The 2040 economy: Long-term growth · PDF fileThe 2040 economy: Long-term growth determinants...

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Global Economics & Country Risk Conference

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IHS

The 2040 economy: Long-term growth determinants

Elisabeth Waelbroeck Rocha, Chief International Economist, IHS, +1 33 1 76 76 3087, [email protected] Pascal Huet, Director Economy & Air Transport, Airbus G. Mustafa Mohatarem, Chief Economist, Public Policy Center, General Motors Company

12 November 2014

ECONOMICS & COUNTRY RISK

© 2014 IHS

1974-2014 in numbers

3.553 Increase in world population between 1970 and 2014

4.5 Increase in number of persons aged 80 and above between 1970 and 2014

30% Share of population aged 0 to 14 in 2014

3.4% Percentage increase in real GDP between 1980 and 2014

5.5% Percentage increase in world exports between 1980 and 2014

1.4 Increase in number of persons aged 0 to 14 between 1970 and 2014

© 2014 IHS

2014-2040 in numbers

2.3 Increase in number of persons aged 80 and above between 2014 and 2040

22% Share of population aged 0 to 14 in 2040

3.1% Percentage increase in real GDP between 2014 and 2040

4.5% Percentage increase in world exports between 2014 and 2040

1.05 Increase in number of persons aged 0 to 14 between 2014 and 2040

1.795 Increase in world population between 2014 and 2040

3.553

4.5

1.4

5.5%

30%

3.4%

© 2014 IHS

Key questions for the coming decades

• Can emerging countries sustain the growth rates they have recently achieved?

• How long will it take them to reach the GDP per capita level of advanced economies?

• Will wage disparities continue to drive globalisation or will these disappear over time?

• Will trade continue to outpace GDP growth? • If so, will the benefits diffuse to the domestic economies and be broadly distributed,

or will it increase regional disparities?

• If not, will growth be mainly domestic driven or regionally driven? Will the type of goods that are traded change?

• How much will technological progress support growth? • The emerging countries could skip some steps on the development ladder

• The new technologies could foster a return to localised production systems

4

MUSTAFA MOHATAREM Chief Economist, General Motors

BRICS: TEMPORARY STUMBLE OR LONGER SLOWDOWN?

• BRICs appear to have decoupled from the developed countries following the global financial crisis

• Timely stimulus and strong starting positions allowed them to sustain growth as others stumbled

• The euphoria is slowly melting away - China is slowing - India slowed, but is making a slight comeback - Brazil is stagnant - Russia is on the verge of a recession

• Is this a stumble, or harbinger of longer-term slowdown?

INTRODUCTION

EMERGING ECONOMIES BECAME A MAJOR SOURCE OF WORLD ECONOMIC GROWTH AFTER 2001 WITH CHINA LEADING THE WAY

Contribution to Global Real GDP Growth

Source: World Bank; Calculations: General Motors Company

-4%

-2%

0%

2%

4%

6%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Other Developing EconomiesBrazil, India, Russia, Indonesia, South Africa, TurkeyChinaAdvanced EconomiesWorld Growth

BUT NOW THEY ARE SLOWING COLLECTIVELY

0%

2%

4%

6%

8%

10%

12%20

01

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Real GDP Growth of Large Emerging Economies

China, India, Brazil, Russia, Indonesia, South Africa, Russia


¶ Pre-crisis growth among emerging markets was believed to be consistent with the Washington Consensus – the set of development strategies focusing, in part, on macroeconomic stability, privatization, and liberalization

