Webinar Global Economy in 2019 - Euromonitor

Webinar:
Global Economy in 2019

December 13, 2018
Daniel Solomon, PhD Economist
Ugne Saltenyte, Macro Analysis Manager
Analysis closing date: December 5, 2018

2 2
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International
3
OVERVIEW
Global outlook
Global risks
The US
The Eurozone
The UK
Japan
China
Russia
Brazil
India
Summary
4
Global outlook
GLOBAL OUTLOOK 5
Global outlook: Growth to slow down
▪ Growth momentum in many World Real GDP Growth

%
6.0
of the world’s economies 4.7 4.7
5.0
might have peaked 3.7
4.0 3.6
▪ The global real GDP growth is 3.0 2.3 2.1
forecast to decline from 3.7% 2.0
in 2018 to 3.6% in 2019 1.0
World Advanced economies Emerging economies
▪ Advanced economies’ growth 0.0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
is anticipated to weaken from Source: Euromonitor International from national statistics/Eurostat/
OECD/UN/IMF, World Economic Outlook (WEO)
2.3% in 2018 to 2.1% in 2019
World Real GDP Growth Decomposition
▪ Emerging economies’ GDP is %
4.0
estimated to remain steady at 3.5
4.7% in 2018 and 2019 3.0
2.5
▪ Emerging economies will 2.0
1.5
account for 77% of global real 1.0
GDP growth 0.5
0.0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: Euromonitor International from national statistics/Eurostat/ Emerging economies
OECD/UN/IMF, International Financial Statistics (IFS) Advanced economies
GLOBAL OUTLOOK 6
Real GDP growth forecasts:

Revisions over last quarter
2018 FORECAST 2019 FORECAST

2021–2025
COUNTRY 2017 % 2018(F) % 2019(F) % 2020(F) % CHANGE CHANGE
AVERAGE(F) %
Percentage points Percentage points
USA 2.2 2.9 2.4 2.0 1.6 0.2 -0.2

Canada 3.0 2.1 2.0 1.7 1.7 0.2 0.2
Japan 1.7 1.1 1.0 0.6 0.7 0.0 0.0
Eurozone 2.5 2.0 1.8 1.6 1.5 -0.1 0.0
Advanced France 2.3 1.7 1.7 1.6 1.5 -0.2 -0.1
Germany 2.5 1.8 1.6 1.6 1.1 -0.2 -0.1
Italy 1.6 1.0 0.8 0.9 0.8 -0.2 -0.3
Spain 3.1 2.5 2.3 1.9 1.4 -0.2 0.0
UK 1.7 1.4 1.5 1.4 1.6 0.2 0.2
China 6.8 6.6 6.1 5.9 5.3 0.1 -0.2
India 6.3 7.7 7.6 7.5 7.0 0.3 0.1
Emerging Brazil 1.1 1.4 2.2 2.4 2.4 -0.5 -0.3
Mexico 2.3 2.2 2.3 2.4 2.8 0.0 0.0
Russia 1.5 1.7 1.5 1.5 1.5 0.2 -0.2
7
Positive global growth factors
Interest rates remain low
Private sector confidence remains high
Ongoing fiscal stimulus and recovery dynamics are still boosting

advanced economies’ growth
The slowdown in China remains gradual and appears under control

in the short-term
Unemployment at long-time lows in some advanced economies
8
Negative global growth factors
Increasing trade war uncertainty
Global trade has lost its past momentum, risks of a more general long-term
rise in protectionism
Advanced economies’ private sector confidence has peaked, declining

in some cases (e.g. Eurozone)
Stock market volatility has increased, and market correction risks have increased
Global debt levels remain high, though risks have shifted towards emerging markets
Low-interest rates and lower effectiveness of QE → Monetary policy more

limited in case of negative shocks
Slow labour productivity growth in advanced economies
US monetary tightening for the emerging economies

