Emerging Markets in the
Global Economic Crisis
Dr. Bernardo M. Villegas
No Great Depression
Black Thursday 1929
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•
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•
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Stock Market Crash
Passive Federal Reserve System
Ignorance of Keynesian Pump Priming
Panic in the Banking Sector
Unemployment Rate of 25%
Complete Dominance of the US Economy in the
World
• World Financial Market Illiquid
No Great Depression
Black Monday 2008
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•
•
•
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•
•
•
•
Real Estate Bubble
Proactive Federal Reserve System
US Government Pump Priming
No Panic in the Banking Sector
No Crash in the Stock Market
Unemployment Rate Manageable
Countervailing Power of Emerging Markets
Liquidity of Sovereign Funds
Massive intervention of European governments
Traditional Engines of Growth:
Growth Rates of Major Economies
6.0
4.0
2.0
0.0
-2.0
-4.0
Average
19912000
2001
2002
2003
2004
2005
2006
2007
-6.0
-8.0
US
Euro Area
F – forecasts
Source: World Economic Outlook Database, IMF, April 2009
Japan
2008
2009F
2010F
2014
Traditional Engines of Growth:
GDP Growth Rates
US
Euro Area
Germany
France
Italy
Spain
Japan
United Kingdom
Canada
Australia
2004
2005
2006
2007
2008
3.6
2.2
1.2
2.2
1.5
3.3
2.7
2.8
3.1
3.8
2.9
1.7
0.8
1.9
0.7
3.6
1.9
2.1
2.9
2.8
2.8
2.9
3.0
2.4
2.0
3.9
2.0
2.8
3.1
2.8
2.0
2.7
2.5
2.1
1.6
3.7
2.4
3.0
2.7
4.0
1.1
0.9
1.3
0.7
-1.0
1.2
-0.6
0.7
0.5
2.1
F – forecasts
Source: World Economic Outlook Database, IMF, April 2009
2009F 2010F
-2.8
-4.2
-5.6
-3.0
-4.4
-3.0
-6.2
-4.1
-2.5
-1.4
0.0
-0.4
-1.0
0.4
-0.4
-0.7
0.5
-0.4
1.2
0.6
2014
2.4
2.3
2.2
2.3
1.9
2.0
2.5
2.8
2.5
3.0
Global Growth Slowdown:
Threats to World Growth
• World GDP to fall from 3.2% in 2008 to -1.3% in 2009
• Financial markets remain difficult.
• Funding markets have only gradually narrowed despite of
government guarantees.
• Asset values fall sharply across advanced and emerging
economies
• Widespread disruptions in credit are constraining household
spending and curtailing production and trade.
• Slump in global demand has led to a collapse in commodity
prices.
• Major stock price indices are 50-60% below 2007 peaks; US
house prices 27% below peak
• More price declines in housing are expected
• Rise in protectionist sentiment and protectionist policies
implemented
Global Growth Slowdown:
Global Outlook
• Recession accompanied by financial crisis
• Output in the advanced economies is now expected to
contract by almost 4% in 2009.
• Growth in emerging and developing economies is expected to
slow sharply from 6.1 % in 2008 to 1.6 % in 2009, under the
drag of falling export demand and financing, lower commodity
prices, and much tighter external financing constraints.
• Inflation pressures are subsiding.
• Global monetary and fiscal policies are providing substantial
support.
• G20 agreement to boost international money supply by $250
billion
• IMF to receive $500 billion to help struggling emerging
economies
The New Global Business Environment
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•
•
Global business environment will be characterized by greater caution,
less liquidity, lower cross-border capital flows, tighter regulation and less
risk-taking.
Poor ratings for the soundness of banking systems, financial sector
distortions and impeded access to finance will have significant effect on
the outlook for financial systems.
Increasing risk of political unrest caused by severe economic downturn,
which has led to rising unemployment and increased economic hardship.
