bbva eagles esade€¦ · page 3 bbva eagles esade/ 15th february, 2011 section 1growth prospects...

BBVA EAGLEs ESADEBarcelona, 15th February, 2011

BBVA EAGLEs ESADE/ 15th February, 2011

Section 1

Emerging Economies: Current SituationSection 2

The Future of Emerging Economies Introducing the EAGLEsResilience against riskInvestment opportunities

Agenda


Section 1

Growth prospects are very positive The emerging economies are mainly responsible for global growth.• The global economy mantains strong growth, and should reach 4.4% in 2011 and 2012• The economic dynamism will remain vigorous in Asia and LatAm, where growth rates will exceed those recorded

in developed countries

GDP growth forecast (%)Source: BBVA Research

Contribution to global growthSource: BBVA Research

-3-2-10123456

2007 2008 2009 2010 2011 2012Rest of World Emerging MarketsOther advanced Ecs. EurozoneUS Global Growth

0

3

6

9

12

US EMU China EmergingAsia exChina

LatAm7 EAGLEs

2010 2011 2012


Section 1

There are pressure factors in the economies Pressure factors on prices and external positions• Higher raw material prices owing to short-term factors: bad weather, geopolitical risk, and greater investment flows

into commodities• Moreover, the pace of differential activity with developed markets and appreciation pressures generate a trend

towards impairment of current accounts in some key countries (Brazil)

-3-2-1012345678

ene 09 abr 09 jul 09 oct 09 ene 10 abr 10 jul 10 oct 10 ene 11

China LatAm7Asia Emergente (ex China & India) EEUUUEM

Inflation (annual %)Source: BBVA Research and Datastream

Brazil: Current Account BalanceSource: BBVA Research

-3,0

-2,5

-2,0

-1,5

-1,0

-0,5

0,0

0,5

1,0

1,5

07 08 09 10 11


Section 1

But the challenges appear manageable and there is room for the implementation of policiesEven so, inflation remains contained and there is broad capacity for reaction through monetary policy…• Despite the upside risk of inflation (derived mainly from food and energy), a significant recovery is not expected • Our expectations are modest increases in interest rates, but there is room to accelerate them effectively if inflation

risks materialize

Inflation (annual average; %)Source: BBVA Research

Official interest ratesSource: BBVA Research

0

2

4

6

Asia

ex-C

hina

Chin

a

Bras

il

Chile

Colo

mbi

a

Méx

ico

Perú

2009 2010 2011

0

1

2

3

4

5

6

7

8

9

jun

09

sep

09

dic

09

mar

10

jun

10

sep

10

dic

10

mar

11

jun

11

sep

11

dic

11

US EMU China EAsia exc China Latam


AgendaSection 1


The Future of Emerging EconomiesIntroducing the EAGLEsResilience against riskInvestment opportunities


Section 2

The future of Emerging Economies World rotation: slowdown in G7 vs sustained growth in EEs

Beyond BRICs: other emerging markets are relevant

EAGLEs: Emerging And Growth-Leading Economies

1

2

3


Section 2

World rotation: Slowdown in G7 vs sustained growth in EEs• Growth in G7 countries is expected to remain below 2% for the next 10 years• Growth in emerging markets will outpace the G7 average by 4pp including China, and 2.5pp excluding the Asian

giant

Note: 45 Emerging Markets– Argentina, Bahrain, Bangladesh, Brazil, Bulgaria, Chile, China, Colombia, Czech Rep., Egypt, Estonia, Hungary, India, Indonesia, Iran, Jordan, Korea, Kuwait, Latvia, Lithuania, Malaysia, Mauricio, Mexico, Morocco, Nigeria, Oman, Pakistan, Peru, Philippines, Poland, Qatar, Romania, Russia, Slovak Rep., South Africa, Sri Lanka, Sudan, Taiwan, Thailand, Tunisia, Turkey, Ukraine, UAE, Venezuela, Vietnam.

GDP adjusted by PPP: growth ratesSource: BBVA Research and IMF

0

1

2

3

4

5

6

7

1980's 1990´s 2000's 2010's

EM without China Average

G7 Average

Emerging Markets Average


Section 2

Beyond the BRICs, other EEs are relevantOther emerging economies (EEs):

• Their combined size is larger than the G6• Contribution to global growth over the next 10 years will be 4 times greater

Emerging EconomiesExpected GDP growth 8 Billion

Emerging EconomiesCurrent GDP 15 Billion

G6Expected GDP growth 2 Billion

G6Current GDP 14 Billion

G6 Aggregate: Canada, Germany, France, Italy, Japan and UKEmerging Economies: other Emerging Economies excluding Brazil, Russia, India and China

GDP: Current size and expected increase (Billions of USD, adjusted by PPP)Source: BBVA Research and IMF


