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Annual Report 2013
March 2013
BBVA EAGLEs Emerging and Growth Leading Economies 2013 The role of ‘emerging people’
2
EAGLEs Annual Report 2013
• The nine emerging countries which had been classified as EAGLEs last year remained this year after revising their long-term projections, namely: China, India, Indonesia, Brazil, Russia, Korea, Turkey, Mexico and Taiwan.
• The Nest group is formed by 14 countries, most of them in Asia and Latin America.
BBVA EAGLEs: a robust group
• EAGLEs & Nest succeeded again in managing a challenging external environment in 2012. Western central banks’ actions reinforced capital inflows and challenges for policy-makers in emerging markets (‘managing success’)
• The dependency on Western countries is still high. There is no room for complacency despite historical low vulnerability levels across the EAGLEs
EAGLEs & Nest key takeaways In 2012
• Big shifts are already underway for people in emerging countries. Investment and productivity gains are needed to face an aging population in some of them.
• Rapid urbanization, declining household size and a growing middle class will radically change consumption patterns in these countries.
The role of ‘emerging people’
Key messages about EAGLEs
3
EAGLEs Annual Report 2013
A guide to the 2013 Report
1. EAGLEs and Nest key takeaways in 2012
• A challenging external environment
• How did EAGLEs and Nest fare?
2. New forecasts for the next decade
• Box: EAGLEs methodology and membership robustness
• Long-term vulnerability assessment
3. The role of ‘emerging people’ in sustainable growth
• Aging is not exclusive of developed economies
• Declining household size
• Migration to cities: rapid urbanization process
• The growing middle class: wealthier and wealthier
• New middle class not only to drive global consumption but to change composition
4
EAGLEs Annual Report 2013
Summary
Section 1
A challenging external environment Section 2
BBVA EAGLEs in 2013: results for the 2012-2022 period
Section 3
Supporting factors for long-term growth: the role of ‘emerging’ people
5
EAGLEs Annual Report 2013
BBVA US Financial Tension Index Source: BBVA Research
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
20
07
20
08
20
09
20
10
20
11
20
12
20
13
Capital inflows into EAGLEs countries (unweighted average in %GDP) (1980-2011) Source: BBVA Research and IMF
A challenging external environment
A challenging external environment: central banks succeeded supporting capital inflows to EM
-2
-1
0
1
2
3
4
5
6
7
8
9
80
82
84
86
88
90
92
94
96
98
00
02
04
06
08
10
12(e
)
FDI Portfolio Other investment
6
EAGLEs Annual Report 2013
Public and private debt-to-GDP ratios (2012) Source: BBVA Research
Sovereign rating* for EAGLEs and Nest countries (end of period) (2000-2012) *Numerical average for Fitch, S&P and Moody’s ratings, rounded-up to zero decimals Source: BBVA Research and rating agencies
A challenging external environment
This creates some tensions but EAGLEs and Nest are now better prepared (‘new risk normal’)
0
20
40
60
80
100
120
140
160
Public debt Private debt:Households
Private debt:Non-final
corporations
External debt
G7 EAGLEs&Nest
7
EAGLEs Annual Report 2013
G7, EAGLEs and Nest: GDP levels (net balance in percentage points) (0-100 range) Source: BBVA Research and Haver
GDP growth (unweighted average of %yoy change) Source: BBVA Research and Haver
A challenging external environment
Weakness in developed economies extended to EM in 2012 and the ‘level gap’ widened
60
70
80
90
100
110
120
130
140
150
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
(f)
G7 EAGLEs Nest
0
1
2
3
4
5
6
7
8
9
10
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2010 2011 2012
G7 EAGLEs Nest
8
EAGLEs Annual Report 2013
Exports momentum 2010-2012 (sa %yoy moving average 3monts) Source: BBVA Research and CPB
EAGLEs and Nest: exports destination (% of total EAGLEs and Nest exports) Source: BBVA Research and CPB
A challenging external environment
Some signs of recovery in world trade are appearing and South-South trade dominates
-5
0
5
10
15
20
25
Q1
/10
Q2
/10
Q3
/10
Q4
/10
Q1
/11
Q2
/11
Q3
/11
Q4
/11
Q1
/12
Q2
/12
Q3
/12
Q4
/12
World exports Advanced Economies
Emerging Economies World exports (annual avg.)
