaction amount minus local fees and taxes in the case of a sale) (for transaction amounts of ¥750,000 and below, maximum domestic sales commission is ¥7,455 tax included). Local fees and taxes in foreign financial instruments markets vary by country/territory. When foreign equities are purchased via OTC transactions (including offerings), only the purchase price shall be paid, with no sales commission charged. However, Nomura Securities may charge a separate fee for OTC transactions, as agreed with the customer. Foreign equities carry the risk of losses owing to factors such as price fluctuations and foreign exchange rate fluctuations. Margin transactions are subject to a sales commission of up to 1.365% (tax included) of the transaction amount (or a commission of ¥2,730 (tax included) for transactions of ¥200,000 or less), as well as management fees and rights handling fees. In addition, long margin transactions are subject to interest on the purchase amount, while short margin transactions are subject to fees for the lending of the shares borrowed. A margin equal to at least 30% of the transaction amount and at least ¥300,000 is required. With margin transactions, an amount up to roughly 3.3x the margin may be traded. Margin transactions therefore carry the risk of losses in excess of the margin owing to share price fluctuations. For details, please thoroughly read the written materials provided, such as listed securities documents or documents delivered before making a contract. Transactions involving convertible bonds are subject to a sales commission of up to 1.05% (tax included) of the transaction amount (or a commission of ¥4,200 (tax included) if this would be less than ¥4,200). When convertible bonds are purchased via OTC transactions (including offerings), only the purchase price shall be paid, with no sales commission charged. However, Nomura Securities may charge a separate fee for OTC transactions, as agreed with the customer. Convertible bonds carry the risk of losses owing to factors such as interest rate fluctuations and price fluctuations in the underlying stock. In addition, convertible bonds denominated in foreign currencies also carry the risk of losses owing to factors such as foreign exchange rate fluctuations. When bonds are purchased via public offerings, secondary distributions, or other OTC transactions with Nomura Securities, only the purchase price shall be paid, with no sales commission charged. Bonds carry the risk of losses, as prices fluctuate in line with changes in market interest rates. Bond prices may also fall below the invested principal as a result of such factors as changes in the management and financial circumstances of the issuer, or changes in third-party valuations of the bond in question. In addition, foreign currency-denominated bonds also carry the risk of losses owing to factors such as foreign exchange rate fluctuations. When Japanese government bonds (JGBs) for individual investors are purchased via public offerings, only the purchase price shall be paid, with no sales commission charged. As a rule, JGBs for individual investors may not be sold in the first 12 months after issuance. When JGBs for individual investors are sold before maturity, an amount calculated via the following formula will be subtracted from the par value of the bond plus accrued interest: (1) for 10-year variable rate bonds, an amount equal to the two preceding coupon payments (before tax) x 0.79685 will be used, (2) for 5-year and 3-year fixed rate bonds, an amount equal to the two preceding coupon payments (before tax) x 0.79685 will be used. Purchases of investment trusts (and sales of some investment trusts) are subject to a purchase or sales fee of up to 5.25% (tax included) of the transaction amount. Also, a direct cost that may be incurred when selling investment trusts is a fee of up to 2.0% of the unit price at the time of redemption. Indirect costs that may be incurred during the course of holding investment trusts include, for domestic investment trusts, an asset management fee (trust fee) of up to 5.25% (tax included, annualized basis) of the net assets in trust, as well as fees based on investment performance. Other indirect costs may also be incurred. For foreign investment trusts, indirect fees may be incurred during the course of holding such as investment company compensation. Investment trusts invest mainly in securities such as Japanese and foreign equities and bonds, whose prices fluctuate. Investment trust unit prices fluctuate owing to price fluctuations in the underlying assets and to foreign exchange rate fluctuations. As such, investment trusts carry the risk of losses. Fees and risks vary by investment trust. Maximum applicable fees are subject to change; please thoroughly read the written materials provided, such as prospectuses or documents delivered before making a contract. No account fee will be charged for marketable securities or monies deposited. Transfers of equities to another securities company via the Japan Securities Depository Center are subject to a transfer fee of up to ¥10,500 (tax included) per issue transferred depending on volume. Nomura Securities Co., Ltd. Financial instruments firm registered with the Kanto Local Finance Bureau (registration No. 142) Member associations: Japan Securities Dealers Association; Japan Investment Advisers Association; The Financial Futures Association of Japan; and Type II Financial Instruments Firms Association. Nomura Group manages conflicts with respect to the production of research through its compliance policies and procedures (including, but not limited to, Conflicts of Interest, Chinese Wall and Confidentiality policies) as well as through the maintenance of Chinese walls and employee training. Additional information is available upon request and disclosure information is available at the Nomura Disclosure web page: http://go.nomuranow.com/research/globalresearchportal/pages/disclosures/disclosures.aspx
Nomura | Global Economic Outlook Monthly 11 March 2013
31
Copyright © 2013 Nomura Securities International Inc.. All rights reserved.
Nomura | Global Economic Outlook Monthly 11 March 2013
32
Global Economics
Economists
Global-Economics Research
Lewis Alexander US Chief Economist [email protected] +1 212 667 9665
North America-Economics Research
Aichi Amemiya US Economist [email protected] +1 212 667 9347
Roiana Reid US Economist [email protected] +1 212 298 4221
Joseph Song
[email protected] +1 212 667 2415
Charles St-Arnaud CAN & AUS Economist [email protected] +1 212 667 1986
Ellen Zentner Senior US Economist [email protected] +1 212 667 9668
EMEA-Economics Research
Jacques Cailloux Chief European Economist [email protected] +44 20 7102 2734
Nick Matthews Senior Economist [email protected] +44 20 7102 5126
Silvio Peruzzo Senior Economist [email protected] +44 20 7102 3205
Dimitris Drakopoulos Economist [email protected] +44 20 7102 5846
Lefteris Farmakis Economist [email protected] +44 20 7103 9242
Takuma Ikeda Senior Economist [email protected] +44 20 7102 1605
Philip Rush Economist [email protected] +44 20 7102 9595
Stella Wang Economist [email protected] +44 20 7102 0599
Japan-Economics Research
Tomo Kinoshita Chief Japan Economist [email protected] +81 3 6703 1280
Shuichi Obata Senior Economist [email protected] +81 3 6703 1295
Kohei Okazaki Economist [email protected] +81 3 6703 1291
Asuka Tsuchida Economist [email protected] +81 3 6703 1297
Asia Ex-Japan-Economics Research
Rob Subbaraman Chief Economist Asia [email protected] +852 2536 7435
Young Sun Kwon Hong Kong, South Korea
and Taiwan Economist [email protected] +852 2536 7430
Euben Paracuelles Southeast Asia Economist [email protected] +65 6433 6956
Sonal Varma India Economist [email protected] +91 22 4037 4087
Zhiwei Zhang China Economist [email protected] +852 2536 7433
Strategists
Global-Emerging Markets Research
Olgay Buyukkayali Head of EM Strategy, EMEA [email protected] +44 20 7102 3242
Tony Volpon Head of Emerging Markets
Research - Americas [email protected] +1 212 667 2182
Peter Attard Montalto Economist [email protected] +44 20 7102 8440
Benito Berber Senior Latin America
Strategist [email protected] +1 212 667 9503
George Lei Associate - EM Research [email protected] +1 212 667 9947