¶ Emerging markets posted mixed economic performance during the Great Recession ¶ Post-crisis developments highlight economic vulnerabilities with emphasis on addressing economic

imbalances, structural inefficiencies, and policy mismanagement

POST-CRISIS, SLOWDOWN IN EMERGING MARKET GROWTH IS BROAD


2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2004-07 2010-13China 10.1 11.3 12.7 14.2 9.6 9.2 10.4 9.3 7.7 7.7 12.1 8.8India 7.9 9.3 9.3 9.8 3.9 8.5 10.3 6.6 4.7 5.0 9.1 6.7Korea 4.9 3.9 5.2 5.5 2.8 0.7 6.5 3.7 2.3 3.0 4.9 3.9Brazil 5.7 3.2 4.0 6.1 5.2 -0.3 7.5 2.7 1.0 2.5 4.7 3.4Mexico 4.3 3.0 5.0 3.1 1.4 -4.7 5.1 4.0 4.0 1.1 3.9 3.6Russia 7.2 6.4 8.2 8.5 5.2 -7.8 4.5 4.3 3.4 1.3 7.6 3.4Turkey 9.4 8.4 6.9 4.7 0.7 -4.8 9.2 8.8 2.1 4.0 7.3 6.0Indonesia 5.0 5.7 5.5 6.3 6.0 4.6 6.2 6.5 6.3 5.8 5.6 6.2Poland 5.3 3.6 6.2 6.8 5.1 1.8 3.9 4.5 1.9 1.6 5.5 3.0Argentina 9.0 9.2 8.4 8.0 3.1 0.1 9.1 8.6 0.9 3.0 8.6 5.4South Africa 4.6 5.3 5.6 5.5 3.6 -1.5 3.1 3.6 2.5 1.9 5.2 2.8Thailand 6.3 4.6 5.1 5.0 2.5 -2.3 7.8 0.1 7.7 1.8 5.3 4.3

Average Annual GrowthGreat Recession

IT IS NOT GUARANTEED THAT GROWTH WILL RETURN TO THE GOLDEN DAYS AS EMERGING ECONOMIES LACK ROBUST INSTITUTIONS THAT PROVIDE LONG TERM STABILITY

Standard Deviation of Real GDP Growth 10-year moving average

0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%

10.0% All Advanced Economies All Developing Economies


BRAZIL IS ONE TYPICAL EXAMPLE

Brazil Real GDP Growth

Source: World Bank

-5.0%-3.0%-1.0%1.0%3.0%5.0%7.0%9.0%

11.0%13.0%15.0%

After the period of what some called an economic miracle in 1968–73 with more than 11% growth, the economy fell back to slow and volatile pattern with 3.0% in the 80s and 1.7% in the 90s

1961-1969 5.9% 1970-1979 8.5% 1980-1989 3.0% 1990-1999 1.7% 2000-2009 3.3% 2010-2014* 2.8%

Note: 2014 real GDP growth is a forecast

FISCAL AND EXTERNAL IMBALANCES AND INFLATIONARY PRESSURE RESTRICTING GROWTH POTENTIAL

-15

-10

-5

0

5

10

15

-15 -10 -5 0 5 10 15 Current Account Balance, % of GDP**

Gov't Budget Balance, % of GDP*

JPY ZAR BRL

INR

IDR EUR RUB

Twin Surpluses

Twin Deficits

USD

TRY

Source: National Central Banks

0.3% 1.5%

3.3%

4.5%

6.4%

6.5%

7.6% 7.8%

8.9%

0%

2%

4%

6%

8%

10%

12%

14% Y/Y % Change

Inflation Target

Inflation Target Range

Current Inflation Rates

Prev. Month Rates

CPI Inflation vs Central Bank Targets

AFTER THREE DECADES OF 10% ANNUAL GROWTH, CHINA HAS BECOME A SIGNIFICANT PLAYER IN WORLD ECONOMY; AS GROWTH SLOWS DOWN, WHAT WILL HAPPEN TO WORLD PRICES?

90

100

110

120

130

140

150 China Export Price Index

Source: China Customs

WHAT IF CHINA CONTINUES TO FOLLOW JAPAN’S PATH AS IT HAS FOR THE PAST DECADES -- GROWTH FALLING TO 4% INSTEAD OF THE WIDELY EXPECTED 6-7%?

