eo2012 cabrera
TRANSCRIPT
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 1/35
THE BIG SHIFT
WORLD ECONOMIC OUTLOOK 2012Ángel CabreraThunderbird School of Global Management
@CabreraAngel
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 2/35
SHIFT HAPPENS
WORLD ECONOMIC OUTLOOK 2012Ángel CabreraThunderbird School of Global Management
@CabreraAngel
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 3/35
THE BIG SHIFT
WORLD ECONOMIC OUTLOOK 2012Ángel CabreraThunderbird School of Global Management
@CabreraAngel
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 4/35
IMF September Forecast for 2012
• Advanced economies• +1.9% (-0.7% from June)
• Emerging economies• +6.1% (-0.3% from June)
• World• +4.0% (-0.5% from June)
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 5/35
IMF September Forecast for 2012
• United States• +1.8% (-0.9% from June)
• Euro Area• +1.1% (-0.6% from June)
• Japan• +2.3% (-0.6% from June)
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 6/35
Emerging Markets GDP Growth
Average Real GDP per Capita
2010-2030ECAGR
World3.6%
$39T $73T $180T
N.A. W. Europe Asia Dev. Asia EmergingCEEMEALatin America
Source: Citi Investment Research & Analysis report “Global Growth Generators,” February 2011. Note: Asia Developed is comprised of Japan, Australia and New Zealand.
Composition of World Real GDP
EM:
52%
EM:42%
EM:70%
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 7/35
Rise of Emerging Markets Trade Flows
Exports/ImportsEM Trade as a % of Total World Trade
EmergingMarkets
DevelopedMarkets
Source: UN Conference on Trade and Development (UNCTAD) Handbook of Statistics 2010.
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 8/35
(1) Calculated using purchase power parity exchange rates.Source: Citi Investment Research & Analysis report “Global Growth Generators,” February 2011 and Pricewaterhouse Coopers, “UK Economic Outlook,”
November 2009.
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 9/35
G7 vs. E7
• U.S., Japan, Germany,U.K., France, Italy andCanada
• China, India, Brazil,Russia, Mexico,
Indonesia and Turkey
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 10/35
G7 vs E7
Source: PWC.com
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 11/35
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 12/35
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 13/35
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 14/35
What world do you prefer• Option A: We grow at 2% while others grow at 1%
• Option B: We grow at 3% while others grow at 6%
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 15/35
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 16/35
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 17/35
SHOULD WE WORRY?
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 18/35
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 19/35
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 20/35
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 21/35
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 22/35
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 23/35
Source: Citi, Economist Intelligence Unit.
P u b l i c D e b t 2 0 1 0
( % G D P )
Average GDP Growth 2010-2014 (%)
UnitedStates
Developed
Emerging
Australia
Brazil
China
India
IndonesiaKorea
Mexico
Russia
Saudi Arabia
South Africa
Turkey
200%
Argentina
CanadaFrance
Germany
Italy
Japan
NetherlandsSpain
UnitedKingdom
Emerging Markets Driving Global GDP Growth
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 24/35
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 25/35
Europanic
• Interbank markets signtrouble
• A run on Italian and
Spanish debt canmake LehmanBrothers seem trivial
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 26/35
Europanic
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 27/35
Summary• Explosive mix:
• Slow recovery, evenrecession in developedeconomies
• Increased fiscal and financial
uncertainty• Rebalancing necessary
• Internal: from public to privatedemand.
• External: from advancedeconomy to developingeconomy demand
• Worries about sovereignbonds, translated intoworries about banksholding that debt
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 28/35
Areas of attention• Fiscal consolidation
• Not too fast or it will kill• Not too slow or it will feed uncertainty• Just right!