Section 2

Absolute growth is better than absolute size

BRICs (GS)

Absolute size• Bigger does not necessarily determine a

potential market

BBVA EAGLEs

Based on absolute growth• Large enough size plus…• Fast enough growth

No clear cut-off

Static concept• Allows no anticipation: inertia• Long horizon: at least 20-25 years• Why only four countries? Subjective

Defined cut-off: the G6

Dynamic concept• Anticipation: dynamic concept• Short horizon: next 10 years• Flexible number of countries: “Club

admission” depends on performance

BBVA EAGLEs is the group of countries whose expected contribution to global growth is greater than the average of the G6


China US. India

12.63.6

3.6

Section 2

China is light-years away• China’s contribution to global growth represents 70% of the contributions of the BRICs

• In 2017, China’s PPP-adjusted GDP will overtake US GDP

• India is another world-class player

GDP adjusted by PPP: 2020 level (Billions of USD)Source: BBVA Research and IMF

GDP adjusted by PPP: change between 2010-2020 (Billions of USD)Source: BBVA Research and IMF

China US. India0

5

15

20

25

10


G6 average: Canada, Germany, France, Italy, Japan and UK

Japan Germany United KingdomCanada France Italy

0.44

0.41

0.35

0.33

0.15

0.73

Section 2

EAGLEs: Emerging And Growth-Leading Economies• In absolute terms, each EAGLE economy will contribute more to global growth than the G6 average

• The BRICs plus Korea, Indonesia, Mexico, Turkey, Egypt and Taiwan



Brazil Indonesia Korea Russia Mexico

Egypt Turkey Taiwan G6 Average

0.74

1.14

0.74 0.59

0.50

0.42

0.41

0.41

0.41

0.94


Section 2

Bigger size does not mean better opportunitiesFox example, the case of Indonesia and Korea, compared with Russia


0.0 0.5 1.0 1.5 2.0 2.5 3.00.0

0.2

0.4

0.6

0.8

1.0

1.2Indonesia

KoreaRussia

GDP in 2010

Abso

lute

gro

wth

bet

wee

n 20

10-2

020


Thailand Nigeria Poland ColombiaSouth Africa Malaysia Vietnam BangladeshArgentina Peru Philippines Italy

0.37

0.32

0.300.28 0.28

0.24

0.200.17

0.15

0.270.26

0.25

Section 2

Anticipation: Who will be the next EAGLEs?Another eleven economies are expected to contribute to global growth more than Italy, the smaller contribution in the G6



CIVETS: Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa. Next 11: Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Korea, Turkey and Vietnam. MIST: Mexico, Indonesia, Korea, Turkey

Section 2

EAGLEs: A better concept in terms of both GDP and geographyEAGLEs include the world’s most important economies over the next ten years

EAGLEs and other groups: absolute growth 2010-2020 (GDP adjusted by PPP, Billions of USD)Source: BBVA Research and IMF

0

5

10

15

20

25

EAGLEs BRICs BRICs exChina

CIVETS Next11

MIST G60

2

4

6

8

10

12

Absolute Growthbetween 2010-2020

Number of countries (Right)


AgendaSection 1


The Future of Emerging EconomiesIntroducing the EAGLEs

Resilience against riskInvestment opportunities


Source: BBVA Research

The “EAGLEs Nest”

ThailandNigeriaPolandColombiaSouth AfricaMalaysiaVietnamBangladeshArgentinaPeruPhilippines

Bangladesh

PeruVietnam

Philippines

Nigeria

MalaysiaColombia

Egypt

South Africa

Thailand

Argentina Poland

Taiwan

Australia

Turkey

Indonesia

Korea

Mexico

Brazil

Russia

0

1

2

3

4

5

6

7

8

9

10

100 600 1,100 1,600 2,100 2,600GDP adjusted by PPP (Billions of USD)

GD

P g

row

th (%

, avg

. 10

year

s)

G6 averageItaly

Section 2

Resilience: There is room for a negative prediction error• It will be difficult for most EAGLEs to be excluded from the club

• Some countries in “The Nest” are close to becoming EAGLEs

Indifference curves: size and growth of the EAGLEs and the NestSource: BBVA Research


Section 2

Resilience: Less dependence on external demand• China is fundamental: BBVA Research forecasts anticipate a moderation in export growth of around 1/3 compared

to the pre-crisis period

• On the other hand, faster growth of emerging economies and the growing importance of South-South trade can anticipate better export performance in EAGLEs than in developed countries