-

10,000

20,000

30,000

40,000

China(1997-2013)

Real GDP per Capita

-10%

-5%

0%

5%

10%

15%

20% Real GDP growth

Per-Capita GDP vs. Long Term Growth

Source: World Bank, Conference Board; Calculations: General Motors Company

WILL INDIA LIVE UP TO ITS EXPECTATIONS WITH SIGNIFICANT STRUCTURAL IMBALANCE REMAINING IN ITS ECONOMY?

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

India: Balance of Payments Current Account Balance as a % of GDP

0%

2%

4%

6%

8%

10%

12%

14%

16%

2007 2008 2009 2010 2011 2012 2013 2014

CPI inflation marginally below the central bank's 8% target

Consumer Price Inflation

Central Bank 8% Consumer Price Inflation target

Policy Rate

Percent, y/y%

Source: India Ministry of Statistics/Programme Implementation, Reserve Bank of India

FALLING OIL PRICES WILL FURTHER DEPRIVE RUSSIAN ECONOMY

-15%

-10%

-5%

0%

5%

10%

15%

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Year Over Year Real GDP Growth

Source: Federal State Statistics Service/Central Bank of Russia

Source: The Economist

POST RECESSION, GLOBAL TRADE HAS BEEN VERY SLOW, PROVIDING LESS LIFT TO ECONOMIES THAT DEPEND ON EXPORTS

-60%

-40%

-20%

0%

20%

40%

60%

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

World Japan Developing Asia

Source: International Monetary Fund

COMPETITION WILL INTENSIFY AMONG EXPORT DEPENDENT COUNTRIES. IS JAPAN STARTING A CURRENCY WAR?

Source: Wall Street Journal

0.000.020.040.060.080.100.12

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

Yuan/Yen

0.00

5.00

10.00

15.00

20.00

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

Won/Yen

Both Korean Won and Chinese Yuan have appreciated against Japanese Yen by 30% since 2010. It is hard to believe the Korean and Chinese governments will watch at the sideline if the Yen continues to weaken by design

LAST, THERE ARE SO MANY UNPREDICTABLE FACTORS -- FROM GEOPOLITICAL SHIFTS TO NATURAL DISASTERS -- THAT COULD CHANGE THE COURSE OF ECONOMIC DEVELOPMENT AND THROW ECONOMIC FORECASTS OFF TRACK

Source: GM compiled data

2011 – a year full of unknowns

Q1 Q2 Q3 Q4 Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.

Arab Spring Revolution

Japanese Earthquake

Severe Weather in the U.S.

European Debt Crisis

U.S. Debt Ceiling Debate

Thailand Flooding

• Considerable uncertainty regarding the near term outlook for the large emerging economies

• Led economic growth in the 2000s

• Outperformed following the global financial crisis - Timely stimulus - Government intervention - Dividend from the “Washington Consensus”

• Policies will have to change to restore growth momentum

• Will politics allow the necessary change?

SUMMARY

© AIRBUS all rights reserved. Confidential and proprietary document.

Air transport outlook

Presented by: Pascal Huet Head of Economy & Air Transport - Airbus

Airbus GMF14 - Flying on Demand September 14

IHS Global Outlook Conference

© AIRBUS all rights reserved. Confidential and proprietary document. September 14 Airbus GMF14 - Flying on Demand

Aviation’s benefit -

23 minutes

2 hours

4 – 12 hours

20 hours

The first commercial flight was 100 years ago


Aviation is a major driver of the world economy

58.1 m

illion

Job supported World-wide

Globally contributes

$2.4

trillion

Aviation’s global economic impact

21st If aviation was a country ranked

by GDP

2,970,000,000 passengers carried worth of cargo shipped

by air

Source: ATAG (2012 figures), Airbus

$6.4 trillion 2% of global man-made CO2

emissions come from aviation


Future of Air Transport

They can feel

The “Inspired entrepreneurs”