9
Global risks
GLOBAL RISKS 10
Probability, %
Global risk scenarios: 44
Revisions over last No-Deal Brexit
42
quarter
29
US-China All-Out Trade War
27
Increasing probability
14
Decreasing probability Emerging Markets
Slowdown
Global Downturn 12
Unchanged probability
10
China Hard Landing Global
Trade War
Eurozone 8
Recession
6
4
Eurozone Debt Crisis
Global Crisis Trump Adverse
Policies
Korean Conflict 2
* Impact is measured as world GDP change 0

over 3 years compared to baseline scenario, -10 -8 -6 -4 -2 0
in percentage points
GDP Impact, % *
GLOBAL RISKS 11
Global risk index: Outlook has deteriorated
SCENARIO GLOBAL RISK INDEX POSSIBLE TRADE WAR SCENARIOS
Global Downturn 65
Global Trade War
Emerging Markets Slowdown 40 5–10% probability
Global Crisis 25
Pure US-China All-Out Trade War
China Hard Landing 22 15–25% probability
Eurozone Recession 20 Increasingly negative
Pure NAFTA Breakdown global impact
US-China All-Out Trade War 16
3–7% probability
No-Deal Brexit 14
Eurozone Crisis 11 Baseline

40–60% probability
Global Trade War 11
Trump Adverse Policies 10 Trade War De-escalation

12–22% probability
Korean Conflict 9
Note: Global Risk Index ranks scenarios by the expected GDP impact, Source: Euromonitor International Macro Model
calculated as the impact of the scenario multiplied by its probability.
GLOBAL RISKS 12
Main risks facing global economy
Global Downturn Emerging Market Slowdown

Global Crisis
China Hard Landing Trade War Escalation
Global Downturn Emerging Market China Hard Landing Trade War Escalation
▪ Fears of trade wars and Slowdown ▪ Rise in the proportion of ▪ US raises tariffs on
populist policies ▪ Uncertainty about the non-performing loans China, possibly other
▪ Fall-in private long-term growth ▪ Banking crisis countries
confidence potential ▪ Countries retaliate with
▪ Tightening credit
▪ Rising uncertainty ▪ Greater protectionism conditions similar tariff increases
▪ Sell-off in financial ▪ Slower global trade ▪ Private sector ▪ Rise in production costs
markets growth confidence declines and inflation
▪ Spill-overs to emerging ▪ Business and consumer ▪ Rebalancing process ▪ Fall in global trade
markets confidence drop slows down volumes
▪ Rise in capital outflows ▪ Declining private
and financing costs confidence, investment
13
The US
THE US 14
US: Fading fiscal stimulus and

worsening trade outlook

2021–2025
INDICATOR 2017 % 2018(F) % 2019(F) % 2020(F) % CHANGE CHANGE
AVERAGE(F) %
Real GDP growth 2.3 2.9 2.4 2.0 1.6 0.2 -0.2
Inflation 2.1 2.6 2.4 2.1 2.0 0.0 0.0
Federal Funds Rate 1.0 1.8 2.8 3.3 3.0 -0.1 0.0
▪ Consumer spending still rising faster than ▪ GDP growth expected at 2–2.8% in 2019
the long-term trend and 1.4–2.6% in 2020
▪ Business investment still expanding ▪ Ageing workforce + low prime working age
robustly participation rate + low productivity
▪ But declining effects of the fiscal stimulus + growth + uncertainty on the size of
worsening trade tensions with China → positive impact from AI technologies →
Slowdown in 2019–2020 2021–2025 annual GDP growth at
1.1– 2.1%
THE US 15
US forecast risks
US Real GDP Growth Forecast

% Pessimistic scenario Optimistic scenario
4
2017 2018 2019 2020
Falling financial markets Declining US-China trade
sentiment lead to further tensions
price declines and rising +
3
costs of financing Strong stock market
+ rebound and growth
Worsening trade tensions +
2
with China Rising private sector
+ confidence
Euromonitor baseline Lower consumer and →
Optimistic scenario
1
Pessimistic scenario business confidence, GDP growth rises to
Major Downturn → 2.8–3.6% in 2019 and
GDP growth declines to 1.8–3% in 2020.
0 1.2–2% in 2019 and Probability: 15–25% at
1.1–2.3% in 2020. 1-year horizon
Source: Euromonitor International Macro Model
Probability: 15–25% at
a 1-year horizon
THE US 16
US labour markets, income and

private sector sentiment
US Income and Employment, y-o-y Growth

▪ Real disposable income annual growth close to %
6
3%, mainly due to strong employment growth 2013 2014 2015 2016 2017 2018
▪ Real wage annual growth remains below 1% 4

2.9
▪ Unemployment rate at 3.7%, lowest since 2 1.8
0.7
1969 0
▪ Labour-force participation and employment -2 Nonfarm private employment

