1. society
2. work
3. unemployment

Global Outlook: Risk Control is Working
- Low oil prices: big boost for Western world, tough luck for Russia
- US: consumers and companies in good shape = solid growth after weak Q1
- China: sufficient growth despite slowing trend, risks well contained
- Eurozone: oil, exchange rate and ECB boost growth as tail risks fade
- Britain: solid recovery but mind the politics, Brexit risk?
- Tail risks: Emerging market
Grexit, euro politics?
April 2015
Holger Schmieding
Chief Economist
+44 20 3207 7889
holger.schmieding@berenberg.com
Christian Schulz
Senior Economist
+44 20 3207 7878
christian.schulz@berenberg.com
Economics
Overview: Cheap oil helps to overcome the legacy of crisis
Economic opportunities political risks
The legacy of post-Lehman recession: caution reigns. Less investment, less credit and less wage growth than
usual. No exuberance = long cycle in the Western world, Eurozone roughly two years behind the US and UK.
US: solid momentum, trend growth - the Fed will not spoil it
Households, companies and banks have repaired their balance sheets. Cheap oil and strong employment gains
have turned US households into global consumers of last resort. Oil boost offsets drag from stronger dollar.
Why worry about the Fed? Yellen will only reduce the stimulus if it looks ultra-safe to do so. No inflation = Fed
can tailor its policy to the real economy. First hike September 2015. Very gradual hikes thereafter.
Eurozone: close to 2% growth ahead, euro crisis over despite 25% Grexit risk as contagion controls work
Easing up. more fiscal repair and less monetary stimulus after Lehman than US and UK = much weaker
demand. But austerity is over, ECB has finally turned aggressive. Eurozone can narrow gap to US and UK.
Cheap oil and weak euro = strong tailwind. Reform countries take the lead, core Europe rebounds from
Putin shock, France lagging. Close to 2% growth by midswing.
UK: return of animal spirits. Growth close to 3% at low inflation. First BoE hike February 2016. Political risks.
China: controlled rebalancing. Trend growth slowing but demand stays close to trend. 40% savings rate,
$3.8 trn fx reserves = China can use all levers of macroeconomic policy if need be. 7% growth 2015, 6.7% in 2016.
Emerging markets: the good, the bad and the ugly. Oil importers with strong exports to US benefit most; oil
exporters and those with a lot of dollar debt are hurt most by cheaper oil and stronger dollar. Volatility ahead.
2
The big picture: a tale of three central banks
Timely asset purchases
can make a difference.
Central bank asset purchases and demand growth until late 2014
30%
3%
Starting in early 2009, the
US Fed and the BoE
reacted aggressively to
market turbulences and
other risks.
2%
The ECB held back,
allowing the euro crisis to
spread in 2011 and 2012.
Asset purchases (% of 2013 GDP), lhs
25%
Real GDP growth since asset purchase start, average qoq ann %
20%
15%
10%
1%
5%
0%
0%
Eurozone
US
UK
Left scale: total central bank asset purchases 2009-2014 (sovereign and private bonds), % of 2013 nominal GDP. Right scale: average quarterly annualised real GDP growth since
the quarter after the first serious purchase programme started (ie Eurozone since Q4 2009, US Q2 2009, UK Q2 2009). Source: IMF, central banks.
The ECB could have done
much more to stabilise
confidence and demand.
The Eurozone has paid the
price for the reluctant ECB
response.
Better late than never:
from March 2015 to
September 2016, the ECB
wants to buy bonds worth
1.1trn (11% of GDP),
60bn per month.
3
Monetary stimulus: aggressive policy is working
GDP: US and UK had left Eurozone behind
Aggressive monetary
policy has done its job
of stimulating demand in
the US and the UK.
110
108
106
UK GDP
US GDP
Eurozone GDP
-crisis
experience is similar to
that of the US, with an
austerity and euro-crisis
induced pause around
2011.
104
102
As front-loaded
austerity eased back
and Draghi ended the
euro-crisis, UK growth
picked up through 2013
and 2014.
100
98
96
94
2006
2007
2008
Index, 2007=100. Source, BEA, Eurostat, ONS.
2009
2010
2011
2012
2013
2014
The Eurozone recovered
modestly after the OMT
programme; QE, oil and
the euro will add
momentum soon.
4
The flip side: Eurozone prudence
After Lehman, the debt
ratio surged much less in
the Eurozone than in the
US and the UK.
Change in public debt ratio since start of euro, in % of GDP
50
Japan would be off the
charts.
40
Eurozone
UK
US
Until 1998, the UK had
been much more prudent
than the future Eurozone.
30
Since then,
way round.
20
The euro crisis was not
primarily about debt. It
was about the ECB
allowing contagion to
spread.
10
0
-10
1998
the other
2000
2002
2004
2006
2008
2010
Increase in the ratio of gross government debt to GDP since the start of the euro, in percentage points of GDP.
End-2014 ratios Eurozone 94.3%, UK 88.7%, US 104.9%, Japan 246.3%. Source: Eurostat; EU Commission projections for 2014-2016
2012
2014
2016
While the Eurozone lags
far behing in terms of
recent GDP growth, it is
far ahead in terms of fiscal
repair.
5
Labour market: Eurozone versus US and UK
Until 2008, the Eurozone
created more jobs than the
US and the UK.
Increase in employment since the start of the euro
115
After a sharp post-Lehman
correction, the US labour
market has rebounded.
UK
112
The Eurozone adjusts more
slowly. Under the pressure of
the euro crisis, employment
fell until spring 2013.
Eurozone
US
109
The US is now a little ahead.
Why is US unemployment at
5.5% well below the 11.2%
Eurozone rate?
106
The US participation rate
has fallen sharply from 67%
to 63% while rising from 67%
to 72.4% in the Eurozone and
from 76% to 77% in the UK.
103
100
1999
2001
2003
2005
Level of employment, 1Q 1999=100; labour force survey data. Source: Eurostat, BLS
2007
2009
2011
2013
2015
In the UK, wages rather than
employment took the postLehman hit. Also, the UK
reduced incentives for early
retirement.
6
Eurozone: reasons to expect firmer growth
Euro crisis over, Putin shock fading, big stimulus in the pipeline
Resilient global demand: US and UK at trend growth, China stable, other emerging markets very mixed
Austerity is largely over (fiscal drag of 0.1% of GDP in 2015 after 0.2% in 2014)
Putin shock fading = Germany rebounding
Spain, Ireland, Portugal reap rewards of their reforms
The stimulus in the pipeline:
•
After the stress test results, banks can lend more freely again (0.1ppt boost to GDP)
•
Very low bond yields; ECB rate cuts and liquidity injections (0.1ppt boost to GDP)
•
Effective euro exchange rate 11% below 2-year average (0.7ppt boost)
•
Lower oil prices, down roughly 30 from 1/2013 6/2014 average of 81 per barrel Brent crude, equivalent
to a roughly 0.7ppt boost to demand over 4-6 quarters
Mind the time lag: Households and companies will only spend the windfall when they feel confident to do so.