They can calculate

The “market analyst”

Page 24


Page 25

25 years ago….

http://www.google.fr/url?url=http://en.wikipedia.org/wiki/1989&rct=j&frm=1&q=&esrc=s&sa=U&ei=Qns_VKcPjt84-4aAwA4&ved=0CDAQ9QEwDQ&usg=AFQjCNFz2iDVSviAIKckpPU04QqFwYxA3g


Oil Crisis Oil Crisis Gulf Crisis AsianCrisis

9/11 SARS

73%

Financial Crisis

September 14

Air travel has proved to be resilient to external shocks

Source: ICAO, Airbus

73% growth through multiple crises over the last ten years

World annual traffic (RPKs - trillions)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1968 1973 1978 1983 1988 1993 1998 2003 2008 2013


Air fares negatively driven by fuel price surge since 2003

$46 $43 $40 $44 $65$91

$116 $133$187

$123 $138$174

$208 $21014% 13% 13% 14%

17%

22%

26% 27%

33%

26% 26%29%

31% 31%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Airline fuel expenses (billion $) Share of total costs

x5



0

5

10

15

20

25

1980 1985 1990 1995 2000 2005 2010

World inflation adjusted average yield stabilizing after strong decrease in the 80s and the 90s

Cents per RPK in 2013 US$

Source: ICAO, IATA, Airbus

Fairly stable


Globalisation has been an important driver

Source: ICAO WASA database, Airbus

0

500

1,000

1,500

2,000

2,500

3,000

1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Number of bilateral air services agreements

More than

2,550 bilateral air services agreements between more than 170 countries


Despite “ups and down”, GMF traffic forecasts track the long term trend

0

2

4

6

8

10

12

14

16

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

2031

2033

Historical traffic

GMF 2014

GMF 2008

GMF 2000

GMF 1990

Poly. ( GMF2000)Poly. ( GMF1990)

World annual traffic (RPKs - trillions)



0

50

100

150

200

250

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

High oil prices here for the long term…

Brent oil price (nominal US$ per bbl) Forecast History

Source: IEA, IHS Energy, Airbus


-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

Passenger traffic is highly correlated to GDP growth

Real GDP growth (%)

GDP

Air Traffic

Air Traffic growth (%)

Source: IHS Global Insight, ICAO, Airbus


-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

2032

2034

2036

2038

2040

Underlying drivers indicate a positive economic outlook

Year-over-year evolution (%) World real GDP

Source: IHS Global Insight, Airbus

© AIRBUS all rights reserved. Confidential and proprietary document. Airbus GMF14 - Flying on Demand

A two-speed economic world

* 54 emerging economies

** 32 advanced economies


Comparison of year-over-year GDP growth

-4%

-2%

0%

2%

4%

6%

8%

10%

1982 1986 1990 1994 1998 2002 2006 2010 2014 2018

Emerging economies*

Real GDP growth (%) History Forecast Emerging economies will continue to lead the pack

Advanced economies**

Page 34

September 14


The World of 2040 will be very different from today

1- US 2- Japan 3- Germany 4- France 5- Italy 6- Russia 7- UK 8- Canada 9- Spain 10- Brazil


1- US 2- China 3- Japan 4- Germany 5- UK 6- France 7- India 8- Brazil 9- Russia 10- Italy

1- China 2- US 3- India 4- UK 5- Brazil 6- Germany 7- Japan 8- Indonesia 9- Russia 10- France

GDP ranking based on nominal GDP expressed in US$

1990 2015 2040


Emerging economies are driving future growth

2033

54% 67% 59% 50%

Today 36% 69% 42% 38%

Source: IHS Global Insight, Ascend, Airbus

Emerging economies (54 countries) All other countries (150 countries)