• Manage looming crisis• Support weak links that can trigger domino effect: european
sovereign debt, banks, ease housing troubles
• Rebalance global trade
• Learn new acronyms• E7• E2E
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 29/35
GLOBAL BUSINESSDIALOGUE - NOV 10-11Thunderbird School of GlobalManagement
@Thunderbird
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 30/35
Global Trends and Business Drivers
Emerging Markets
Large InvestmentNeeds
Technology
– Sustained higher GDP growth – Rise of EM corporate multinationals
– Growth in EM consumer demand
– Growing trade and capital flows, particularly intra-EM
– Rapid population growth in EM cities
– Driving changes in consumer behavior and expectations
– Improving efficiency
– Increasing ability to store and use data
– Significant and growing demand for credit and investment inEM
– Growing capital markets volumes and products
– Financial re-intermediation as investment needs are metlargely by traditional banking products (lending, cash
management)
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 31/35
The Shift from G7 to E7• Measured by GDP in purchasing power parity (PPP) terms,
which adjusts for price level differences across countries, thelargest E7 emerging economies seem likely to be bigger thanthe current G7 economies by 2020, and China seems likely tohave overtaken the US by that date. India could also overtakethe US by 2050 on this PPP basis.
If instead we look at GDP at market exchange rates (MERs),which does not correct for price differences across economiesbut may be more relevant for practical business purposes, thenthe overtaking process is slower but equally inexorable. TheChinese economy would still be likely to be larger than that ofthe US before 2035 and the E7 would overtake the G7 before2040. India would be clearly the third largest economy in theworld by 2050, well ahead of Japan and not too far behind theUS on this MER basis.
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 32/35
Its not all gloom for G7• Although current fuel prices are at historical highs (at least in real U.S. dollar
terms), food prices are at or below levels that prevailed before the mid-1990s.• The major shift in economic power to emerging countries such as China and India
should be grasped by those in established economies as an opportunity formutual benefit in terms of the economy and business as opposed to a zero sumcompetitive game that should be feared.
• Rapid growth in consumer markets in the major emerging economies associated
with a fast growing middle class will provide great new opportunities for Westerncompanies that can establish themselves in these markets.• Even though relative GDP shares decline, the average per capita income will
remain well above the E7. The rise of the E7 should boost average G7 incomes inabsolute terms through the newly created market opportunities
• G7 economies can specialize in their areas of comparative advantage and haveaccess to a larger global market both at home and overseas
• G7 customers will continue to benefit from low cost imports from the E7 and otheremerging economies• Restructuring of emerging market economies will give rise to many more
opportunities for private equity firms
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 33/35
Inflation still lower in G7 countries
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 34/35
Other Considerations• This changing world order poses both challenges and opportunities for
businesses in the current advanced economies. On the one hand,
competition from emerging market multinationals will increase steadily overtime and the latter will move up the value chain in manufacturing and someservices (including financial services given the weakness of the Westernbanking system after the crisis).
• Until recently, emerging market economies have been largely immune to the
adverse developments of the financial crisis. They have had to deal withvolatile capital flows, but in general have continue to sustain high growth.Indeed, some are close to overheating, although prospects are moreuncertain again for many others. Under certain risk scenarios, they may wellsuffer more adverse export conditions and even more volatile capital flows.Low exports and, perhaps, lower commodity prices will also create challenges
for low-income countries.• Finally, there will also be challenges arising from the rapid rise of China, India
and other emerging economies in terms of pressure on natural resourcessuch as energy and water, as well as implications for climate change.Commodity prices will tend to remain high, so boosting exporters of theseproducts (e.g Brazil. Russia, Indonesia, the Middle East) and increasing input
costs for natural resource importers.Source: PWC.com
8/2/2019 Eo2012 Cabrera
http://slidepdf.com/reader/full/eo2012-cabrera 35/35
So What?• Too many companies in mature markets assume that the only
reason to enter emerging countries is to pursue newcustomers. They fail to perceive the potential for innovation inthose countries or to notice that a few visionary multinationalsare successfully tapping that potential for much-needed ideas
in products and services• There becomes an increased need to leverage “global
bridgers”
• This term coined by Nathan T. Washburn and B. Tom Hunsaker – two colleagues who teach at Thunderbird School of Global
Management, is used to describe a new kind of manager thatmultinationals need to foster, cultivate and deploy globally.
• These managers come up with innovations in emergingmarkets and bring home tested ideas that are integrated intotheir companies’ offerings worldwide.
S hb