7
Eurozone: the boost from cheaper oil
Direct impact of oil prices on headline inflation
36
1.6
27
1.2
18
0.8
9
0.4
0
0.0
-9
-0.4
-18
-0.8
-27
-1.2
Change in oil price, yoy, in , 1m fwd
-36
-45
Jan 97
-1.6
Energy contribution to yoy inflation, rhs
-2.0
Jan 99
Jan 01
Jan 03
Jan 05
Jan 07
Jan 09
Jan 11
Jan 13
Yoy change in oil price per barrel Brent crude, in ; 1 month forward, on left scale. Energy contribution to yoy rate of Eurozone HICP, on right scale.
Source: Factset, Eurostat, Berenberg calculations
Jan 15
A sustained rise/decline in
the oil price by 25 per
barrel adds/subtracts 1
point from the yoy rate of
headline inflation within two
months.
The overall effect is bigger.
Because oil prices affect
the costs of production and
prices for transport and
other energy-intensive
services, the indirect
impact adds about 0.4ppt
to the direct impact on
headline inflation.
More real purchasing power
of consumers, cheaper
inputs for companies =
boost of 0.7% to real GDP
within 4-6 quarters.
Similar effects for US, UK
and Japan, also nice
stimulus for China and
India.
8
Eurozone: the boost from the weaker euro
Exchange rate can drive export outlook if global demand holds up
20
Effective exchange rate, inverted, % yoy
15
Exports, yoy %
20
15
A cheaper euro helps euro
exporters gain market share
and/or boost profit margins.
10
More expensive imports get
substituted by domestic
produce.
10
5
0
5
-5
0
-10
-5
-15
-20
1982
-10
1985
1988
1991
1994
The Euro exchange rate
usually influences the
medium-term export outlook
strongly.
1997 2000 2003 2006 2009 2012
Since the 2007/08 global
financial crisis, the
relationship has been
marred by major fluctuations
in global demand and
extreme FX volatility.
But strong US domestic
demand combined with a
healing euro economy raise
hopes that the depreciation
of the euro can boost GDP
by 0.7% in 4-6 quarters.
Left scale: Nominal euro effective exchange rate (inverted), yoy %,. Right scale: change in Eurozone real exports of goods and services (pre-1995 = France), yoy %. Sources: ECB, Eurostat
9
Real M1: the Power of Money
Our best leading indicator for the Eurozone
Feb 2015
14
12
6
5
10
4
8
3
6
2
4
1
2
0
0
-1
-2
-2
Real M1, 3q fwd, lhs
-4
-3
GDP, rhs
-6
Jan 92
-4
Jan 95
Jan 98
Jan 01
Jan 04
Jan 07
Jan 10
Jan 13
Major changes in real M1
money supply dynamics
herald changes in GDP
growth some three quarters
in advance.
A rebound in M1 growth from
mid-2012 onwards signalled
the return to economic
growth in spring 2013.
Real M1 lost momentum for a
while after mid-2013,
signalling somewhat slower
growth for mid-2014.
But the pace has turned up
again sharply, pointing to a
major gain in cyclical
dynamics in mid-2015.
Real M1 suggests that the
more aggressive ECB stance
will work.
Yoy changes in %, real M1 advanced by 3 quarters. Source: ECB, Eurostat, Berenberg
10
ECB easing already working
Since June 2014, the ECB
has announced a series of
easing measures,
including rate cuts, a
negative deposit rate and
purchases of ABS and
covered bonds.
Eurozone SME borrowing costs fall faster since ECB stepped up easing
7
6
The stimulus is working
already. Nominal
Eurozone SME borrowing
costs have dropped
significantly since May
2014.
5
Inflation expectations
have also declined, but
borrowing costs have
fallen more, providing a
real boost for businesses.
Germany
4
Spain
Italy
3
Jan 2003
Jan 2005
Jan 2007
Jan 2009
Jan 2011
Jan 2013
Jan 2015
Sovereign bond
purchases will now add to
the stimulus.
Effective interest rate on new loans to non-financial corporations up to €1m, 1 to 5 years maturity. In %.. Source: ECB
11
Eurozone: low inflation can be good for debt dynamics
A theoretical risk:
Unexpectedly low inflation
or even outright deflation
can worsen debt dynamics.
Real yields fall with core inflation
4.0
While nominal debt stays
constant, nominal income
falls short of expectations.
3.5
3.0
But lower costs to finance
the debt can more than
offset the hit.
2.5
That has happened in the
Eurozone: real financing
costs for governments have
come down dramatically.
2.0
1.5
Low inflation lessened the
German resistance against
more forceful ECB action.
1.0
Real 10yr yield
That has allowed the ECB to
start buying sovereign
bonds.
0.5
Core inflation
0.0
Jan 2005
Jan 2007
Jan 2009
Jan 2011
Jan 2013
Jan 2015
Core inflation ex food and energy, yoy rate in %; weighted average of 10year sovereign yields in the Eurozone adjusted for core inflation.
Source: Bloomberg, Eurostat.
12
Eurozone: recovery benefits from low inflation
Households purchase more when inflation is low
-1
0
-5
0
-10
1
-15
2
-20
-25
3
HICP inflation, %, lhs (inverted)
-30
4
Consumer major purchases at
present, rhs
5
2003
-35
-40
2005
2007
2009
2011
2013
Left scale (inverted): Eurozone HICP yoy, %. Right scale: Eurozone consumer survey major purchases at present, balance, sa, long-term average: -16.4.
Source: Eurostat, European Commission.
No coincidence: households
spend more as prices rise
more slowly.
No deflationary spiral at all:
households are not
postponing purchases.
Instead, the readiness to
make major purchases has
surged to ist highest level
since May 2001.
Inflation has probably
bottomed out.
But due to significant slack
in the economy
(unemployment rate at
11.2%), inflation will stay
close to 0 for much of 2015
until the base effects from
the late 2014 oil price plunge
kick in.
Inflation will revert to the 2%
target only very slowly.
2015
13
Eurozone: reform countries overtake Germany
Economic sentiment: Germany stable, reform countries strong, Eurozone edging up
120
120
The erstwhile crisis
countries have moved up
nicely.
Sentiment in the periphery is
now higher than in the core.
110
110
100
100
90
80
Eurozone
Periphery
Germany
Think Spain, not Greece.
Spain is almost six times as
big as Greece. The surge in
confidence in Spain more
than offsets the latest
plunge in Greece.
90
In
exportoriented industry, concerns
about Russia caused a
setback from June 2014
onwards.
80
This also affected other
parts of the Eurozone, but to
a lesser extent.
70
70
Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15
Sentiment stabilised at the
end of 2014 and move up
sharply in early 2015.
Economic sentiment, Eurozone, Germany and weighted average for Spain, Portugal, Greece and Cyprus; no data for Ireland. Source: European Commission
14
Germany: surging consumption, investment wobbly
German private consumption
Buoyant consumption, Putin hit to investment fading
108
Most observers seem to believe that private consumption is the weak
spot of the German economy.
