[PPT] - GLOBAL ECONOMIC OUTLOOK CANADIAN CONSTRUCTION ASSOCIATION VIRTUAL PowerPoint Presentation

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GLOBAL ECONOMIC OUTLOOK

CANADIAN CONSTRUCTION ASSOCIATION VIRTUAL BRIEFING

Peter Hall - EDC Economics Forecast as of March 12, 2020

Insights on the world's key economies GDP growth, commodity prices, interest and exchange rates.

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HIGHLIGHTS

Global recession; worst moment since 2008-09
First half of 2020 is the hard part
2 waves: China; the OECD (US, Jap, EU, Mex, Can)
All industries not hit equally
Most will need assistance thru Q3
Pattern of growth

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CHINA: INDICATOR OF WHAT’S COMING?

50 100 150 200 250 300 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Motor vehicle sales, China – x10,000 units

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CHINA: INDICATOR OF WHAT’S COMING?

10
8
6
4
2

2 4 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Retail sales, China – SA, M/M change, %

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COVID-19: EFFECT ON THE ECONOMY

Depth th Duration tion time me GDP

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COVID-19: EFFECT ON THE ECONOMY

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OUTLOOK UNDER REVISION!

OECD: old forecast obsolete
IMF: big downward revisions coming
IIF: global growth from 2.6% → 1.6% → -1.5%
Canadian banks revising down (Q2: -10% to -30%)
Moving target!
EDC Economics forecast process

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CHANGES FROM PREVIOUS FORECAST

Global Economic Outlook

Real GDP Growth (percentage point change)

2019 2020* 2021*

Developed countries

0.0

1.7

1.1

Canada

0.0

1.5

1.7

United States

0.1
1.5

1.4

Eurozone

0.0

1.7

1.0

Germany

0.0

1.7

0.3

France

0.0

1.7

1.0

United Kingdom

0.3

0.8

0.6

Japan

0.3
2.5

2.0

Emerging countries

0.3
2.3

1.1

China

0.0

2.8

2.3

India

3.0
1.8

1.0

Brazil

0.1

0.5

0.9

Mexico

0.3
1.7

0.5

Total World

0.2
2.1

1.1

Note: * denotes the forecast period. Source: EDC Global Economic Outlook, March 2020

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REAL GDP GROWTH

Global Economic Outlook

(Annual % change)

2019 2020* 2021*

Developed countries 1.7 0.2 3.7 Canada 1.6 0.4 3.8 United States 2.3 0.9 4.7 Eurozone 1.2

0.4

2.8 Germany 0.6

0.6

2.1 France 1.2

0.4

2.5 United Kingdom 1.4 0.1 2.9 Japan 0.7

2.2

2.9 Emerging countries 3.5 2.4 6.3 China 6.1 3.4 8.8 India 4.3 5.8 8.8 Brazil 1.1 1.5 3.4 Mexico

0.1
0.5

2.7 Total World 2.8 1.6 5.3

Note: * denotes the forecast period. Source: EDC Global Economic Outlook, March 2020

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IMMINENT RECESSION: WHERE’S THE BUBBLE?

4000
3000
2000
1000

1000 2000 3000 4000 10 20 30 40 50 60 70 80 90

Housing then and now (surplus/deficit), ‘000 units

2008-09 Current

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CANADA’S HOUSING MARKET BUBBLE

300
250
200
150
100
50

50 100 150 200 50 100 150 200 250 300 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Housing starts, requirements, balance, SAAR, ‘000 units

Surplus/Deficit [R] HH formation [L] Starts [L]

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BUSINESS INVESTMENT

Supply chain risk/travel risk again an issue
Near-shoring/re-shoring…
…vs. co-location, future demand centres
Mechanization driving domestic revival?
Capacity pressures as economy re-emerges

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INFRASTRUCTURE: FUTURE NEEDS

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CANADA: INFRASTRUCTURE

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Oil (West Texas Intermediate)

Sources: Energy Information Administration, Haver Analytics, EDC Economics

West Texas Intermediate (WTI), (USD per barrel) 30 35 40 45 50 55 60 65

01-Aug-19 01-Sep-19 01-Oct-19 01-Nov-19 01-Dec-19 01-Jan-20 01-Feb-20 01-Mar-20

Jan 3: US assassinates Iranian General Soleimani Jan 10: Iran admits to downing Ukraine International Airlines Flight 752 Nov/Dec : Oil prices move on news and speculation of US- China Phase 1 Trade deal Jan 20: China confirms coronavirus can be transmitted human- to-human Jan 30: WHO declares the coronavirus outbreak as a Public Health Emergency Feb 25: Italy confirms

utbreak cluster

March 7: OPEC+ agreement falls apart and Saudi increases production and cuts prices Sept 14: Saudi Aramco Facilities Attacked

Oil prices tank amid fears from coronavirus and Middle East tensions

COVID-19 worries had already reduced the outlook for global oil

demand in 2020, even before the flood of oil supply onto market following the collapse of the OPEC+ agreement, which has become the biggest factor driving our forecast adjustments.

Beginning in April 2020, more than three million barrels per day of

extra crude are expected in the market, coming from Saudi Arabia, Russia, Iraq and the United Arab Emirates.

Global demand is expected to increase starting in the second half
f 2020 as the COVID-19 impacts recede. However, the significant
versupply in the market is expected to persist until early 2022,

resulting in significantly lower global prices for oil.

The oil price forecast averages US$38.84 in 2020 and US$42.89 in

2021.

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CURRENCIES AND INTEREST RATES

Global Economic Outlook 2019 2020* 2021*

Currency Exchange Rate U.S. dollar USD per CAD 0.75 0.72 0.75 Euro CAD per EUR 1.49 1.53 1.46 Euro USD per EUR 1.12 1.11 1.09 U.K pound USD per GBP 1.28 1.35 1.31 Interest Rates, annual average Bank of Canada, Overnight Target Rate 1.75 0.85 1.81 U.S. Federal Reserve, Fed Funds Target Rate (Upper limit) 2.14 0.35 1.83 Bank of England, Policy Interest Rate 0.75 0.68 0.54 European Central Bank, Policy Interest Rate 0.00 0.00 0.14

Note: * denotes the forecast period. Source: EDC Global Economic Outlook, March 2020

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COMMODITY PRICES

Global Economic Outlook 2019 2020* 2021*

Brent Crude Spot, USD / bbl 64.08 43.89 47.42 West Texas Intermediate, USD / bbl 56.99 38.84 42.89 Western Canada Select, USD / bbl 43.30 28.97 33.31 Natural Gas, USD / MMBtu 2.57 2.04 3.21 Gold, USD / troy ounce 1,392 1,600 1,320

Note: * denotes the forecast period. Source: EDC Global Economic Outlook, March 2020