Real compensation per hour in business sector
rates remain below the historical average Real disposable income
-4
▪ Private sector confidence remains above Source: Euromonitor International from FRED
long-term averages but is no longer rising US Consumer and Business Confidence Indices
or even declining 3
Index
2015 2016 2017 2018
2 Small business optimism

Consumer sentiment
2.2
1 1.2
-1
Source: Euromonitor International from University of Michigan Survey of Consumers
and from the National Federation of Independent Business
Note: Values above 0 indicate confidence above long term average
THE US 17
US stock markets
▪ S&P500 index declined by more than 7% in US Stock Markets

January 2015=100
160
October, recovering some of its losses in
November 140
S&P500
Russell 2000 small cap stocks
140.0
▪ Stock market volatility also increased in the 120
137.5
October market decline but was comparable
to other recent market corrections 100
2015 2016 2017 2018

▪ Low long-term interest rates + strong 80
Source: Euromonitor International from FRED
short-term earnings growth → Stock market Note: S&P 500 covers the 500 largest US public companies, representing around 75% of the
US stock market. Russell 2000 covers 2000 smaller companies, representing around 10% of
approximately fairly-valued, but vulnerable the US stock market
to irrational pessimism and macro shocks US Stock Market Volatility

Index
(e.g. escalating trade war, global downturn) 30
25
19.3
20
15
10
5
2015 2016 2017 2018
0
Source: Euromonitor International from FRED and the CBOE
Note: CBOE volatility index measure stock prices' short-term expected volatility based on
option prices
18
The Eurozone
THE EUROZONE 19
Eurozone: Losing momentum

2021–2025
AVERAGE(F) %
Real GDP growth 2.5 2.0 1.8 1.6 1.3 -0.1 0.0
Inflation 1.5 1.7 1.7 1.7 1.9 0.1 0.0
ECB Refinancing Rate 0.0 0.0 0.0 0.4 1.4 0.0 0.0
▪ Economy has lost its strong momentum ▪ Business investment still growing
from 2017 with annual growth around significantly faster than trend, external
1.7% in H2 2018 financing costs remain low and demand
▪ GDP is expected to rise by 1.4–2.2% in conditions remain above average
2019 and by 1.1–2.1% in 2020 ▪ But consumption growth has been
▪ Labour markets continue to improve, with relatively slow, and private sector
the average unemployment rate now close confidence is falling
to that from late 2008
THE EUROZONE 20
Eurozone forecast risks
Eurozone Real GDP Growth Forecast

%
Pessimistic scenario Optimistic scenario
4
2017 2018 2019 2020 Decline in private sector Rebound in Eurozone stock
confidence and stock markets and private sector
2
market prices confidence
+ +
Growing uncertainty in Decline in Italy’s planned
Italian debt markets budget deficits
0
→ →
Declining consumer Rising consumer spending
Euromonitor baseline spending and business and business investment
Optimistic scenario
-2
Pessimistic scenario investment growth →
Eurozone Recession → GDP growth rises to
GDP growth declines to 2–2.8% in 2019 and
-4 0.3–1.1% in 2019 and 1.5–2.5% in 2020.
0.5–1.5% in 2020. Probability: 15–25% at
Probability: 15–25% at a 1-year horizon
a 1-year horizon
THE EUROZONE 21
Eurozone private sector sentiment

and stock markets
▪ Private sector confidence indices remain high Eurozone Confidence Indices, Standardized
Index
2
relative to historical averages, but they have 2015 2016 2017 2018
continued to decline since January 2018 1.5 Consumer confidence
Economic sentiment
Business climate
▪ Falling private sector sentiment due to ↑
1
pessimism about future disposable income 1.3
1.0
and profit growth rates + ↑ uncertainty about 0.5 0.9
global demand conditions and the financial
0
markets Source: Euromonitor International from the European Commission
Note: Values above 0 indicate confidence above long-term historic average
▪ Stock markets have underperformed in 2018,
dropping 10% in October
Eurozone Stock Markets vs. Advanced Economies Stock Markets
▪ Undervaluation and investor bias against the December 31 2014 = 100
160
Eurozone or higher risk? 140 MSCI Eurozone index
MSCI World index
120
100
125.9
80 111.6
2014 2015 2016 2017 2018
60
Source: Euromonitor International from MSCI and Black Rock
Note: MSCI Eurozone index tracks large and mid capitalisation Eurozone company stocks.
MSCI World Index tracks, Advanced Economies' stock markets.
THE EUROZONE 22
Eurozone monetary policy