That is wrong. Supported by strong employment gains, consumption
has trended up nicely since 2006.
The post-Lehman recession caused only a minor dip. After slowing
down temporarily when the euro crisis escalated in late 2011,
consumption growth firmed again. Buoyant consumer confidence, low
oil prices and strong retail sales project healthy gains for 2015.
Index 2005=100
106
104
102
100
98
Mar 02
Mar 04
Mar 06
Mar 08
Mar 10
Mar 12
Mar 14
Volume index; 2005=100; Smoothed for 2007 VAT hike. Source: Eurostat
Uncertainty hurts: the euro crisis hit investment from mid-2011 to
early 2013. After the euro crisis faded, investment growth picked up
strongly after the spring of 2013.
Investment data for Q2 and Q3 showed a Putin effect: a decline in
investment that goes well beyond the mere correction of the Q1 boost
to construction from a mild winter.
After Russia scaled back its intervention in Ukraine last September,
German business expectations started to recover in late 2014.
Investment edged up again in Q4 2014, boding well for 2015.
German gross fixed capital formation
120
Machinery
115
Construction
110
105
100
95
90
Mar 02
Mar 04
Mar 06
Volume index; 2005=100. Source: Eurostat.
Mar 08
Mar 10
Mar 12
Mar 14
15
The blueprint for European reforms: the German turnaround
Core employment: strong increase since 2006
stupid.
30
After four decades of
rising joblessness,
Germany turned its labour
market around with the
reforms of 2004.
29
Since early 2006, core
employment has risen by
4.3 million (+16%) to a new
record of 30.6 mn.
31
More employment
= more taxpayers
= balanced budget
In million
28
The German experience
shows: labour market
reforms work after a little
lag. Some 30% of recent
new hires are immigrants.
27
26
Jan 92
Jan 95
Jan 98
Jan 01
Jan 04
Jan 07
Core employment: subject to social security contributions, in million. Source: Bundesagentur für Arbeit, Bundesbank
Jan 10
Jan 13
Strong employment gains
bode well for German
consumption.
With the euro supporting
exports, the overall
16
outlook is excellent.
European politics: tough love at work
The EU and the euro are political projects
European integration has delivered the longest period of peace and prosperity for major parts of Europe since the
days of the Roman Empire. Preserving European integration is a dominant national interest of almost all euro
members. Putin has reminded many countries of that big picture.
Tough love: euro members help each other
but set conditions for such support.
Anti-European backlash ?
•
Support for the EU and the euro has fallen in many opinion polls.
•
Slashing inflation or fiscal deficits and reforming labour markets is tough and unpopular.
•
Thatcher in Britain (early 1980s) and Schröder in Germany (2003-2005) also faced a major rise in unemployment and
massive protests until the results of their reforms became obvious with a lag.
•
The euro-periphery is going through the same experience. The positive results are starting to show. But politics lag.
•
The facts on the ground: the grand bargain holds
Tough love: all crisis countries have so far done what they had to do. But Greece is now wavering.
Berlin and the ECB have granted the support needed and become more flexible over time.
But Europe will not let Greece get away with reneging on its commitments. Political risks ahead.
17
Euro periphery adjustment progress (I): external adjustment
The five euro crisis
countries have turned
their external accounts
around very nicely.
Turnaround in the external account
2
They balanced their
joint current account in
late 2012 and achieved a
surplus (1% of GDP) in
2013.
1
Current account (% of GDP)
0
-1
Individually, Italy, Spain,
Portugal, Greece and
Ireland now have a
current account surplus.
-2
-3
The erstwhile crisis
countries no longer
need to import capital.
-4
-5
-6
-7
Jan 2003
Jan 2005
Jan 2007
Jan 2009
Current account balance in % of GDP, Italy, Spain, Greece, Portugal and Ireland; 12-month moving average.
Source: Eurostat, Berenberg calculations
Jan 2011
Jan 2013
Jan 2015
Imports are starting to
pick up again. But lower
prices for oil imports
and stronger receipts
from tourism and
shipping services
(Greece) help.
18
Adjustment progress (II): Labour costs
Turnaround at the euro
Real unit labour costs: the great convergence
140
labour
costs are falling sharply.
Turnaround in Germany as
130
Germany
labour costs are
now rising at an aboveaverage pace.
Portugal
120
In the base year 2000,
Germany still was the
Spain
110
Portugal and Spain have
probably achieved all the
convergence they need.
100
If they bring down their
unit labour costs even
further relative to
90
2000
2002
2004
Nominal unit labour costs, 2000=100. Source: Eurostat
2006
2008
2010
2012
2014
a significantly better place
to invest than Germany.
19
Adjustment progress (III): Structural reforms
Who is implementing progrowth structural reforms?
Crisis countries more responsive to OECD reform proposals
0.0
Greece
Ireland
Estonia
Spain
Portugal
United Kingdom
Slovakia
Poland
Euro18
Austria
Finland
Italy
Sweden
France
Slovenia
Netherlands
Germany
Belgium
Luxembourg
0.2
0.4
0.6
0.8
1.0
The OECD regularly makes
detailed reform proposals.
Once a year, the OECD
checks whether countries
are heeding such advice.
The bailout countries are
enacting sweeping
reforms
while Germany does very
little.
OECD reform responsiveness indicator
2010 - 2013
Responsiveness to Going for Growth recommendations across OECD countries, average of 2010/11, 2011/12 and 2012/13. Score from 0 (no reforms) to 1 (serious
reforms in all policy areas identified by the OECD). Source: OECD 2014
20
Eurozone progress: labour market has turned up
Unemployment is falling fast
400
2,500
Youth unemployment, lhs
300
2,000
Total unemployment, rhs
1,500
200
1,000
100
500
0
0
-100
-500
-200
-1,000
2002
2004
2006
2008
2010
2012
The worst is over for the
labour market of the
reform countries.
Since the peak in March
2013, the number of
unemployed in Spain,
Greece, Portugal and
Ireland has fallen by 1.1mn
to a still-high 7.5 mn.
Youth unemployment
remains very high, with a
total of 1.13 million. But the
number of unemployed in
the 16-24 age bracket has
declined by 270 since the
peak.
The labour market
reforms support
sustainable jobs growth.
The challenge for 2015:
preventing reform
reversals.
2014
Change in total unemployment in Spain, Portugal, Ireland and Greece, 12-month sum, based on monthly nsa data. Source: Eurostat
21
Eurozone periphery the pain was not in vain
Employment: reform countries are recovering fast
0.8
Employment growth, qoq %, 2014 Q1 - Q4 average
0.6
Crisis countries
0.4
0.2
0.0
-0.2
Average qoq change in employment, in % . EE: Estonia, EL Greece, IE Ireland, ES Spain, PT Portugal, DE Germany, FI Finland, BE Belgium, SI Slovenia, SK Slovakia, MT Malta, LU
Luxembourg, NL: Netherlands, LV: Latvia, IT: Italy, FR: France, Source: Eurostat
It was very tough. But the
bitter medicine is working.
