Macroeconomic Outlook 2019 - events.risiinfo.com · Conclusions • World economy expected to decelerate 2019, 2020 • US economy projected to slow down Still healthy domestic economy

Macroeconomic Outlook 2019

Fastmarkets RISI – Latin American Conference 2019

Lasse Sinikallas, Director of Macroeconomics

2019 | Fastmarkets | Macroeconomic Outlook 2019

Global economy growing moderately, risks heightened


1.6 %2.3 %

2.9 % 2.6 %

1.1 %1.8 %

2016 2017 2018 2019 2020 2021

USA1.9 %

2.5 %

1.8 %

1.1 % 0.9 %1.4 %

2016 2017 2018 2019 2020 2021

Europe

6.7 %6.9 %

6.6 %

6.2 %6.0 % 6.1 %

2016 2017 2018 2019 2020 2021

China

-0.9 %

1.1 % 0.9 % 0.8 %1.7 %

2.8 %

2016 2017 2018 2019 2020 2021

Latin America

Annual real GDP growth

2

Oil prices volatile and remain relatively low

3

$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

WTI Brent


US: Good performance, slowdown ahead?

2019 | Fastmarkets | Macroeconomic Outlook 2019 4

US job growth continues

-800

-600

-400

-200

0

200

400

600

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Employment change Six-month moving average (employment change) 24-month moving average (employment change)


Monthly employment change, total non-farm, thousands; six-month moving average; 24-month moving average

Dollar regained strength in 2018, remains strong

80

90

100

110

120

130

140

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

6

Trade weighted US dollar index: broad, goods, 1997=100


Industrial production now supported by policy?

0

10

20

30

40

50

60

70

0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10

1.15

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Industrial production (L) PMI (R)


Index of industrial production, January 2012 = 1.00; PMI

US GDP growth expected to slow

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

8

Real GDP growth, annualized percentage change


Europe: Loss of momentum


Euro area momentum low

-0.4%

-0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

0

10

20

30

40

50

60

70

12 13 14 15 16 17 18 19

Euro area GDP growth Q/Q (R) Euro Area Composite PMI® (L) Economic sentiment indicator (-50)Industrial confidence indicator (+50) Consumer confidence indicator (+50) Euro Area Manufacturing PMI®

10

Sentiment indicators; euro area real GDP growth, quarter-over-quarter


European industrial production hit breaks in 2018

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

EU-27 (from 2019) EU-28 Euro area (19 countries) Germany France United Kingdom

11

Volume index of production, year-over-year percentage change, calendar adjusted


Euro has lost some of the strength of early 2018

$0.70

$0.80

$0.90

$1.00

$1.10

$1.20

$1.30

$1.40

$1.50

$1.60

$1.70

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

USD/EUR


Euro area GDP growth slower

-8%

-6%

-4%

-2%

0%

2%

4%

6%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Germany France Italy UK Eurozone

13

Real GDP growth, annual percentage change


China: Trade war dampening the economy


Chinese industrial sector has cooled down

30.0

35.0

40.0

45.0

50.0

55.0

60.0

65.0

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Fixed asset investment Industrial production PMI (R)

15

Year-over-year growth in industrial production, fixed asset investment; Purchasing Managers Index


Volatility in Chinese trade growth and renminbi strength

¥5.0

¥5.5

¥6.0

¥6.5

¥7.0

¥7.5

¥8.0

¥8.5

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19Exports Imports RMB/USD

16

Exports and imports, year-over-year percentage change, RMB/USD


High lending, increased debt risk

0%

5%

10%

15%

20%

25%

30%

35%

-¥800

¥200

¥1,200

¥2,200

¥3,200

¥4,200

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Aggregate financing (L) New loans (L) M2 (R)

17

New bank loans, aggregate financing, billion renminbi; money supply, year-over-year percentage change


Chinese GDP trending lower, 2019 a slowdown

0%

2%

4%

6%

8%

10%

12%

14%

16%

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

18



Latin America: Improving, with challenges


Improving domestic environment should help Latin American economy despite global slowdown

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

20

Latin America, Real GDP growth*, annual percentage change


* Measured at purchasing power parity exchange rates.

Latin American economies returning to growth

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Brazil Mexico Argentina Chile

21



Inflation slowing, except in Argentina

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

Brazil Argentina Chile Mexico

22

Consumer price indexes, year over year percentage change


Interest rates lowered when inflation is in control

0%

10%

20%

30%

40%

50%

60%

70%

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Brazil (SELIC) Chile (BCC target rate) Argentina (BCRA reverse repo, overnight)

23

Central bank interest rates


Brazil’s consumption growth slowing down again

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

Ratio of exports to imports (R) Private consumption growth (y/y) (L)

24

Ratio of exports to imports, private consumption year over year percentage change


Investment remains low in Latin America

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 2010%

15%

20%

25%

30%

35%

Advanced economies Emerging market and developing economiesLatin America and the Caribbean ArgentinaBrazil Chile

25

Investment as percentage of GDP


Brazilian real expected to maintain current level

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

26

Nominal exchange rate BRL/USD


Economic activity in Chile slower in 2019

0

20

40

60

80

100

120

08 09 10 11 12 13 14 15 16 17 18 19-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Year-over-year growth rate (R) Imacec SA (L)

27

Monthly indicator of economic activity, Imacec, 2013=100


Chilean peso closely linked to copper price

0

2,000

4,000

6,000

8,000

10,000

12,00095 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

300.00

350.00

400.00

450.00

500.00

550.00

600.00

650.00

700.00

750.00

800.00

CLP/USD Copper (R)

28



Inverse scale

Mexican exports supported by US consumption, production growth negative

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Industrial production year-over-year growth (R) Exports year-over-year growth (L)

29



Mexican peso remains weak

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 5.00

7.00

9.00

11.00

13.00

15.00

17.00

19.00

21.00

23.00

MXN/USD


Conclusions


Conclusions

• World economy expected to decelerate 2019, 2020

• US economy projected to slow down Still healthy domestic economy

• China moving toward consumer-led growth Trade war, continued slowdown, debt a major risk

• Europe’s momentum slower, still growth Unemployment low, policy uncertainty

• Latin America improves, but challenges remain Politics, global slowdown impact


Risks

• Trade policy issues and trade war Uncertainty slows growth

• Central banks’ ability continue stimulus

• Pace of GDP growth deceleration in China

• Low inflation

• Overall political uncertainty

• Geopolitical tensions


Documents

Macroeconomic Outlook 2019 - events.risiinfo.com · Conclusions • World economy expected to decelerate 2019, 2020 • US economy projected to slow down Still healthy domestic economy