Confrence conomique AFTE AU Group - Coface 15 fvrier 2017 Global - - PowerPoint PPT Presentation

Conférence économique AFTE – AU Group - Coface

15 février 2017

Global Economic Outlook: it’s all about politics!

Julien MARCILLY, Chief Economist

• 1,6
• 1,4
• 1,2
• 1
• 0,8
• 0,6
• 0,4
• 0,2

T+1 T+2 T+3 T+4 T+5 T+6 T+7 T+8 T+9 T+10 T+11 T+12 T+13 T+14 T+15 Europe France Allemagne Italie Espagne Royaume-Uni

Ever higher political risk in Europe

Impact on GDP of a political uncertainty shock similar to the UK referendum (in pp)

Source: Coface

Political uncertainty in Europe (EPU index, 3-months average)

Source: Economic Policy Uncertainty Italy Germany UK Europe France Spain

• 0.2
• 0.4
• 0.6
• 0.8
• 1
• 1.2
• 1.4
• 1.6

100 200 300 400 500 600 700 800 2 007 2 008 2 009 2 010 2 011 2 012 2 013 2 014 2 015 2 016 France Germany Italy Spain UK Europe

Source: Economic Policy Uncertainty

UK France Europe Germany Spain Italy

Are financial markets becoming tired of politIcal risk?

Sources: Reuters, Coface Source: Coface

10 20 30 Référendum italien (Déc. 2016) Election américaine (Nov. 2016) Référendum britannique (Juin 2016) Grèce : A.Tsipras nommé PM (Jan. 2015) Grèce : 4ème & 5ème plans d'austérité (T3 2011) Grèce : 1er plan de sauvetage (T2 2010)

Greece: First bailout plan (Q2 2010) Greece: 4th & 5th austerity packages (Q3 2011) Greece: A. Tsipras sworn as PM (Jan. 2015) UK referendum (June 2016) US election (Nov. 2016) Italy’s referendum (Dec. 2016)

Political uncertainty & stock market volatility Stock market volatility after a major political shock (VIX, 1-month average)

Global political uncertainly index (EPU) VIX index (RHS) 10 20 30 40 50 60 50 100 150 200 250 300 350 400 06-00 06-03 06-06 06-09 06-12 Incertitudes politiques mondiales (EPU) Indice VIX (éch.d.)

Fiscal policies: 2017, a year of disappointed hopes?

Eurozone: structural primary budget balance (change in pp)

Sources: IMF Coface

Japan: structural primary budget balance (change in pp)

Source: OECD, Coface

• 2
• 1,5
• 1
• 0,5

0,5 1 1,5 2009 2010 2011 2012 2013 2014 2015 2016 2017

• 4,0
• 3,0
• 2,0
• 1,0

0,0 1,0 2,0 2002 2004 2006 2008 2010 2012 2014 2016

US: will Trump manage to delay the end of the cycle?

US: Corporate profits, building permits and vehicle sales

Sources: Coface, BEA

Eurozone: lesser gains in in purchasing power, but greater employment

Nominal and real wages (year on year % growth)

Source: OECD Sources: IMF, OECD, Consensus Forecast, Coface Euro area US UK

OECD Forecast

Gap between structural unemployment rate and unemployment rate (%)

• 0,5

0,0 0,5 1,0 1,5 2,0 2,5 3,0 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 Inflation Real wages Nominal wages France Spain Germany UK Italy US

France: the investment puzzle is not solved yet

Source: INSEE, Ellisphere, Coface Sources: Coface, EPU, Insee, OECD, Reuters

France: Business insolvencies France: Business investment

50 100 150 200 250 300 350

• 15%
• 10%
• 5%

0% 5% 10% 15% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Consommation (% sur un an) Investissement (% sur un an) taux d'interêt 10 ans réel (%) Incertitudes politiques (éch.d. inv.)