Most of the reform countries
have started to reap the
rewards of their efforts.
Jobs growth in Portugal,
Greece, Spain and Ireland
reached a very health pace
in 2014, ahead of most of
core Europe.
Paying the price: France and
Italy had very slow jobs
growth in 2014 because they
had not made their sclerotic
labour markets more flexible.
But Italy could soon be
catching up after Renzi
finally passed his serious
labour market reform in
early 2015.
The warning: a reform
reversal could still undo the
progress. Is Greece
listening?
22
Greece: A remarkable fiscal adjustment until late 2014
Greece achieved a primary
surplus.
Dramatic expenditure cuts, almost stable tax intake
After a massive increase
in public spending until
the autumn 2009
75
70
since the start of the
Greek crisis were savage.
65
Despite higher tax rates,
revenues were hit by the
huge adjustment
recession until the
situation stabilised in
2013.
60
55
50
With the return to growth
in early 2014, the
underlying situation was
gradually improving
without extra austerity.
Primary outlays, 12mo sum
Revenues, 12mo sum
45
Jan 07
Jan 08
Jan 09
Jan 10
Jan 11
Jan 12
Jan 13
Jan 14
Government budget, revenues and primary expenditures, 12-month rolling sum, revenues adjusted for July 2013 transfer of ESCB profits
from Greek bonds. Source: Bank of Greece
Jan 15
Tspiras
has probably put an end
to this. Tax revenues
dropped 14% yoy in the
first two months of 2015. 23
The Greek tragedy: Populism takes a devastating toll
The rise of Syriza aborts the Greek recovery
The Syriza threat appeared in early December when Greece brought its presidential elections forward,
leading to snap parliamentary elections in late January.
The situation before the rise of the Syriza: on the recovery track
GDP rebound at 2.3% annualised pace in first 3 quarters of 2014
1.6% yoy rise in employment in Q3
Primary fiscal surplus of around 1% of GDP
2.8% yoy gain in real wages in Q3
7.0% yoy rise in real exports in Q3, driven mostly by shipping and other services
Greece had regained market access with a 5-year bond
On top of the IMF programme running until mid-2016, Greece would have needed no more than a pre-cautionary
credit line from Europe to stay afloat after the end of the European support programme in early 2015.
Since the rise of Syriza: heading for the abyss
•
Capital flight of roughly 50bn (28% of GDP) in 3 months December to February, visible in Target2 balances
•
Serious drain in bank deposits of roughly 30bn
•
14% yoy drop in tax revenues in January/February
•
Relapse into recession
•
Major drop in leading indicators for businesses while consumers (=voters) celebrate expected tax cuts
24
Greece: From Samaras recovery to Tsipras recession?
Business sentiment: Greek rebound faltering while Spain roars ahead
1.5
Recession over: on the
back of a major surge in
confidence, Greek GDP
expanded at a 2.3%
annualised pace in the
first 3 quarters of 2014, in
line with Spain.
1.0
0.5
0.0
-0.5
-1.0
-1.5
After the ECB finally
stopped the rot in August
2012, sentiment turned up.
Greek corporate
confidence
Spain corporate
confidence
But when the Syriza threat
came to the fore in
December 2014, Greek
confidence started to
crumble.
While Spain roars ahead,
Greece has apparently
fallen back into recession.
-2.0
Jan 2000 Jan 2002 Jan 2004 Jan 2006 Jan 2008 Jan 2010 Jan 2012 Jan 2014
Corporate confidence: average of industrial, services, retail and construction confidence, standardised. Source: European Commission, Berenberg calculations
25
Grexit ?
The plight of populism: scenarios for Greece
-out to end-June. If Greece completes the pending review of its reform
progress, the last 7.2bn instalment may be enough to keep Greece afloat. Then Greece will need a third bail-out.
Scenario 1: Tsipras turns half-Lula soon, strikes necessary deals with troika (50% probability)
Continues current policies with small amendments only, accepting a face-saving compromise offered by Europe.
Greece gets back on track after some hiccup. Populists across Europe deflated.
Scenario 2: Reality shock tears Syriza-led government asunder within six months (25%)
Heightened uncertainty, new coalition or new elections to usher in a more realistic government
Scenario 3: Grexit (25%)
Having to choose between ditching its unaffordable election promises and risking euro exit, Greece refuses to
accept the deal its creditors can offer. Greece reneges on its obligations to its creditors and defaults, ECB stops
accepting Greek assets as collateral and can no longer authorise emergency liquidity assistance to Greek banks.
Greece may have to print its own money (Grexit).
Scenario 4: Default within euro? Highly unlikely
Greek banks would be bust if Greece defaults on its creditors. Only Europe/ECB could supply Greek banks with
euros. For that, Greece has to strike a deal with Europe and accept European conditions. But if it accepts
conditions, it need not default in the first place.
26
Grexit ?
The European angle
Three Euro crisis basics:
1.
Tough love. Conditional mutual support for countries that play by the rules.
2.
Contagion control. It is not about Greece. It is about controlling contagion risks.
3.
Whatever it takes: ECB and Berlin ready to act decisively to keep all compliant countries in the euro.
The Achilles heel of the Eurozone: political will to play by the rules, that is to accept the conditions attached to
mutual support.
Contagion control: Eurozone in much better position to cope with turbulences up to potential Grexit.
1.
ECB is buying sovereign bonds anyway to combat deflation risk = little contagion through bond markets
2.
ESM support funds
3.
Banking union and cleaner bank balance sheets = little contagion risk through bond markets
4.
Political contagion? The mess Syriza is creating in Athens reduces the allure of populists elsewhere
Key events
20 April:
24 April: Eurogroup to decide on Greek reform list
By end April: completion of bail-out review under troika supervision, release of 7.2bn?
By end June: third bail-out necessary to keep Greece afloat, probably 30-50bn
27
Spain: the turnaround
House prices and employment rebounding fast
20
The boom-bust cycle is
over.
House prices, Spanish Ministry of
development (yoy, %, lhs)
House prices, INE, yoy % (lhs)
15
10
Employment yoy, %, rhs)
8
6
4
5
2
0
0
-5
-2
-10
-4
-15
-6
-20
2005
-8
2007
2009
2011
After hitting bottom in
early 2013, the Spanish
real estate market has
turned up again.
This is part and parcel
of a rebound in
consumption,
investment and
employment.
2013
Yoy changes in %. Source: INE
28
Spain unemployment: the worst is over
Unemployment is falling fast
1400
1200
Spanish unemployment, year-onyear change, in 1000s
1000
800
600
400
200
The worst is over for the
Spanish labour market.
The collapse of
construction industry in
2008/2009 and the
austerity hit have run their
course.
After a five-year rise in
Spanish unemployment,
the number of jobless
started to fall in mid-2013.
The labour market
reforms support
sustainable jobs growth.
Spain is reaping the
rewards of its reforms.
