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WEALTH + ECONOMIC OUTLOOK
KOEN DE LEUS Overijse, 11/10/2017
OUR OUTLOOK 2017
(% YoY)
2018 (% YoY)
Interest rates
Fed funds 1.00-1.25 1.75-2.00
US-10Y 2.25 2.75
ECB refi rate 0.00 0.00
GE. 10Y 0.70 1.25
GDP growth
USA 2.1 2.7
Eurozone 2.2 1.9
Belgium 1.6 1.6
Brent oil 60 US$ 63 US$
EUR/USD
EUR/USD 1.17 1.23
EUR/GBP 0.90 0.85
GBP/USD 1.26 1.41
Source: BNP Paribas Global Outlook or latest available
%
Wealth+ - Overijse 2 11/10/2017
OUR OUTLOOK 2017
(% YoY)
2018 (% YoY)
Interest rates
Fed funds 1.00-1.25 1.75-2.00
US-10Y 2.25 2.75
ECB refi rate 0.00 0.00
GE. 10Y 0.70 1.25
GDP growth
USA 2.1 2.7
Eurozone 2.2 1.9
Belgium 1.6 1.6
Brent oil 60 US$ 63 US$
EUR/USD
EUR/USD 1.17 1.23
EUR/GBP 0.90 0.85
GBP/USD 1.26 1.41
Source: BNP Paribas Global Outlook or latest available
%
Wealth+ - Overijse 3 11/10/2017
OUR OUTLOOK 2017
(% YoY)
2018 (% YoY)
Interest rates
Fed funds 1.00-1.25 1.75-2.00
US-10Y 2.25 2.75
ECB refi rate 0.00 0.00
GE. 10Y 0.70 1.25
GDP growth
USA 2.1 2.7
Eurozone 2.2 1.9
Belgium 1.6 1.6
Brent oil 60 US$ 63 US$
EUR/USD
EUR/USD 1.17 1.23
EUR/GBP 0.90 0.85
GBP/USD 1.26 1.41
Source: BNP Paribas Global Outlook or latest available
%
Wealth+ - Overijse 4 11/10/2017
OUR OUTLOOK 2017
(% YoY)
2018 (% YoY)
Interest rates
Fed funds 1.00-1.25 1.75-2.00
US-10Y 2.25 2.75
ECB refi rate 0.00 0.00
GE. 10Y 0.70 1.25
GDP growth
USA 2.1 2.7
Eurozone 2.2 1.9
Belgium 1.6 1.6
Brent oil 60 US$ 63 US$
EUR/USD
EUR/USD 1.17 1.23
EUR/GBP 0.90 0.85
GBP/USD 1.26 1.41
Source: BNP Paribas Global Outlook or latest available
%
Wealth+ - Overijse 5 11/10/2017
OUR OUTLOOK 2017
(% YoY)
2018 (% YoY)
Interest rates
Fed funds 1.00-1.25 1.75-2.00
US-10Y 2.25 2.75
ECB refi rate 0.00 0.00
GE. 10Y 0.70 1.25
GDP growth
USA 2.1 2.7
Eurozone 2.2 1.9
Belgium 1.6 1.6
Brent oil 60 US$ 63 US$
EUR/USD
EUR/USD 1.17 1.23
EUR/GBP 0.90 0.85
GBP/USD 1.26 1.41
Source: BNP Paribas Global Outlook or latest available
%
Wealth+ - Overijse 6 11/10/2017
OUR OUTLOOK 2017
(% YoY)
2018 (% YoY)
Interest rates
Fed funds 1.00-1.25 1.75-2.00
US-10Y 2.25 2.75
ECB refi rate 0.00 0.00
GE. 10Y 0.70 1.25
GDP growth
USA 2.1 2.7
Eurozone 2.2 1.9
Belgium 1.6 1.6
Brent oil 60 US$ 63 US$
EUR/USD
EUR/USD 1.17 1.23
EUR/GBP 0.90 0.85
GBP/USD 1.26 1.41
Source: BNP Paribas Global Outlook or latest available
%
Wealth+ - Overijse 7 11/10/2017
OUR OUTLOOK 2017
(% YoY)
2018 (% YoY)
Interest rates
Fed funds 1.00-1.25 1.75-2.00
US-10Y 2.25 2.75
ECB refi rate 0.00 0.00
GE. 10Y 0.70 1.25
GDP growth
USA 2.1 2.7
Eurozone 2.2 1.9
Belgium 1.6 1.6
Brent oil 60 US$ 63 US$
EUR/USD
EUR/USD 1.17 1.23
EUR/GBP 0.90 0.85
GBP/USD 1.26 1.41
Source: BNP Paribas Global Outlook or latest available
%
Wealth+ - Overijse 8 11/10/2017
CHAPTER I
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WHICH PROPOSALS STAND A CHANCE?