20122000
EMU
42%
43%
15%25%
59%
16%
Other DMs EMs
9
EAGLEs Annual Report 2013
Summary
Section 1
A challenging external environment
Section 2
BBVA EAGLEs in 2013: results for the 2012-2022 period Section 3
Supporting factors for long-term growth: the role of ‘emerging people’
10
EAGLEs Annual Report 2013
BBVA EAGLEs in 2013: results for the 2012-2022 period
Criteria for the 2012-2022 period: the new thresholds
G6 economies - average
G6 economies - minimum
NEST countries
EAGLEs
Rest of emerging economies candidates
446 bn USD
194 bn USD
Italy
G6 avg.
Incremental GDP between 2012 and 2022 measured in PPP-
adjusted 2012 USD
11
EAGLEs Annual Report 2013
BBVA EAGLEs in 2013: results for the 2012-2022 period
EAGLEs and Nest 2013: geographically balanced
China
India
Indonesia
Brazil
Russia
Korea
Turkey
Mexico
Taiwan
Egypt
Nigeria
Thailand
Colombia
Vietnam
Malaysia
Poland
Bangladesh
South Africa
Philippines
Peru
Argentina
Pakistan
Chile
EAGLEs Nest
12
EAGLEs Annual Report 2013
BBVA EAGLEs in 2013: results for the 2012-2022 period
China and India continue playing in another league
Incremental GDP between 2012 and 2022 (% share of world growth and bn USD for the 3 big players) Source: BBVA Research and IMF/WEO
1242815727
4756
129714092
5036
0
2500
5000
7500
10000
12500
15000
17500
20000
22500
25000
27500
China USA India
2012 2012-2022
EAGLEs57%
Nest10%
Other EMs3%
G717%
Other DMs5%
RoW8%
13
EAGLEs Annual Report 2013
BBVA EAGLEs in 2013: results for the 2012-2022 period
Other relevant players in Asia, as well as in Latin America and Europe
Incremental GDP between 2012 and 2022 and GDP level in 2012 [EAGLEs] (bn USD) (incremental GDP in y-axis and 2012 level below country labels) (bubbles are proportional to 2012 level) Source: BBVA Research and IMF/WEO
Indonesia1219 Brazil
2363Russia2520
Korea1618
Japan4623
Turkey1126
Germany3207 Mexico
1768UK
2335 Taiwan905
G6 avg.2620
300
400
500
600
700
800
900
1000
1100
1200
1300
14
EAGLEs Annual Report 2013
BBVA EAGLEs in 2013: results for the 2012-2022 period
And there are more candidates, some of them really close to the threshold
Incremental GDP between 2012 and 2022 and GDP level in 2012 [Nest] (bn USD) (incremental GDP in y-axis and 2012 level below country labels) (bubbles are proportional to 2012 level) Source: BBVA Research and IMF/WEO
G6 avg.2620
Egypt540
Nigeria453
Thail.655
Australia967
S.Arabia744
France2260
Canada1451
Colombia500
Vietnam322
Malaysia498
Poland806
Spain1415
Bang.307
S.Africa580
Philip.425
Iraq156
Peru328
Argentina745
Pakistan517
Iran1002
Chile322
G6 min.(Italy)1808
100
150
200
250
300
350
400
450
500
15
EAGLEs Annual Report 2013
BBVA EAGLEs in 2013: results for the 2012-2022 period
A robust and “fair” approach: countries decide
Growth forecasts and thresholds over the 2012-2022 period (annual average growth in %) Source: BBVA Research, IMF/WEO, OECD and Consensus
0
1
2
3
4
5
6
7
8
9
10
India
Chin
a
Indonesi
a
Turk
ey
Taiw
an
Kore
a
Bra
zil
Russ
ia
Mexic
o
Vie
tnam
Bangla
desh
Nig
eri
a
Egypt
Peru
Colo
mbia
Phili
ppin
es
Thaila
nd
Mala
ysi
a
Chile
S.A
fric
a
Pakis
tan
Pola
nd
Arg
entina
Canada
UK
Germ
any
Fra
nce
Japan
Italy US
EAGLE Nest G6
BBVA To be an EAGLE To be a Nest IMF OECD Consensus
16
EAGLEs Annual Report 2013
Summary
Section 1
A challenging external environment
Section 2
BBVA EAGLEs in 2013: the changing map of world growth Section 3
Supporting factors for long-term growth: The role of Emerging People
17
EAGLEs Annual Report 2013
BBVA EAGLEs in 2013: the changing map of world growth
Emerging world to lead growth in the next decade