GDP (Nominal GDP in US$) Population Passenger trips Fleet in service

1990 15%

70% 15%

17% 15%


0.01

0.10

1.00

10.00

0 10 20 30 40 50 60

2013 trips per capita

North Americans and Europeans are the most willing to fly today…

Source: Sabre (annualized September 2013 data), IHS Global Insight, Airbus |

*Passengers originating from respective country

Bubble size proportional to population

2013 GDP per capita (thousands $US)

Europe ~1 trip per capita

North America 1.6 trips per capita

China 0.25 trips per capita

India 0.06 trips per capita

22% of the population of the emerging countries took a trip a year in 2013

September 14 Airbus GMF14 - Flying on Demand

Page 37


0.01

0.10

1.00

10.00

0 10 20 30 40 50 60

…but by 2033, China’s potential will reach European levels

Source: Sabre (annualized September 2013 data), IHS Global Insight, Airbus |

*Passengers originating from respective country

Bubble size proportional to population

66% of the population of the emerging countries will take a trip a year in 2033

2033 trips per capita

2033 GDP per capita (thousands $US)

India 2033 0.26 trips per capita

China 2033 0.95 trips per capita


Page 38

© AIRBUS all rights reserved. Confidential and proprietary document. September 14

Urbanisation to increase

49%

60%

67%

0%

10%

20%

30%

40%

50%

60%

70%

80%

-

1

2

3

4

5

6

7

8

9

10

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Rural

Urban

Urban share

billion History Forecast

Urban population: 1.3B 2.3B 3.5B 5.0B 6.4B

World population and share of urban agglomeration evolution

Source: UN population division, Airbus


Global Middle Class to more than double

679 697 673 264 261 252

1,413

2,782

4,450

0

1,000

2,000

3,000

4,000

5,000

2013* 2023 2033

Global Middle Class** (Millions of people)

Emerging countries

World Population

% of world population

8,500

63%

7,900

48%

7,200

33%

Source: Kharas and Gertz, Airbus * EOY 2013 ** Households with daily expenditures between $10 and $100 per person (at PPP)

3,740

2,356

5,375

North America

Europe


Page 40


Tourism stimulates economic and air transport growth

September 14

Source: World Tourism Organization, OAG, IHS Global Insight, Airbus

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0% 2% 4% 6% 8% 10% 12% 14%

International tourist arrivals (CAGR* 1995-2012)

Real GDP (CAGR* 1995-2012)

* Compound Annual Growth Rate

Economic growth catalyst

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0% 2% 4% 6% 8% 10% 12% 14%

International tourist arrivals (CAGR* 1995-2012)

ASKs (CAGR* 1995-2012)

Air transport growth catalyst


Worldwide international arrivals by type of border crossing

58% 36% 5% 1%

45% 48%

5% 2%

Aviation, the first contributor to international tourist arrivals growth

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

CAGR* 1995-2012 (%)

Road

Air

Sea

* Compound Annual Growth Rate Source: World Tourism Organization, Airbus

1995 2012

529 million tourists

Air Sea

Road

1,035 million tourists

Air Sea

Road

Rail

Rail

Rail 5.5%

4.1%

2.3%

1.5%


Visiting friends and relatives is a key driver of traffic growth


Source: UN WTO, UN DESA, Airbus

Origin

Page 43

Pacific

North America

Latin America

Europe/CIS

Asia/Middle East

Africa Destination

Immigration flow by region

27% …of all trips are for Visiting Friends and Relatives (VFR)


International students have taken advantages of increased mobility

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1975 1980 1985 1990 1995 2000 2005 2009

International students (Thousands) International Students / World population ratio (Base 1 in 1975)