9 11/10/2017
Wealth+ - Overijse 10
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Wealth+ - Overijse 16 11/10/2017
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TRUMPONOMICS
Individual tax plan
Corporate tax plan
Infrastructure spending
Border Adjustment Tax
Source: Haver Analytics, CBO, Tax Policy Center, BNP Paribas
11/10/2017 18
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HOW HIGH IS THE CURRENT TAX RATE?
Source: IRS
60%
50%
40%
30%
20%
10%
0%
1950 1960 1970 1980 1990 2000 2010
US Corporate income tax rate (Top Bracket, marginal rate)
11/10/2017 21
Wealth+ - Overijse 22
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TRUMPONOMICS
Individual tax plan
Corporate tax plan
Infrastructure spending
Border Adjustment Tax
Source: Haver Analytics, CBO, Tax Policy Center, BNP Paribas
11/10/2017 23
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2017
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2017
2018
Wealth+ - Overijse
2017
2019
2018
CHAPTER II
Wealth+ - Overijse
SELF-SUSTAINING RECOVERY IN EUROZONE
27 11/10/2017
…maar ook voor populisme
28 11/10/2017 Wealth+ - Overijse
…maar ook voor populisme
29 11/10/2017 Wealth+ - Overijse
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UNEMPLOYEMENT RATE AND WAGES
Source: Eurostat, Macrobond, BNP Paribas
11/10/2017
Wealth+ - Overijse 32
UNEMPLOYEMENT RATE AND WAGES
Source: Eurostat, Macrobond, BNP Paribas
11/10/2017
Wealth+ - Overijse 33
UNEMPLOYEMENT RATE AND WAGES
Source: Eurostat, Macrobond, BNP Paribas
11/10/2017
Wealth+ - Overijse 34
UNEMPLOYEMENT RATE AND WAGES
Source: Eurostat, Macrobond, BNP Paribas
11/10/2017
Wealth+ - Overijse 35
UNEMPLOYEMENT RATE AND WAGES
Source: Eurostat, Macrobond, BNP Paribas
11/10/2017
Wealth+ - Overijse 36 11/10/2017
Wealth+ - Overijse 37
WHAT ABOUT BREXIT
Source: Macrobond
11/10/2017
Wealth+ - Overijse 38
«Go Whistle !!»
Boris Johnson
Wealth+ - Overijse 39
«I am not hearing
any whistling,
just a clock ticking!»
Michel Barnier
BREXIT CALENDAR
Wealth+ - Overijse 40
Status quo
End of 2
year period
Q1 2019
Invoking
“Article 50”
Q1 2017
11/10/2017
BREXIT CALENDAR
Wealth+ - Overijse 41
Status quo
End of 2
year period
Q1 2019
Invoking
“Article 50”
Q1 2017
After
German
elections:
Real start of
negotiations
Q4 2017
11/10/2017
End of 2
year period
Q1 2019
BREXIT CALENDAR
Wealth+ - Overijse 42
Status quo
Transition period
Negotiating a
stable trade
agreement
Invoking
“Article 50”
Q1 2017
After
German
elections:
Real start of
negotiations
Q4 2017 2019-2021?
11/10/2017
Wealth+ - Overijse 43
CONSEQUENCES BREXIT: CUSTOM UNION
11/10/2017
Wealth+ - Overijse 44
CONSEQUENCES BREXIT : SINGLE MARKET
11/10/2017
Wealth+ - Overijse 45
CONSEQUENCES BREXIT: CONSUMPTION SLOWDOWN
11/10/2017
CONSEQUENCES BREXIT: UNCERTAINTY
11/10/2017 Wealth+ - Overijse 46
Wealth+ - Overijse 47 11/10/2017
CHAPTER III
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ECONOMIC SITUATION IN BELGIUM
48 11/10/2017
IN A NUTSHELL
Wealth+ - Overijse 49
STEADY GROWTH JOB CREATION STABLE DEFICIT
11/10/2017
Wealth+ - Overijse 50 11/10/2017
-5
5
10
15
Belgium, Capacity Utilization, Total, RHS
Corporate investment growth (yoy%), LHS
Capacity limits spur on investment growth
2011
-10 72,5
0
%
75,0
77,5
80,0
82,5
85,0
87,5
2012 2013 2014 2015 2016 2017
%
Loans to Non-Financial Corporations, Total, EUR Ihs [c.o.p. 1year, c.m.a.4 quarters], yoy, LHS
Gross Profit Share of Non-Financial Corporations, [c.m.a.4 quarters), RHS
2000 2002 2004 2006 2008 2010 2012 2014 2016
15,0
12,5
10,0
7,5
5,0
2,5
0,0
-2,5
-5,0
-7,5
44
43
42
41
40
38
37
36
45
35
39
% %
CORPORATE INVESTMENT PICKING UP
51
Belgium
Source: BNP Paribas Fortis, Macrobond
Wealth+ - Overijse 11/10/2017
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STRONG JOBCREATION UNDER MICHEL-I…
Source: INR (2016)
11/10/2017 52
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…DRIVEN BY PRIVATE SECTOR AND AGEING POPULATION