Contribution to GDP world growth (percentage points) (over PPP-adjusted 2012 USD) Source: BBVA Research and IMF/WEO
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
80s 90s 00s pre-crisis Global crisis 2012-2022
RoW G6 US Nest EAGLEs WORLD
18
EAGLEs Annual Report 2013
BBVA EAGLEs in 2013: the changing map of world growth
The Pacific connection: Asia and America
Incremental GDP between 2012 and 2022 by region (%) Source: BBVA Research and IMF/WEO
10.9
Latin America
Africa Australia
New Zealand
North America
Asia (ex.Japan)
Japan
7.5
6.8
4.9
Eastern Europe
56.4 1.7
1.0
6.4
Western Europe
Middle East
4.5
+
19
EAGLEs Annual Report 2013
BBVA EAGLEs in 2013: the changing map of world growth
Increasing South-South trade
EAGLEs and Nest export share by country groups Source: BBVA Research and IMF
EMU; 15,8
Other DMs; 58,8
EMs; 25,4
2000 EMU; 14,9
Other DMs; 43,5
EMs; 41,7
Jan-Sep/12
Summary
Section 1
A challenging external environment
Section 2
BBVA EAGLEs in 2013: results for the 2012-2022 period
Section 3
Supporting factors for long-term growth: the role of ‘emerging people’
21
EAGLEs Annual Report 2013
Supporting factors for long-term growth: the role of ‘emerging people’
Aging is not exclusive of developed countries
Working-age population growth (1980-2040) (average annual % change) Source: BBVA Research and UN
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040
WORLD G7 China&Korea Eastern Europe Asia exChina&Korea, LatAm, Turkey and Africa
22
EAGLEs Annual Report 2013
Supporting factors for long-term growth: the role of ‘emerging people’
However, there are significant differences across countries
Population pyramids (2010) (% of total population) Source: BBVA Research and UN
China, Russia and Korea India, Indonesia, Brazil, Mexico & Turkey G7 countries
Female Male MaleFemale Female Male
23
EAGLEs Annual Report 2013
Supporting factors for long-term growth: the role of ‘emerging people’
The population premium will still be relevant for most EMs
Stage of demographic transition referenced to working-age population Source: BBVA Research and UN
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
19
75
19
80
19
85
19
90
19
95
20
00
20
05
20
10
20
15
20
20
20
25
20
30
20
35
20
40
20
45
20
50
20
55
20
60
20
65
20
70
20
75
20
80
20
85
20
90
20
95
21
00Expect
ed a
nnual ch
ange o
f w
ork
ing a
ge p
opula
tion
betw
een 2
01
0 a
nd 2
02
0 (
%)
Approximate year when the share of population aged 15-64 years reaches a peak
Germany
Japan
Italy
France
US
UK
Ukraine
RussiaPoland
Korea
CanadaArgentina
China
Thailand
ChileVietnam
WORLD Brazil
Malaysia
Indonesia
MexicoColombia
TurkeyPeru
Bangladesh
India
Egypt
S.Africa
Pakistan
Philippines
Nigeria
24
EAGLEs Annual Report 2013
Supporting factors for long-term growth: the role of ‘emerging people’
The reduction in the household size will soften the effects of aging
Income per capita and household size (c.2000) Source: BBVA Research, IMF, UN and WB
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
Fin
land
Norw
ay
United K
ingdom
Cze
ch R
epublic
Canada
Italy
Bulg
ari
a
Slo
vak R
epublic
Irela
nd
Cro
atia
Slo
venia
Chile
Bosn
ia a
nd…
Georg
ia
FYR
Mace
donia
Bots
wana
Jam
aic
a
Beliz
e
Turk
ey
Bangla
desh
Uganda
Chad
Cam
ero
on
India
Bahra
in
Yem
en
World Household size
0
1
2
3
4
5
6
7
8
6 7 8 9 10 11 12
House
hold
siz
e
Real PPP-adjusted GDP per capita (in logs)
25
EAGLEs Annual Report 2013
Supporting factors for long-term growth: the role of ‘emerging people’
EM population is moving to cities… very fast