Source: OECD, UN Population Division, Airbus

Number of international students and share of World Population

Page 44


Air transport growth is highest in expanding regions

Billions of people will increasingly want to travel by air

China India Middle East Asia Africa CIS Latin America Eastern Europe

Western Europe North America Japan

Yearly RPK growth 2014 - 2033

1 billion

people 2014

6.2 billion

people 2014

Em

ergi

ng/D

evel

opin

g A

dvan

ced

+6.0 %

+4.2 %

Page 45

September 14


Air traffic will double in the next 15 years

Source: ICAO, Airbus GMF 2014

0

2

4

6

8

10

12

14

16

1973 1978 1983 1988 1993 1998 2003 2008 2013 2018 2023 2028 2033

World annual RPK* (trillion) Airbus GMF 2014

ICAO total traffic

4.7%

2013-2033

Page 46

September 14


But we will face higher expectations and more competition

2013

Page 47

Safe

Sim

ple

Affordable

Eco-efficient G

row

th Fuel price

Competition

Reg

ulat

ions


Future of Air Transport through uncertainties

2030 ATS -Presentation to FEAMA - YC - 18-05-10

Politics Environment

Economy

Air Transport

Energy


Air Transport Scenario

2030 ATS -Presentation to FEAMA - YC - 18-05-10

Page 49

today 2030

Scared & Selfish

Mega Blocs

Turning Green


Page 50


© AIRBUS (Airbus S.A.S., Airbus Operations S.A.S., Airbus Operations GmbH, Airbus Operations LDT, Airbus Opeartions SL, Airbus China LTD, Airbus (Tianjin) Final Assembly Company LTD, Airbus (Tianjin) Delivery Centre LTD). All rights reserved. Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS. No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS S.A.S. This document and its content shall not be used for any purpose other than that for which it is supplied. The statements made herein do not constitute an offer. They are based on the mentioned assumptions and are expressed in good faith. Where the supporting grounds for these statements are not shown, AIRBUS S.A.S. will be pleased to explain the basis thereof. AIRBUS, its logo, A300, A310, A318, A319, A320, A321, A330, A340, A350, A380, A400M are registered trademarks.

© AIRBUS (Airbus S.A.S., Airbus Operations S.A.S., Airbus Operations GmbH, Airbus Operations LDT, Airbus Opeartions SL, Airbus China LTD, Airbus (Tianjin) Final Assembly Company LTD, Airbus (Tianjin) Delivery Centre LTD). All rights reserved. Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS. No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS S.A.S. This document and its content shall not be used for any purpose other than that for which it is supplied. The statements made herein do not constitute an offer. They are based on the mentioned assumptions and are expressed in good faith. Where the supporting grounds for these statements are not shown, AIRBUS S.A.S. will be pleased to explain the basis thereof. AIRBUS, its logo, A300, A310, A318, A319, A320, A321, A330, A340, A350, A380, A400M are registered trademarks.


Page 51

© 2014 IHS

IHS ECONOMICS & COUNTRY RISK

THE OUTLOOK TO 2040

Factors likely to drive change in the world economy

NOVEMBER 2014

Elisabeth Waelbroeck-Rocha, Chief International Economist [email protected] +336 07 21 12 20

mailto:[email protected]

© 2014 IHS

Multiple factors influence long term developments

• Demographic trends • Demographic growth, changing age pyramids, urbanisation, …

• Underlying structural trends, and the legacy of the past • In economic terms: sectoral composition of output, industrial organisation (clusters, large/small,

gazelles…), income distribution, wealth distribution,…

• How “resources” are preserved: education levels, …

• Regulatory structure: democracy, rule of law

• Technological progress, and the diffusion of innovation

• Changing face of finance

• What people will do / how they will behave – ie attitudes, values and strategies • Can vary across countries / role of culture

© 2014 IHS

Four families of stakeholders will influence tomorrow’s future

54

Governments Financial organisations

Non-financial organisations

Households

© 2014 IHS

The future will be defined by the interactions between these stakeholders and their environment

55

Governments Financial organisations

Non-financial organisations

Households

Economy Environment

Social Societal

© 2014 IHS

Progress is measured on several dimensions. The economic dimension is only one of them…

56

© 2014 IHS

Driving factors on the demographic front include

• Changing age pyramids

• Urbanisation patterns / hence increased risks from a security/health standpoint, and changed infrastructure needs ?