Source: ViewsWire, Economist Intelligence Unit, May 19, 2009
The Most Powerful Economies in the World
Country
US
Eurozone
Japan
China
Germany
France
UK
Italy
Russia
Brazil
Canada
India
Mexico
South Korea
GDP (2008)
US$B
14,265
13,633
4,924
4,402
3,668
2,866
2,674
2,314
1,677
1,573
1,511
1,210
1,088
947
GDP Growth (%)
year on year
Current
Account (%
of GDP)
Inflation (%)
year on year
Unemployed (%)
1.1
0.9
-0.6
9.0
1.3
0.7
0.7
-1.0
5.6
5.1
0.5
7.3
1.3
2.2
-4.7
-0.7
3.2
10.0
6.4
-1.6
-1.7
-3.2
6.1
-1.8
0.6
-2.8
-1.4
-0.7
3.8
3.3
1.4
5.9
2.8
3.2
3.6
3.5
14.1
5.7
2.4
8.3
5.1
4.7
5.8
7.6
4.0
n/a
7.3
7.8
5.5
6.8
n/a
n/a
6.2
n/a
n/a
3.2
*n/a – not available
Source: IMF, World Economic Outlook Database, April 2009
Asia: The Most Dynamic Region
Growth Rates
SOUTHEAST ASIA
Indonesia
Malaysia
Philippines
Singapore
Thailand
Vietnam
NORTHEAST ASIA
China
Hong Kong
Korea, Republic of
Taiwan
2004
2005
2006
2007
2008
2009F
5.0
6.8
6.4
9.3
6.3
7.8
5.7
5.3
5.0
7.3
4.6
8.4
5.5
5.8
5.4
8.4
5.2
8.2
6.3
6.3
7.2
7.8
4.9
8.5
6.1
4.6
4.6
1.1
2.6
6.2
3.6
-0.2
2.5
-5.0
-2.0
4.5
2004
2005
2006
2007
2008
2009F
10.1
8.5
4.7
6.2
10.4
7.1
4.2
4.2
11.6
7.0
5.1
4.8
13.0
6.4
5.0
5.7
9.0
2.5
2.5
0.1
7.0
-2.0
-3.0
-4.0
8.0
3.0
4.0
2.4
9.0
7.1
5.0
6.5
2010F
5.0
4.4
3.5
3.5
3.0
6.5
2010F
OTHERS
India
7.5
9.5
9.7
Source: Asian Development Outlook, April 2009 (IMF)
BRICA
Emerging Engines of Growth
BRICA
Brazil
Russia
India
China
ASEAN
*2007 data
Population
(in Millions)
2008
191.9
142.0
1,190.5
1,327.7
575.5*
GDP Value
(in current
prices,US$B)
2008
1,573.0
1,677.0
1,210.0
4,402.0
1,265.6
Foreign
Exchange
Reserves
(US$B)
2008
192.9
421.3
271.7
2,135
469.4*
Real GDP Growth
2009F
-1.3
-6.0
5.0
7.0
0.7
2010F
2.2
0.5
6.5
8.0
4.2
Inflation
2009F
4.8
12.9
3.5
0.8
3.3
Sources: IMF World Economic Outlook (April 2009); World Bank Key Development Data & Statistics
ADB Asian Development Outlook (April 2009); www.aseansec.org
2010F
4.0
9.9
4.0
1.0
4.1
The Next Eleven
Emerging Engines of Growth
Country
Bangladesh
Egypt
Indonesia
Iran
Mexico
Nigeria
Pakistan
Philippines
South Korea
Turkey
Vietnam
Population 2008
GDP 2008
(in millions)
(current US$ B)
161.9
75.0
227.8
72.9
106.3
147.8
160.5
90.3
48.6
69.7
86.3
81.9
162.2
511.8
344.8
1,088.1
214.4
167.6
168.6
947.0
729.4
89.8
Source: IMF, World Economic Outlook Database, April 2009
US, EU, Japan and BRICA
Emerging
Engines of
Growth
US
Euro Area
Japan
BRICA
Brazil
Russia
India
China
ASEAN
2006
2007
2008
2009F 2010F
2.8
2.9
2.0
2.0
2.7
2.4
1.1
0.9
-0.6
-2.8
-4.2
-6.2
0
-0.4
0.5
4.0
7.7
9.7
11.6
6.0
5.7
8.1
9.0
13.0
6.4
5.1
5.6
7.1
9.0
4.3
-1.3
-6.0
5.0
7.0
0.7
2.2
0.5
6.5