Population according to residence area (millions of people) Source: BBVA Research and UN
Developed economies Emerging economies
0
100
200
300
400
500
600
700
800
900
1000
1100
1200
1300
1400
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
Rural Urban
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
5500
6000
6500
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
Rural Urban
26
EAGLEs Annual Report 2013
Percentage Urban0-25% 1-5 million
5-10 million10 million or more
25-50%50-75%75-100%
City population
Supporting factors for long-term growth: the role of ‘emerging people’
With an increasing number of urban agglomerations
Percentage of urban population and agglomerations by size class (2025) Source: BBVA Research and UN
Percentage Urban0-25% 1-5 million
5-10 million10 million or more
25-50%50-75%75-100%
City population
27
EAGLEs Annual Report 2013
Supporting factors for long-term growth: the role of ‘emerging people’
Emerging middle class already in ‘fast track mode’ since the beginning of this century
Population according to GDP per capita range* in EAGLEs and Nest countries (millions of people and % share) **Affluent are over 40,000 PPP-adjusted 2010 USD per year, High Middle Class between 25,000 and 40,000, Medium Middle Class 15,000-25,000, Low Middle Class 5,000-15,000, Low Income 1,000-5,000 and Poor below 1,000. Source: BBVA Research
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
20
Poor Low Income
Low Middle Class Medium Middle Class
High Middle Class Affluent
Slow Motion Fast Track
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
20
Poor Low IncomeLow Middle Class Medium Middle ClassHigh Middle Class Affluent
Slow Motion Fast Track
28
EAGLEs Annual Report 2013
Supporting factors for long-term growth: the role of ‘emerging people’
EM middle classes will change consumption patterns… significantly
Consumption patterns and income transition* in EMs (% of CPI basket and GDP per capita) *Low-income include countries with GDP per capita between 2,000 and 8,000 PPP-adjusted 2010 USD (up to 9 in log terms), medium-income comprise the income range between 8,000 and 22,000 USD (between 9 and 10 in log terms) and high-income countries are those above 22,000 USD. Source: BBVA Research and Haver
0
5
10
15
20
25
30
35
40
45
Food
Alc
.&Tobacc
o
Clo
th.&
Footw
.
Housi
ng
Equip
ment
Health
Tra
nsp
ort
Com
m.
Recr
.&C
ulture
Educa
tion
Rest
.&H
ote
ls
Mis
c.
Low-income Medium-income High-income (OECD) 7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
7.0 7.5 8.0 8.5 9.0 9.5 10.0 10.5 11.0
20
20
2010
Korea
China
Poland
Russia/Chile
Bangl.Pakistan
Nigeria
Philipp.
IndiaVietnam
Indonesia Egypt
Ukraine
Argent./MalaysiaTurkey
Mexico
Brazil/PeruThail./Colomb./S.Africa
Low-income
Medium-income
High income
High income
Med.-income
29
EAGLEs Annual Report 2013
Supporting factors for long-term growth: the role of ‘emerging people’
Some industries to benefit from booming demand… generating some challenges
World markets according to annual growth of the car fleet between 2010 and 2020 Source: BBVA Research
0% ≥8% 4% 2% 6%
30
EAGLEs Annual Report 2013
DISCLAIMER
This document and the information, opinions, estimates and recommendations expressed herein, have been prepared by Banco Bilbao Vizcaya Argentaria, S.A. (hereinafter called “BBVA”) to provide its customers with general information regarding the date of issue of the report and are subject to changes without prior notice. BBVA is not liable for giving notice of such changes or for updating the contents hereof.
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