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1
People and Power:
The Forces Shaping Asia’s Key Economies
Prepared for LBMA/LPPM Precious Metals Conference
Andrew Staples, PhD.
Director, South-east Asia
Economist Corporate Network
October 2016
2
Power: The return of political risk
3
Global imbalances
4
Global shift
5 5
Global risk profile
6 6
Security
7 7
Political stability
8 8
The return of political risk
9 9
The return of political risk
Anti-establishment Long running
disputes
Stagnant
incomes?
10 10
ASEAN political challenges
11 11
Globalisation on the back foot
End of an era?
12 12
Globalisation on the back foot
We now think it highly unlikely that the TPP will be ratified in the US
13 13
Global trade having its worst year since 2009, will improve modestly in 2017
Trade, a secular decline
-20
-15
-10
-5
0
5
10
15
20
2009m01 2010m01 2011m01 2012m01 2013m01 2014m01 2015m01 2016m01
Global merchandise trade (% change yoy)
Volume terms Value terms
0
4
8
12
16
1991 1996 2001 2006 2011 2016
Share of global trade (%)
China Germany Japan US
14 14
High stocks and higher OPEC production will prevent a surge in oil price
The oil price will rise, but not by much
• Source: The Economist Intelligence Unit.
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
2013 2014 2015 2016 2017 2018 2019 2020
Production growth Consumption growth
15 15
What a difference a year makes
Lower for longer: interest rates (our forecasts)
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
20
15
Q1
20
15
Q3
20
16
Q1
20
16
Q3
20
17
Q1
20
17
Q3
20
18
Q1
20
18
Q3
20
19
Q1
20
19
Q3
20
20
Q1
20
20
Q3
US Fed BoJ ECB BoE
Main policy rates
(%, year end)
Now
16 16
Central banks are unprepared for the next recession
End of the road for monetary policy?
Source: The Economist Intelligence Unit.
Policy options
Quantitative easing ✓
Forward guidance ✓
Negative interest rates ?
Higher inflation target ?
Target nominal GDP ?
Helicopter money ? 0
2
4
6
8
10
12
14
1983 1988 1993 1998 2003 2008 2013
US federal funds rate (%)
17 17
Looser monetary policy will benefit emerging economies
Always look on the bright side: LCU vs US$
18
Burgernomics
19
Searching for growth
20
Global growth
21 21
Tries hard, could do better…
Where’s the growth?
Real GDP growth; % change, year on year. As of September 2016. Source: The Economist Intelligence Unit.
-4
-2
0
2
4
6
8
10
Ind
ia
Ch
ina
AS
EA
N
So
uth
Ko
rea
Mid
dle
East
Latin A
merica
Ru
ssia
US
Eu
ro z
on
e
Ja
pa
n
Glo
ba
l
2015 2016 2017
22 22
Consumers are driving the economy, as firms fail to invest
US: a two-speed economy
Source: Bureau of Labor Statistics.
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2
(%)
Consumer spending Business investment Real GDP
23 23
For the UK, and Europe
Brexit: profound consequences
• UK recession in 2017
• Contagion: boost for anti-
establishment and anti-EU parties
across Europe
• EU referendums in other
countries—Netherlands and
France–could trigger euro zone
crisis
• Scotland independence, united
Ireland?
24
Regional growth
25
China: Time to act
Concern about China has eased but fears will return quickly when the economy stutters
26
India: All systems go?
27
People: Powering growth
28 28
Demographic dividends, and challenges
Annual labour force growth rate (%)
29 29
Wages rising in Asia
Growth in annual average real wages (%)
30
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2016
2020
GDP per head (US$)
52
,15
0
66
,28
0
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
2016
2020
Private consumption per head (US$)
19
,91
0
25
,59
0
Drivers of growth: income & consumption
31
Drivers of growth: urbanisation
32
Drivers of growth: urbanisation
33
Drivers of growth: urbanisation
ASEAN urban population, 2015
European urbanisation rate
34 34
Mass of middle class
35
Drivers of growth: socioeconomics
Nearly
900m
people will
move out of
this class
by 2025
37 37
Mobile subscriptions in
Asia (m)
Mobile subscriptions
per 100 people
Looking ahead: the rise of mobile
38 38
Internet users in Asia (m)
% of global online population
260
540
470
970
300
380
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2013 2018
Shipments of new smartphones (m)
Non-Asia emerging markets
Non-Asia developed markets
Asia Pacific
Looking ahead: the rise of mobile
39 39
0
2
4
6
8
10
12
14
16
18
2013 2018China e-commerce: Growing by 35% a year China m-commerce: Growing by 74% a year
E-commerce as % of total retail sales in 2013, and forecast for 2018
Looking ahead: the rise of e-commerce
40 40
Looking ahead: digital disruption
41
What do these trends mean for
precious metals?
Panel discussion
42
People and Power:
The Forces Shaping Asia’s Key Economies
Prepared for LBMA/LPPM Precious Metals Conference
Andrew Staples, PhD.
Director, South-east Asia
Economist Corporate Network
October 2016