57

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1970 2014 2040

80+

65-80

14-65

<14

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1970 2014 2040

80+

65-80

14-65

<14

Advanced economies Emerging economies

© 2014 IHS

Demographic structures

58

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

1970 1970 2014 2014 2040 2040

80+

65-80

14-65

<14

Advanced Economies

Emerging Economies

Advanced Economies

Emerging Economies

Advanced Economies

Emerging Economies

1970

2014

2040 Million

© 2014 IHS

Household’s behaviours/values will change

• Generational shifts

• Income (re-)distribution

• Attitudes / consequences of technological change and impact on behaviours and preferences

• Risk and perception of risk

59

© 2014 IHS

Globalisation is likely to take new forms

60

Protectionism and regional integrati

on Protectionism and regional integrati

on

Intangibles / shift in values

?

18-19th centuries

? ?

?

1900-30

1940-80 1990-2005

2005-14

Intangibles & Shift in consumer

values

Return to localised

prod systems

Global sourcing

to mitigate

risks

Regional integration

Protectionism

Localised production

Fordism

Trade liberalisation

ICT Revolution

Mass

customisation Clusters

1 2

3

4

© 2014 IHS

Technological progress will contribute to the change in globalisation patterns. A new revolution is in the making

61

1980

2005

2015 ?

© 2014 IHS

In past decades, trade has been an engine of world growth

62

-15

-10

-5

0

5

10

15

1980 1984 1988 1992 1996 2000 2004 2008 2012

Total exports of goods and services

GDP Real

World - Total Export vs Real GDP growth - in yoy, %

© 2014 IHS

It will continue to play a role in the future, but more limited

63

-15

-10

-5

0

5

10

15

1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2024 2028 2032 2036 2040

Total exports of goods and services

GDP Real

World - Total Export vs Real GDP growth - in yoy, %

© 2014 IHS

The share of exports in world GDP will stabilise

64

0%

5%

10%

15%

20%

25%

30%

1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2024 2028 2032 2036 2040 2044

World : Ratio Total exports to GDP (in %)

© 2014 IHS

The trend in FDI is another sign of the globalisation. Its future trend illustrates the changing form of globalisation

65

0

500

1000

1500

2000

2500

3000

3500

4000

2003

Q1

2003

Q3

2004

Q1

2004

Q3

2005

Q1

2005

Q3

2006

Q1

2006

Q3

2007

Q1

2007

Q3

2008

Q1

2008

Q3

2009

Q1

2009

Q3

2010

Q1

2010

Q3

2011

Q1

2011

Q3

2012

Q1

2012

Q3

2013

Q1

2013

Q3

2014

Q1

2014

Q3

Inward FDI into China

Total outward FDI

© 2014 IHS

FDI growth will resume, but should not reach the pre-crisis peak

66

0

500

1000

1500

2000

2500

3000

3500

4000

2003

Q1

2004

Q3

2006

Q1

2007

Q3

2009

Q1

2010

Q3

2012

Q1

2013

Q3

2015

Q1

2016

Q3

2018

Q1

2019

Q3

2021

Q1

2022

Q3

2024

Q1

2025

Q3

2027

Q1

2028

Q3

2030

Q1

2031

Q3

2033

Q1

2034

Q3

2036

Q1

2037

Q3

2039

Q1

2040

Q3

© 2014 IHS

Financial market developments have largely contributed to global growth

67

0

50

100

150

200

250

1989

2014

Ratio of equity market capitalization to GDP for key markets

© 2014 IHS

Capital (53.8%)

ENEII (4.4%)

TFP (36.3%)

Labor (5.5%)

Forecast (2013-2040)

Productivity will be the main driver of growth in the advanced economies

68

Capital (54.3%)

ENEII (-1.6%)

TFP (43.8%)