Private sector Public (administration) Public (care)
Source: INR (2016)
11/10/2017 53
Wealth+ - Overijse 54
UBERISATION OF LABOUR MARKET IS NOT MOST IMPORTANT TREND…
0%
5%
10%
15%
20%
25%
30%
1992 1997 2002 2007 2012
Labour market trends (% of the total number of employees)
Temporary Part time Flex work
Source: Eurostat, Statbel
11/10/2017
Wealth+ - Overijse 55
…AND DEFINITELY NOT IN BELGIUM
0%
5%
10%
15%
20%
25%
30%Temporary employees
(% of the total number of employees)
Source: Eurostat (2016)
11/10/2017
Wealth+ - Overijse 56 11/10/2017
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STRUCTURAL BUDGET OPTIMISM…
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Budget optimism: projected government deficit paths per publication date
2017
2016
2015
2014
2013
2012
2011
Source: Stabiliteitspact
11/10/2017 57
Wealth+ - Overijse
STRUCTURAL BUDGET OPTIMISM…
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Budget optimism: projected government deficit paths per publication date
2017
2016
2015
2014
2013
2012
2011
Source: Stabiliteitspact
11/10/2017 58
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STRUCTURAL BUDGET OPTIMISM…
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Budget optimism: projected government deficit paths per publication date
2017
2016
2015
2014
2013
2012
2011
Source: Stabiliteitspact
11/10/2017 59
Wealth+ - Overijse 60
…AS PUBLIC DEBT STAYS STUBBORNLY HIGH
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
200%Government debt to GDP (%)
Source: Eurostat (2016)
11/10/2017
Wealth+ - Overijse
Not to mention government inefficiencies
11/10/2017 Wealth+ - Overijse 62
0
1
2
3
4
5
6
7
Effi
cie
ncy
of
pu
blic
sp
en
din
g (1
-7, 7
= e
xtre
me
ly
eff
icn
en
t)
Efficiency of government spending
Source: World Economic Forum (2016-2017)
#60
#136
#10
CHAPTER IV
Wealth+ - Overijse
MONETARY POLICY
63 11/10/2017
Wealth+ - Overijse 64
WHERE WILL RATES GO?
Source: Federal Reserve, ECB - Dotted lines = forecasts BNP Paribas Fortis
Policy rates for FED and ECB
0%
1%
2%
3%
4%
5%
6%
2006 2008 2010 2012 2014 2016 2018
ECB FED
Projections
11/10/2017
Wealth+ - Overijse 65
WHERE WILL LONG TERM RATES GO?
11/10/2017
Wealth+ - Overijse 66
FED READY TO UNWIND MASSIVE POSITION
11/10/2017
Fed liabilities
0.0 Jan 07 Jan 10 Jan 13 Jan 16 Jan 19 Jan 22 Jan 25
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
USD, trillion
FED BALANCE SHEET
Midyear Economic & Investment Outlook 2017 67
4.5
2.9
1.9
2.6
3.5
Low reserves
scenario
High reserves
scenario
HOW WILL THE FED REDUCE ITS BALANCE SHEET?
Midyear Economic & Investment Outlook 2017 68
Source: BNP Paribas, Yellen speech (January, 2017)
*Hikes refer to 25bp increases.
The Equivalent amounts of fed funds rate tightening shown above reflect the following relationship between short-term and long-term interest rates, cited by Chair
Yellen in a January 19, 2017 speech: a 15bp increase in the 10yr Treasury yield is roughly equivalent to two 25bp fed funds rate hikes.
• Initial cap: 10 bn, +10 bn. / trimester
till 50 bn US$
• 10y premium: +/- 90 bp
• Equivalent to Fed funds rate tightening of
300bp
• 12 rate hikes (4/yr for 3 years)
SCENARIO FED
Wealth+ - Overijse 69
VALUATION STOCK MARKETS
11/10/2017
Wealth+ - Overijse 70
VALUATION STOCK MARKETS
11/10/2017
CHAPTER I
Wealth+ - Overijse
WHICH PROPOSALS STAND A CHANCE?
71 11/10/2017
CHAPTER II
Wealth+ - Overijse
SELF-SUSTAINING RECOVERY IN EUROZONE
72 11/10/2017
CHAPTER III
Wealth+ - Overijse
ECONOMIC SITUATION IN BELGIUM
73 11/10/2017
CHAPTER IV
Wealth+ - Overijse
MONETARY POLICY
74 11/10/2017
WEALTH + ECONOMIC OUTLOOK
KOEN DE LEUS Overijse, 11/10/2017
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76 Wealth+ - Overijse 11/10/2017
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Wealth+ - Overijse 77 11/10/2017
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