0
-200
-400
Jan 2001 Jan 2003 Jan 2005 Jan 2007 Jan 2009 Jan 2011 Jan 2013 Jan 2015
Change in total unemployment 12-month sum, based on monthly nsa data. Source: Eurostat
29
Spain: Greek-style populist upset unlikely
Challenger party Podemos beyond its peak already ?
70
60
While drawing some
traditional mainstream
parties, the Popular Party
and the PSOE, much of
the support has come
from the ex-communists.
50
40
30
Pro-European parties (PP, PSOE, C's)
Podemos
Ciudadanos) has
surged around 15% at the
expense of the Popular
Party, the PSOE and to
some extent even of
Podemos.
20
10
0
Jan 2014
Podemos, a Syriza-style
radical left protest party,
has made waves in Spain,
rising to almost 30% in the
opinion polls in late 2014.
Apr 2014
Jul 2014
Oct 2014
Jan 2015
Voting intention for national elections; pro-European parties centre-right Popular Party, centre-left PSOE, new liberal Ciudadanos party. Average of the last 5 polls, in %.
Sources: various pollsters
The liberal party is pro
Europe. Taken together,
the pro-European parties
are far ahead of Podemos.
The Greek mess now
seems to hurt Podemos.
30
Portugal: paying back the debt
Portugal is among the most
leveraged European
countries. 2013 public debt
was 128% of GDP, private
debt 203%, (up from 68/185%
in 2007).
Loans to companies and households falling
80
The Eurozone had to bail out
Portugal in 2011 when
markets stopped rolling over
the public debt.
70
Now, debt is on a firm
downward trend. Companies
and households are repaying
loans. The fiscal deficit will
fall below 3% this year.
60
50
MFI loans to non-financial corporations (% of GDP)
40
Jan 2003
MFI loans to households (% of GDP)
Jan 2005
Jan 2007
Jan 2009
Jan 2011
Jan 2013
Jan 2015
Monetary and financial institutions (MFI) loans to households and non-profit institutions servings households (NPISH) as % of GDP, and MFI loans to non-financial
corporations, as % of GDP. Source: ECB, INE
Austerity and reforms work.
Having cooperated fully with
the troika, Portugal has
regained full market access
and prepared the ground for
a sustainable recovery.
Elections later this year are
only a minor risk with
mainstream parties still
dominating.
31
Italy: the Renzi effect
Italian economic sentiment rebounds in early 2015
Since 2010, sentiment in
Italy has usually lagged
behind that of the
Eurozone.
110
When Renzi came to
power in early 2014,
sentiment briefly rose to
the Eurozone average.
100
But it fell back sharply
toll and
reform
drive stalled in
parliament.
90
Sentiment rebounded
strongly from December
2014 onwards.
80
Renzi has finally
delivered the labour
market reform.
Eurozone
Italy
70
Jan 07
Jan 09
Index levels, rebased to 2005 = 100. Source: Istat
Jan 11
Jan 13
Jan 15
That confidence boost
adds to the stimulus
from oil and the
exchange rate.
32
France versus Spain: who is competitive?
While Spanish exports
have risen strongly in
the last 13 years
Real exports of goods and services
160
behind.
150
140
France is the one major
economy in the
Eurozone which is not
competitive.
Spain exports
France exports, 1Q02 = 100
France has serious
130
much about them.
120
110
100
90
Jan 2002
Jan 2004
Jan 2006
Jan 2008
Real exports of goods and services, GDP definition (ESA2010), Q1 2002 = 100. Source: Eurostat
Jan 2010
Jan 2012
Jan 2014
33
But France is not a crisis country
Sluggish growth but not a candidate for an acute crisis
France is less reliant on exports than other countries. Export ratio =
29% of GDP (Germany 47%)
France suffered less in the Lehman and Euro crises than most of its
neighbours - and benefitted less from upturns.
French growth in the middle
15
13.4
11.2
10
7.2
4.6
5
3.2
2.1
0
Structural problems: inflexible labour market, bloated government
sector, excessive tax burden = weak trend growth
Reform laggard: we expect below-average growth in 2015 and 2016.
Financially, France is not a crisis country. It does not suffer from the
debt problems of the crisis countries.
Real GDP 2014 over 2007, %
change
-5
-7.9
-10
Canada
US
Fiscal austerity and household deleveraging will weigh less on growth
than in other countries.
Promised spending cuts by 50bn until 2017 and tax cuts by 40bn
are positive steps after two modest labour market reforms. The recent
Loi
But is that enough? The rise of the ultra-right Front National (now
around 25% of the vote) poses long-term risks. But France has no
reason for early elections and Le Pen is very unlikely to win in 2017.
Germany
UK
France
Japan
Spain
Italy
Real GDP change 2014 over 2007, national currency, in %. Source: IMF World
Economic Outlook, October 2014
Debt-to-income ratio
0
Neither the state nor households are excessively indebted.
-3.0
50
100
150
200
Netherlands
Cyprus
Portugal
Spain
Luxembourg
Belgium
Finland
Eurozone
Malta
France
Italy
Greece
Germany
Austria
Slovenia
Slovakia
Debt-to-income ratio 2011, in %.
Source: Eurosystem Household Finance and Consumption Survey, April 2013
34
Political risks in Europe
The politics of populism
Populist protest parties are a nuisance across the Western world, from the US (Tea Party) to the UK (UKIP),
from Sweden to Spain (Podemos), from France (Front National) to Greece (Syriza, Golden Dawn). They rail
against the centre (Washington, Brussels), immigration and other indignities of modern life.
But key institutions in Europe (EU, euro) are more fragile than those in most nation states (US federal
government, US dollar). As a result, populists could do more damage in Europe than in the US.
Key elections and political risks to watch in 2015:
UK: general election 7 May 2015. Hung parliament? What coalition? Brexit risk?
Greece: radical left won snap elections 25 January, coalition with right-wing populists. Syriza promised the
turns, bail-out extension but will the deal last or will Greece print its own money (=Grexit)?
Spain: national election between 25 October and late November. Podemos populists currently on par with
centre-right, reformist Citizenry Party catching up. But with further major falls in unemployment, pro-reform
parties likely to win. Podemos may moderate over time. Otherwise, mainstream could join forces to stay on
pro-European path. But Podemos may make headlines with a protest vote at regional elections in May.
Portugal: election between 20 September and 11 October. No major anti-European populist protest party yet.
Current centre-right government may still win as centre-left opposition tainted by corruption scandal.
Italy: PM Renzi maintains control. Grillo on the way down, Berlusconi weakened, but Lega Nord on the rise.
French tail risk: if current government were to lose parliamentary majority, snap parliamentary elections could
see surge in support for ultra-right and ultra-left populists. France ungovernable? Just a small tail risk.
35
Core Europe: The Putin Effect
German exports to Russia are falling fast
Russia is inefficient. It needs
high and rising oil prices to
pay for more imports.
60
50
Before Putin started his war
against Ukraine, stable or
falling oil prices had already
curtailed
capacity to
import in 2013.
40
30
The key reason for falling
German exports to Russia is
weaker demand from Russia,
not the sanctions.