UK: rising inflation impacts sectors in different ways

UK: Coface Sector Risk Assessments

Source: Coface

UK: Impact of a 15% depreciation of the GBP (% points, REER)

Source: Coface Low risk Medium risk High risk Very high risk Low risk Medium risk High risk Very high risk

Businesses: fewer insolvencies, but still little business creation

Business creations

(% change between 2015 and the pre-crisis peak)

Sources: National sources

Business insolvencies: 2017 growth forecast (%)

Sources: Coface forecast, national sources 36,5%

• 0,1%
• 4,1%
• 5,1%
• 19,8%
• 20%

0% 20% 40% R-U France (2016) Italie Etats-Unis Allemagne

36,5% Germany US Italy France (2016) UK

Emerging markets: slight economic upturn in 2017

Emerging markets: 2017 Growth forecasts by sector

Sources: Coface, Oxford Economics

2017-2016 Growth change in pp 2017 Growth forecast

Agro Metals Chemical Construction Auto Pharma Pulp & paper Transport Oil & gas Textile Clothing Retail Emerging markets Consumer electronics Services 1 2 3 4 5 6

• 2,5
• 2,0
• 1,5
• 1,0
• 0,5

0,0 0,5 1,0 1,5 2,0 2,5

Corporate debt and banking risk go hand in hand

Banking credit condition survey (below 50 = tightening)

Sources: IIF, Coface

Corporate debt to GDP ratio (Change between Q2 2015 et Q2 2016 in pp)

Sources: Coface, BIS

• 5%

5% 15% 25% 2006 2009 2012 2015

• 200
• 150
• 100
• 50

50 100 150 2012 2013 2014 2015 2016

China: from one bubble to another

Sources: Bloomberg, CEIC, Coface

• 1. Stock market

(CSI 300 index)

• 2. Capital outflows

(USD bn / month)

• 3. Bond market

(5-year sovereign bond yield, %)

• 4. Real estate market

(average national price, RMB/sqm)

1 500 2 000 2 500 3 000 3 500 4 000 4 500 5 000 5 500 2012 2013 2014 2015 2016

2,0 2,5 3,0 3,5 4,0 4,5 5,0 2012 2013 2014 2015 2016

5.0 4.5 4.0 3.5 3.0 2.5 2.0 2012 2013 2014 2015 2016 20122013201420152016 2012 2013 2014 2014 2016 2006 2009 2012 2015

5,50 5,00 4,50 4,00 3,50 3,00 2,50 2,00 1,50

0% 5% 10% 15% 20% 25% 30% 35% 40% Less than 30 days 30-60 days 60-90 days 90-150 days more than 150 days 2014 2015 2016

Coface survey: higher proportion of long

• verdues in China

Average overdue days (share of total) Overdues by sector (longer than 150 days, share of total)

Source: Coface Source: Coface 2014 2015 2016 2014 2015 2016

0% 5% 10% 15% 20% 25% 30% Automotive Pharma IT Metals Chemicals Paper-wood Electronics Retail

• Ind. machinery

Construction Textile clothing 2014 2015 2016

Social discontent + security risk = high political risk

Coface political risk index for Emerging markets (100% = worst risk)

*** The security data taken into account in 2016 are those relate to 2015. Source: Coface 0% 10% 20% 30% 40% 50% 60% 70% 20072016 20072016 20072016 20072016 20072016 20072016 20072016 20072016 20072016 RUSSIA TURKEY SAUDI ARABIA INDIA CHINA MEXICO SOUTH AFRICA BRAZIL POLAND Pressures Tools Security risk*** Coface Political Risk Index

Turkey: political uncertainties give the economic tempo

Turkey: Real GDP growth and net capital inflows Turkey: Sector risk assessments

* January to October Sources: CBRT, Coface Source: Coface

10 20 30 40 50 60 70 80

• 6
• 4
• 2

2 4 6 8 10 12 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* Croissance du PIB (en %) Entrées de capitaux nettes (Mds USD, éch.D.)

Real GDP growth (%, LHS) Net capital inflows ($ bin, RHS)

Sub-saharan africa: the small fare better than the large

Sub-Saharan Africa: GDP and GDP growth

(%, bubble size = GDP)

Sources: Coface forecast

Growth gap 2017-2016 2017 growth forecast

0% 1% 2% 3% 4% 5% 6% 7%

Average 2002-2007 Average 2008-2015 Q3 2016 Forecasts Coface 2017

Emerging countries: Exports to the United States (% of GDP) Global trade

(exports, annual growth)

Sources: CNUCED, IMF, Coface Source: Coface

Exports excluding primary commodities (% GDP) Exports primary commodities (% GDP) Risk threshold = 5%

Global trade: better outlook in 2017, but watch out for protectionism risk

Country risk assessments (1)

Source: Coface

Country risk assessments (2)

Source: Coface

Country risk assessments (3)

Source: Coface

Country risk assessments: Advanced Economies

Source: Coface