Labor (3.5%)

History (1997-2012)

Capital (37.3%)

ENEII (-1.1%)

TFP (60.9%)

Labor (2.9%)

Forecast (2013-2040) Advanced Economies

Capital (52.7%)

ENEII (7.4%)

TFP (27.1%)

Labor (12.8%)

History (1997-2012) Major Emerging Markets

© 2014 IHS

These factors explain the different speed of growth across regions

69

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

Africa Asia-Pacific CentralAmerica

SouthAmerica

NAFTA Europe EMU Middle East& North

Africa

1994-20142014-2040

Real GDP growth, %

© 2014 IHS

By 2040, 85% of the world’s economies will still have a real GDP per capita level below that of the US in 2000

70

0

1

2

3

4

5

6

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alia

Buru

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elan

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Real GDP per capita in 2040 as a share of US real GDP per capita in 2000

© 2014 IHS

Number of countries with a real GDP per capita in 2040 below x% of the US real GDP per capita in 2000

71

0

20

40

60

80

100

120

140

160

180

200

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

© 2014 IHS 72

10 poorest and 10 wealthiest countries by 2040

• Lichtenstein

• Qatar

• Macau

• Luxemburg

• Bermuda

• Norway

• Singapore

• Switzerland

• Australia

• United States

• Somalia

• Guinea-Bissau

• Burundi

• Niger

• Madagascar

• Eritrea

• Democratic Republic of Congo

• Liberia

• Togo

• Central African Republic

© 2014 IHS

Risks of social disruptions abound …

73

One-year outlook for social/labour unrest

© 2014 IHS

Trend in the share of different countries/regions in real world GDP in selected years

74

0

5

10

15

20

25

30

2000

2014

2024

2040

%

© 2014 IHS 75

The Asia-Pacific region will account for half of the growth in world GDP in 2040

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2014 2024 2040

Africa

Middle East

Latin America andCaribbeanAsia-Pacific excludingJapan and ChinaChina

Emerging Europe

Western Europe

Japan

Mexico

Canada

United States

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000 2014 2024 2040

Africa

Middle East

Latin America andCaribbeanAsia-Pacific excludingJapan and ChinaChina

Emerging Europe

Western Europe

Japan

Mexico

Canada

United States

Composition of world GDP by country/region Contribution of each country/region to the RISE in world GDP

© 2014 IHS

Conclusion

• Globalisation will take new forms going forward • Increased intra-regional focus • Focus on intangibles/value of services • Impact of manufacturing 4.0 on the location of production • Global sourcing to mitigate risks

• The Asia-Pacific region will continue to drive world growth

• Global world imbalances will persist: 85% of the world’s economies will still have a real GDP per capita level below that of the US in 2000: social disruptions could change the outlook

• Technological progress, geopolitical factors and demography will have at least as big a contribution as underlying economic developments going forward

76

© 2014 IHS

Global Outlook

ihs.com

IHS

Thank you!

Elisabeth Waelbroeck-Rocha, Chief International Economist, +331 76 76 30 87, [email protected]

ECONOMICS

IHS Customer Care: • Americas: +1 800 IHS CARE (+1 800 447 2273); [email protected] • Europe, Middle East, and Africa: +44 (0) 1344 328 300; [email protected] • Asia and the Pacific Rim: +604 291 3600; [email protected]

© 2014 IHS. No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent, with the exception of any internal client distribution as may be permitted in the license agreement between client and IHS. Content reproduced or redistributed with IHS permission must display IHS legal notices and attributions of authorship. The information contained herein is from sources considered reliable but its accuracy and completeness are not warranted, nor are the opinions and analyses which are based upon it, and to the extent permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage or expense incurred by reliance on information or any statement contained herein. For more information, please contact IHS at Customer Care (see phone numbers and email addresses above). All products, company names or other marks appearing in this publication are the trademarks and property of IHS or their respective owners.




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