20
10
0
-10
German exports to Russia
and Ukraine equal 1.5% of its
GDP. The drop in exports to
the region reduced German
2014 GDP by a mere 0.2%.
Russia and Ukraine
-20
Total ex Russia and Ukraine
German exports to other
regions of the world picked
up modestly in 2014, more
than offsetting the loss in
trade with Russia.
-30
-40
-50
2001
2003
2005
2007
2009
2011
2013
2015
German goods exports to all countries excluding Russian and Ukraine, and to Russia plus Ukraine, 3-month moving averages of the year-on-year change, in %. Source: Destatis
36
The Russian risk: a badly wounded bear
Oil and real wages in Russia it has started to hurt
Oil price (WTI, $)
20
• In February, real wages
were down 9.9% yoy.
140
Russia real monthly wages, yoy
15
120
10
• So far, Putin seems be
popular and in firm control,
having whipped up
nationalist sentiment.
• But for how long will
Russians put up with that?
100
80
60
40
Feb 2007
• Cheap oil, a costly war and
sanctions erode Russian
living standards.
5
• Russians may be very
patient but even Russia
can stage a revolution.
0
• Serious turmoil in Russia is
not imminent. But it is a
risk for the future like the
risk that the wounded bear
lashes out again with a new
major military offensive.
-5
Feb 2009
Feb 2011
Feb 2013
Left scale: oil price (WTI, $). Right scale: Total remuneration (in cash or in kind) paid to employed in return for work done (or paid leave), adjusted for inflation.
Sources: Bloomberg, Russian Federal Service of Statistics.
-10
Feb 2015
• So far, Putin has acted
rationally on tactical level,
only going as far as he can
get away with.
37
UK economy: confidence is back
•
One of the biggest
changes over the past
year and a half has
been the return of
animal spirits.
•
As well as seeing
output grow rapidly
now, firms are
confident in the future.
•
That means:
1.
Interest rates are
gaining more traction.
2.
Cycle can start.
3.
Little reason why
pace of recovery will
slow much from here.
Manufacturing and services weighted by their share in value added. Source: British Chambers of Commerce, Berenberg calculations.
38
UK politics: the big uncertainty
Labour and Conservatives neck on neck in the polls
•
The stronger economy
is not giving much
bounce to Tories yet.
•
Hung parliament likely.
But possible tactical
voting, rising real
wages and Tory lead
on economic
competence suggests
55% chance that
Tories will lead the
next government.
•
As it gets serious,
UKIP and Greens lose
some support.
•
We look for another
stable coalition, but
some bad outcomes
are possible (e.g.
Labour/SNP or even
Tories/UKIP).
45
40
35
30
25
Conservative
Labour
20
Lib Dem
UKIP
15
Greens
10
5
0
01.07.2010
01.07.2011
01.07.2012
Average of last ten polls, excluding the top and bottom most extreme. Source: UK Polling Report.
01.07.2013
01.07.2014
39
Risks from the UK election
Prepare for a hung parliament
• Bookies: 81% chance of hung parliament, 49:51% chance of Tory-led government (61% chance Tories have most seats)
• Independent forecasters: Labour-led government more likely (they take the polls very seriously).
• Berenberg call: 75% chance of hung parliament. 55% chance of Conservative-led government, 40% Labour, 5% chaos so
we are not far away from where bookies have now moved to.
• No party will have mandate to enact their more radical policies. But potential for unstable government, or one including the
SNP, is the biggest worry.
Policy differences: all options hurt - left-wing statism or still big public spending cuts and a Brexit vote
• Small state Conservatives vs. bigger government Labour/Lib Dems
• Circa 1.5% of GDP less austerity overall for Labour/Lib Dems
• Labour/Lib Dems would also tax/spend more for any given deficit target.
• In total, worth about £20bn on departmental spending in current plans.
• The macro: Labour/Lib Dems total spending more sensible. Conservative austerity more severe: both front loaded and
longer lasting.
• Coalition budget still involves large cuts that
happen (or at least not in their current form). Future government of any
colour will spend, borrow and tax more than current budget envisages, just a bit less for Tories and a bit more for Labour.
• Tax rises will probably be needed: higher earners, banks, windfall taxes, fuel duty, raising state pension age faster.
• Blue sky: prepare for NHS charges and means testing state pension?
• The micro: Labour proposed tax changes are a mess but at least a mess of small changes. Still, meaningful implications for
some sectors. Minimum wage change is not significant.
• Defence budget a serious problem for whoever the next government is. Cuts will be eased. Trident (SNP)?
• Pensioners vs. the rest.
• Conservatives much more business friendly and taxation policy better, but Brexit risk.
40
UK election: Betting odds
Probabilities of overall majority
Average
Max
Min
Hung parliament
81
83
78
Conservative majority
13
15
12
Labour majority
6
7
4
•
Prepare for hung UK
parliament. Bookies
see that as 4-1 on.
•
Conservative-led
government a little
more likely than
Labour-led (51 : 47).
•
But bookies also
confident that neither
party will get a
majority of seats, and
even a ConservativeLiberal Democrat
coalition could
(probably) not
command a majority.
•
So also prepare for
minority governments.
Can function fine, but
will mean more
uncertainty (sterling).
Probabilities for next Prime Minister
Average
Conservative
51
Labour
47
These are a little tricky to interpret as bookies offer odds too high on very unlikely
outcomes (e.g. 1 in 50 chance for Nigel Farage). Fortunately, they attached roughly
the same probability on silly Labour led outcomes as Conservatives, so it should not
distort the result too much.
Average of Bet365, Paddy Power, Ladbrokes, William Hill and Betfair. Odds scaled to sum to 100%. Odds taken 13/4/15. Source:
Oddschecker.com.
41
UK: Brexit unlikely but it is the tail risk to watch
One big risk the Conservatives would take, but would the UK really vote out?
Political uncertainty is a
big risk.
Ultimately markets could
cope with mild political
uncertainty and a Labour
government.
But Brexit could be
disruptive.
surge in
2014 has raised that risk
by prompting more
extreme policies from the
ruling Conservatives.
Fortunately, and contrary
to received wisdom, the
UK is not very EU-sceptic
any more. The polls have
shifted in favour of the EU
as the Euro crisis has
faded.
We expect the UK to
remain in the EU.
Poll asked: “If there was a referendum on Britain’s membership of the European Union, how would you vote?”. Source: YouGov
UKIP support for Tories in
exchange for a late 2015
EU referendum? Unlikely.
42
US labour market: very solid expansion
400
The US economy is
creating jobs with the
usual odd fluctuations.
200
Monthly gains of around
250k support consumer
spending.
Monthly change in payrolls
We look for the first Fed
0
-200
gradual moves
thereafter.
-400
As in 2014, soft data for
a wintry Q1 may be
followed by a spring
rebound in Q2.