8.0
4.2
The Next Eleven
Bangladesh
Egypt
Indonesia
Iran
Mexico
Nigeria
Pakistan
Philippines
South Korea
Turkey
Vietnam
2006
2007
2008
2009F
2010F
6.5
6.8
5.5
5.8
5.1
6.2
6.2
5.4
5.2
6.9
8.2
6.3
7.1
6.3
7.8
3.3
6.4
6.0
7.2
5.1
4.7
8.5
5.6
7.2
6.1
4.5
1.3
5.3
6.0
4.6
2.2
1.1
6.2
5.0
3.6
2.5
3.2
-3.7
2.9
2.5
0.0
-4.0
-5.1
3.3
5.4
3.0
3.5
3.0
1.0
2.6
3.5
1.0
1.5
1.5
4.0
Asia: The Most Dynamic Region
Consumer Trends in Asia
• Non-income consumption factors
• Expanding middle class
• Diversity of consumer tastes and
lifestyles
• “Mallification” of Asian cities
• Demographic gift stage in South and
Southeast Asia
• Rapid aging in Northeast Asia and
Singapore
• Widespread use of English
• The telecom revolution
• Spread of university education
Asia: The Most Dynamic Region
Selected Sunrise Industries in Asia
• Agribusiness
• Mining
• Triple Ts: Transport, Telecom, and
Tourism
• Infrastructures
• Automobiles
• Consumer durables
• IT-enabled and IT services
• Logistics and retailing
• Health care and medical tourism
• Education
• Construction and real estate
• Four Fs: Food, Fashion, Furniture, Fun
The Philippine Economy
Threats
• Net factor income will be slightly lower as the
recession in OFWs’ host countries will affect
remittances and deployment growth
• Slowdown in consumer spending
• Industry sector on a slowdown in 2009 and 2010
• Slowdown in exports
• High though slowing inflation rate
• Higher government deficit
• Higher trade deficit
• Depreciating Peso
The Philippine Economy
Opportunities
• Continuous influx of East Asian tourists
• Expansion in mining and energy
investments
• Pump priming in infrastructure spending
• Above-average growth in agricultural
production due to improved infrastructure
support
• Expansion in low- and medium-costs
housing and office buildings
• Increase in demand for BPO services
• Medical tourism and retirement villages
The Philippine Economy
BUSINESS ECONOMICS INDICATORS
Item
2008
2009F
2010F
I. Agriculture, Fishery and Forestry
3.19%
3.00%
3.00%
II. Industrial Sector
4.97%
3.59%
4.68%
0.6%
4.3%
8.2%
7.7%
-15.0%
3.0%
12.5%
4.7%
4.0%
3.5%
10.0%
5.0%
4.90%
4.76%
5.77%
3.7%
4.7%
4.9%
7.0%
5.6%
4.7%
4.3%
4.8%
3.8%
3.7%
5.1%
7.6%
6.0%
5.6%
3.7%
5.0%
6.8%
7.6%
A. Mining and Quarrying
B. Manufacturing
C. Construction
D. Electricity, Gas and Water
III. Service Sector
A. Transportation, Communication and Storage
B. Trade
C. Finance
D. Owners Dwelling and Real Estate
E. Private services
F. Government services
Gross Domestic Product
Source: UA&P/BEC Estimates, March 25, 2009
4.62%
4.06% 4.92%
Emerging Markets in the
Global Economic Crisis
Thank you.