China: contributions to GDP GrowthSource: BBVA Research

External demand growth forecastSource: BBVA Research

GDP Exports Imports Net exports

2005-2007 2011-2015

-4

-2

0

2

4

6

8

10

12

14

Taiw

an

Kore

a

Indo

nesi

a

Braz

il

Indi

a

Egyp

t

Chi

na

G6

aver

age

Rus

sia

Mex

ico

Turk

ey

G6 USA Rest of the World

0.0

1.0

2.0

3.0

4.0

5.0


Section 2

Resilience: Low dependence on raw materials and China• Exposure to raw materials is a greater risk than dependence on China, with the exception of Russia

• In the case of the “Nest” some economies are more dependent on China and on commodities

Exports to China and commodity exports: % of GDPSource: BBVA Research

Note: Australia is not an Emerging Economy

0.0

G7USA

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0 3 6 9 12 15 18

Commodity exports to the world as a % of GDP (2009)

Russia

Australia

Indonesia

Brazil

India

TurkeyChinaMexico Egypt

Tota

l exp

orts

from

Chi

na a

s a

% o

f GD

P (2

009)


Section 2

Resilience: The institutions are improving, the difference with G6 narrows • Most EAGLEs show significant progress in recent years in institutions indicators

• The greatest progress was made in political stability, while control of corruption remains a weakness

Note: The bars show the difference between EAGLEs and the G6 average for the 4 indicators obtained from the composite indexes of the Worldwide Governance Indicator: 1. Political stability and absence of violence, 2. Government’s effectiveness and regulation quality, 3. Rule of law, 4. Control of corruption. The lines represent the average gap between EAGLEs and the G6.G6: Canada, Germany, France, Italy, Japan and UK

Institutions: political stability and absence of violence/terrorism Source: BBVA Research and WB

Institutions: control of corruptionSource: BBVA Research and WB

Chi

na

Indi

a

Braz

il

Kore

a

Indo

nesi

a

Rus

sia

Mex

ico

Turk

ey

Egyp

t

Taiw

an

2009 Difference EAGLEs vs G6 in 2000 2009 Difference EAGLEs vs G6 in 2000

0.0

0.5

1.0

1.5

2.0

2.5

3.0 Improvement indicator: 0.30 Improvement indicator: 0.26

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Chi

na

Indi

a

Braz

il

Kore

a

Indo

nesi

a

Rus

sia

Mex

ico

Turk

ey

Egyp

t

Taiw

an

2009 Difference EAGLEs vs G6 in 2000 2009 Difference EAGLEs vs G6 in 2000


AgendaSection 1


The Future of Emerging EconomiesIntroducing the EAGLEsResilience against risk

Investment opportunities


Out of scale:

• China = 6% worldwide FDI, 30% global growth

• India = 2% worldwide FDI, 9% global growth

Section 2

FDI: The EAGLEs are undervalued• EAGLEs’ participation in global FDI is low; they are expected to be major recipients of FDI flows in coming years

• The G6 is clearly overrated

G6

Turkey

TaiwanEgypt

Mexico

Russia

Korea Indonesia

Brazil

0.0

2.0

4.0

6.0

0.0 2.0 4.0Participation in global growth (2010-2020)

Par

ticip

atio

n in

glo

bal F

DI f

low

s (2

005-

2009

)

G6 average: Canada, Germany, France, Italy, Japan and UK

Share of world GDP growth and FDI inflowsSource: BBVA Research & UNCTAD


Section 2

Population: The demographic bonus benefits EAGLEsPopulation growth drives the contribution to global GDP

• With the additional impact of the increase in working-age population (which will continue to grow over the next decade, even in China) and employment rates

Contribution to potential GDP growth: Population growth, global participation rate and NAIRUSource: BBVA Research

Chi

na

Indi

a

Braz

il

Kore

a

Indo

nesi

a

Rus

sia

Mex

ico

Turk

ey

Egyp

t

Taiw

an

G7

aver

age-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5


Section 2

The middle classes will grow more in EAGLEs• Households with monthly income higher than USD 800 adjusted by PPP

• China is the country with the largest middle class

• The gains in Brazil and Russia are considerable

• In other countries, more time is still needed

G7: Middle class growthMillions of people with annual income above USD 9,600 adjusted by PPPSource: BBVA Research

EAGLEs: Middle class growthMillions of people with annual income above USD 9,600 adjusted by PPPSource: BBVA Research

Absolute change, 2010 - 2020 Millions of people, 2010

CAN GER FRA RU ITA JAP USA

3.51.3

4.1 4.2 1.4

-3.3

35.9

-50

0

50

100

150

200

250

300

350

Absolute change, 2010 - 2020 Millions of people, 2010

BRA CHN EGP IDN IND KOR MEX RUS TUR TAW-50

0

50

100

150

200

250

300

350

14.2

188.3

0.1 1.1 5.73.9 9.5 13.1

7.2 3.4

bbva eagles esade€¦ · page 3 bbva eagles esade/ 15th february, 2011 section 1growth prospects...

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