Non-farm payrolls, in 000s
-600
Private sector
-800
Jan 1991 Jan 1994 Jan 1997 Jan 2000 Jan 2003 Jan 2006 Jan 2009 Jan 2012 Jan 2015
Monthly change in payrolls, in 1000s, 3-month rolling average. Source: BLS
Low inflation enables
the Fed to use its
monetary policy to keep
the economy on track.
Financial healing = less
stimulus needed over
time.
43
US households: reducing the debt overhang
US household debt: nice progress
130
15
Household debt, % disposable income, lhs
Household debt service ratio, rhs
120
14
110
13
100
12
90
11
Households borrowed
heavily when house
prices were rising
rapidly.
After the real estate
bust, households
reduced their debt.
Rock-bottom Fed rates
have also brought debt
service costs down.
Households are no
longer afraid of losing
their jobs and their
home.
The deleveraging is
over.
80
70
1995
1997
1999
2001
2003
2005
2007
In % of disposable income; debt ratio on left-hand scale, debt service ratio on right-hand scale. Source: Fed
2009
2011
2013
2015
10
Households started to
spend more freely again
in 2013.
9
Low oil prices boost
purchasing power of
households.
44
China: using public investment as the key buffer
Chinese GDP growth is
still driven largely by
investment.
Up and down: investment spending growth
60
But investment growth
less spectacular that it
was 5 years ago.
50
The authorities use
public investment as a
buffer, turning the taps
on and off as needed to
stabilise the overall pace
of demand growth.
40
30
20
This has worked so far
and will continue to
work.
10
0
-10
Total investment
-20
Jan 2000
Jan 2002
Jan 2004
Real estate
Jan 2006
Yoy change in %, 3-month average. Source: National Office of Statistics
Jan 2008
Public investment
Jan 2010
Jan 2012
Jan 2014
While trend growth is
slowing as China
matures, China can use
all policy levers to keep
demand close to trend.
40% savings rate and
$3.8 trn fx reserves are
comfortably cushions. 45
Japan: Abenomics a missed opportunity
Just a flash in the pan due to the lack of thorough structural reforms
The nature of Abenomics
Very aggressive monetary policy with 2% inflation target, major drop in exchange rate; promise of structural reforms.
Does it work?
Yes it did for a while. Monetary stimulus, weaker Yen and post-Tsunami reconstruction boosted demand in early 2013.
Inflation went up, helped by a VAT hike in April 2014.
But the artificial boost has faded. The sales tax hike triggered a recession in mid-2014. The rebound in Q4 was modest.
Cheap oil and switching on of some nuclear power plants will help in 2015
What is the problem?
Abenomics got
of stable or falling prices.
dismal demographics.
A macro gimmick such as Abenomics cannot cure that. Without serious structural reforms, Japan is returning to its
long-run misery - with even more debt than before.
Will Abe finally get serious after the December 2014 elections?
46
Eurozone: not the new Japan !
Open for business = no place to hide for zombie companies
Asset bubbles and excessive credit: only in pockets of the Eurozone (Spain, Ireland)
Europe is open (I): Share of imports in GDP 15% in Japan, 51% Germany, 37% Spain, 34% France, 29% Italy.
Europe is open (II): Stiff competition in services sector due to EU internal market.
Europe is open (III): Significant immigration and internal labour mobility
Balance sheet recession ? Mind the data. Household debt high in Netherlands, Ireland, Portugal and Spain.
These are now among the fastest-growing Eurozone members. Low debt ratios in France and Italy, the
problem countries of the Eurozone.
Public debt: Japan tried in vain to revive growth by a series of very expensive but futile fiscal stimuli. After
some post-Lehman austerity, Eurozone fiscal policy is now neutral.
Wave of structural reforms: Germany 2004, Greece 2010 onwards, Spain and Portugal 2012 onwards, Italy
47
The real tail risks
War in Ukraine and Iraq, chain reactions, European politics
Wounded bear
does Russia lash out again?
A renewed hot war remains possible despite the current ceasefire. Russia has the clear edge on the ground.
More likely: frozen conflict, confidence shock wanes, Eurozone returns to growth.
Oil price: the flip-side of great news
A massive redistribution of income causes frictions
Series of defaults among oil producers, trouble for their lenders?
Benefits far outweigh the frictions. But the frictions can be more front-loaded than the benefits.
Chain reactions in emerging markets?
Rate rout after taper tantrum? But gradual and cautious Fed rate hikes to come no longer surprise.
Strong dollar, lower commodity prices: great for countries that import commodities and export to the US; very
bad for countries that export raw materials and are indebted in US dollars.
Europe: will the political glue hold?
Grexit? Brexit?
France: Can Valls deliver more reforms? Risk of early elections? Could Le Pen come to power? Unlikely
48
Eurozone economic forecasts
GDP
Private Consumption
Government Consumption
Investment
Final Domestic Demand 1
Net Exports
1
Stockbuilding 1
Current Account Balance
Industrial Production
2
2
Unemployment rate
CPI 2
General Govt. Balance
General Govt. Debt
3
ECB main refinancing rate
1
Contribution to GDP growth
Source: Berenberg
% y/y
% q/q
%q/q ann.
% y/y
% q/q
% y/y
% q/q
% y/y
% q/q
% y/y
% q/q
% y/y
% q/q
% y/y
% q/q
EUR bn
% of GDP
% y/y
% q/q
%
% y/y
% of GDP
% of GDP
%
2
2013 2014 2015 2016 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
-0.4 0.9
1.4
1.9
1.1
0.8
0.8
0.9
1.0
1.2
1.5
1.7
1.7
1.9
2.0
2.0
0.3
0.1
0.2
0.3
0.4
0.3
0.5
0.5
0.5
0.5
0.5
0.5
1.1
0.3
0.7
1.3
1.7
1.2
1.9
1.9
1.9
2.1
2.1
2.1
-0.6 1.0
1.5
1.2
0.6
0.8
1.1
1.4
1.7
1.6
1.4
1.3
1.1
1.2
1.2
1.2
0.2
0.2
0.5
0.4
0.5
0.2
0.3
0.3
0.3
0.3
0.3
0.3
0.2
0.7
0.8
1.4
0.6
0.6
0.7
0.8
0.8
0.8
0.8
1.0
1.2
1.4
1.5
1.6
0.2
0.2
0.2
0.2
0.2
0.2
0.3
0.3
0.4
0.4
0.4
0.4
-2.4
1.0
1.4
3.2
2.3
1.0
0.4
0.3
0.4
1.2
1.8
2.2
2.5
3.1
3.4
3.5
0.4 -0.5 0.0
0.4
0.5
0.3
0.6
0.8
0.8
0.9
0.9
0.9
-0.8 0.9
1.3
1.6
0.9
0.7
0.8
1.0
1.2
1.3
1.3
1.4
1.4
1.6
1.7
1.7
0.3
0.1
0.3
0.4
0.4
0.2
0.3
0.4
0.4
0.4
0.4
0.4
0.4
0.1
0.3
0.3
0.1
-0.1
0.2
0.2
0.2
0.3
0.4
0.2
0.3
0.3
0.3
0.3
0.0
0.0
0.0
0.2
0.0
0.1
0.1
0.1
0.1
0.1
0.1
0.1
-0.1 -0.1 -0.2 -0.3 0.1
0.1
-0.2 -0.3 -0.4 -0.3 -0.2
0.1
0.1
0.1
0.1
0.1
0.1
0.0
-0.1 -0.2 0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
230 231 275 267
52
52
58
68
75
64
66
70
75
64
63
65
2.4
2.4
2.8
2.6
-0.7 0.7
1.3
2.0
1.4
0.8
0.4
0.3
0.5
0.9
1.8
1.9
2.0
2.1
2.1
2.1
0.1
0.1
-0.3 0.4
0.4
0.5
0.5
0.5
0.5
0.5
0.5
0.5
12.0 11.6
11.1 10.2 11.8 11.6 11.6 11.5 11.3
11.2
11.1 10.8 10.5 10.3
10.1
9.9
1.3
0.4
0.2
1.2
0.7
0.6
0.4
0.2 -0.3 0.0
0.2
0.7
1.1
1.1
1.2
1.2
-2.9 -2.6 -2.4 -2.2
90.9 93.0 93.9 93.2
0.25 0.05 0.05 0.05 0.25 0.15 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05
Period averages
3
End of period
49
Global economic forecasts
World*
US
Japan
China
India
Latin America
Weight
100.0
22.8
6.8
12.2
2.4
7.9
2013
2.4
2.2
1.6
7.7
6.7
2.7
GDP
2014 2015
2.4
2.6
2.4
2.8
-0.1
0.9
7.4
7.0
7.2
7.5
1.1
0.9
2016
2.9
2.9
1.5
6.7
7.5
1.8
2013
Inflation
2014 2015
2016
1.5
0.4
2.6
9.5
6.1
1.6
2.7
2.0
8.0
6.0
1.9
0.7
2.5
7.5
5.5
0.4
0.6
1.3
7.3
5.8
Unemployment
2013 2014 2015 2016
Fiscal balance
2013 2014 2015 2016
7.4
4.0
4.1
-5.8
-9.0
-2.0
-7.2
-3.4
6.2
3.6
4.1
5.4
3.5
4.3
4.8
3.5
4.3
-5.5
-7.8
-2.1
-6.9
-3.5
Europe
30.0
0.5
1.3
1.2
1.9
Eurozone
17.3
-0.4
0.9
1.4
1.9
1.3
0.4
0.2
1.2
12.0
11.6
11.1
10.2 -2.9
-2.6
Germany
4.9
0.2
1.6
1.9
2.3
1.6
0.8
0.3
1.5
5.2
5.0
4.6
4.2
0.1
0.4
France
3.7
0.4
0.4
1.1
1.4
1.0
0.6
-0.2
0.7
10.3
10.3
10.5 10.4
-4.1
-4.0
Italy
2.8
-1.7
-0.3
0.3
1.1
1.3
0.2
0.2
1.0
12.2
12.7
12.6
12.2
-2.8
-3.0
Spain
1.8
-1.2
1.4
2.6
2.4
1.5
-0.2 -0.6
1.0
26.1
24.5
22.4 20.1
-6.3
-5.7
Portugal
0.3
-1.6
0.9
1.7
2.3
0.4
-0.2
0.1
1.1
16.4
14.1
13.7 12.6
-4.5
-4.0
Other Western Europe
UK
3.4
1.7
2.8
2.6
2.6
2.6
1.5
0.2
1.5
7.6
6.2
5.3
4.7
-5.7
-5.1
Switzerland
0.9
1.9
1.9
1.1
1.6
-0.2
0.1
-0.7
0.1
3.2
3.2
3.3
3.5
0.2
0.6
Sweden
0.8
1.3
1.9
2.3
2.6
0.4
0.0
0.6
1.5
8.0
7.8
7.6
7.2
-1.3
-2.0
Other Europe
Russia
2.9
1.3
0.5
-4.0
-1.0
6.8
7.8
14.1
8.6
5.5
5.5
7.0
8.0
-1.3
-1.5
Turkey
1.1
4.1
3.0
3.6
3.8
7.5
8.9
6.8
6.5
9.1
9.8
9.4
9.3
-1.5
-1.6
Unemployment rate: Harmonised definition (ILO/Eurostat); fiscal balance: general government deficit in % of GDP excluding one-off bank support.
*At current exchange rates, not purchasing power parity. PPP estimates give more weight to fast-growing emerging markets and inflate global GDP.
-4.3
-6.5
-2.0
-6.5
-3.5
-3.8
-6.3
-2.0
-6.0
-3.5
-2.4
0.3
-3.8
-2.7
-4.0
-2.9
-2.2
0.2
-3.4
-2.2
-2.5
-2.0
-4.1
0.4
-1.3
-3.1
0.4
-0.8
-3.0
-2.0
-3.1
-1.8
Weights based on IMF World Global Outlook statistics 2013 estimated GDP figures.
Source: Berenberg
50
Global economic forecasts: Berenberg vs consensus
GDP
US
China
Japan
UK
EZ
Germany
France
Italy
Spain
Portugal
2015
-0.1
0.0
-0.1
0.0
0.1
0.3
0.2
-0.2
0.4
0.2
-0.1
0.0
-0.1
0.0
0.1
0.3
0.2
-0.2
0.4
0.2
Inflation
2016
0.1
0.0
0.1
0.3
0.3
0.5
0.0
0.1
0.2
0.5
0.1
0.0
0.1
0.3
0.3
0.5
0.0
0.1
0.2
0.5
2015
0.2
-0.2
-0.3
-0.2
0.2
0.1
-0.3
0.2
-0.1
0.1
2016
0.2
-0.2
-0.3
-0.2
0.2
0.1
-0.3
0.2
-0.1
0.1
-0.3
0.3
-0.6
-0.2
0.0
0.0
-0.3
0.2
-0.1
0.2
-0.3
0.3
-0.6
-0.2
0.0
0.0
-0.3
0.2
-0.1
0.2
Unemployment Rate
2015
2016
0.0
-0.2
0.2
0.2
0.0
0.2
-0.2
-0.5
-0.1
-0.6
n/a
n/a
0.2
0.3
-0.2
-0.3
-0.2
-0.9
0.2
-0.4
0.0
0.2
0.0
-0.2
0.2
0.2
-0.2
-0.5
-0.1
-0.6
0.2
0.3
-0.2
-0.3
-0.2
-0.9
0.2
-0.4
Govt. Budget Balance
2015
2016
0.0
0.0
0.4
0.5
0.0
0.0
0.1
0.1
-0.1
-0.2
0.1
0.0
0.5
0.5
0.1
0.2
0.5
0.9
0.1
0.4
0.0
0.0
0.4
0.5
0.0
0.0
0.1
0.1
-0.1
-0.2
0.1
0.0
0.5
0.5
0.1
0.2
0.5
0.9
0.1
0.4
Differences in percentage points; Bloomberg consensus taken on 27 March 2015. Source: Bloomberg, Berenberg
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