and credit conditions
Eurozone vs. US Monetary Policy Rates

▪ ECB plans to raise interest rates slowly over %
4
2019–2021, despite improving labour markets 2015 2016 2017 2018 2019 2020 2021
and above-trend growth. Cautious approach 3
compared to US Fed Eurozone:
ECB Refinancing rate
▪ Quantitative easing programme will end in 2 US: Fed Funds rate
December 2019, though the ECB’s large

1
balance sheet is only likely to be reduced very
slowly starting in 2020 0
▪ Average Eurozone borrowing spreads relative Source: Euromonitor International Macro Model
Eurozone 10-Year Government Bond Yield Spreads vs. Germany

to Germany have remained moderate with the
%
exception of Italy. No indications of significant 4
2015 2016 2017 2018
financial contagion from Italian borrowing 3.0
3
costs but risks remain in 2019
2 Italy
Spain 1.1
1
France 0.4
0
Source: Euromonitor International from Eurostat and Bloomberg
Note: Germany = 0
23
The UK
THE UK 24
UK: Economic activity has edged up
UK Real GDP and Components Growth

▪ The UK economy picked up pace in Q3 2018, %
14
real GDP growth accelerated to 1.5% y-o-y 2014 2015 2016 2017 2018
12
▪ Tight labour market and declining inflation, 10 Real GDP
Private consumption
more rapid real wage growth, higher 8 Fixed investment
Exports
1.6
consumer spending 6
1.5
4 0.7
▪ Consumer sentiment improved during 2
0.0
summer, but dropped again in autumn 0

-2
▪ Business confidence reached a two-year Source: Euromonitor International from Eurostat
low in September
The Slowest Real GDP Growth in Advanced Economies
▪ Employment has slowed down, businesses
have reported labour shortages Italy 2018
Japan 2019
▪ The economic growth is forecast to remain UK
subdued at around 1.5% in 2019 Germany
France
Belgium
% 0 0.5 1 1.5 2
THE UK 25
Brexit negotiations:
UK businesses craving for certainty
▪ The possibility of chaotic Brexit remains UK Economic Outlook in Deal and No-Deal Scenarios
a principal risk to the UK outlook Real GDP Growth Unemployment Rate Deal (baseline)
▪ The Brexit negotiators have reached a draft No-Deal: 2019 Q1
withdrawal agreement, endorsed at the EU

summit in November 2018. However, there
has been a backlash against the deal in the UK
▪ Conclusion of any Brexit agreement between
the UK and the EU is highly uncertain and
turbulent times are set to continue for
Inflation Interest Rate
the UK economy
▪ Our baseline assumes a transition to a final
trade deal after 2020. But a No-Deal Brexit is a
real possibility given the lack of cohesion in the
UK government
▪ More Brexit analysis is available on
Brexit Scenarios Tool
26
Japan
JAPAN 27
Japan: Growth momentum fading
▪ In Q3 2018, Japan’s economy started feeling Japan Real GDP Growth by Expenditure Component
%
4
the effects of the slowing global economy and Stocks Private consumption
Investment Public consumption
China-US trade tensions — two of Japan’s 3 Net exports Real GDP growth
largest export partners 2
▪ Japan’s trade balance has been in decline for 1 0.4

the last few months
0
▪ The trade surplus with the US brings fears 2016 2018
-1
of protectionist policies against Japanese Source: Euromonitor International from national statistics
production
Japan Major Foreign Trade Partners
▪ Trade frictions might hurt business confidence
0% 100%
and prevent raising wages, hurting
Export
consumption share 19.2 18.8 7.1 38.6
4.8
▪ For now, we maintain our real GDP growth 5.6
5.9
forecast at 1.0% in 2019
US South Korea Hong Kong, China Rest of the
China Taiwan Thailand World
Source: Euromonitor International from Ministry of Finance

Note: September 2018 data
28
China
CHINA 29
China: Controlled slowdown?

2021–2025
AVERAGE(F) %
Real GDP growth 6.9 6.6 6.1 5.9 5.3 0.1 -0.2
Inflation 1.6 2.1 2.5 2.5 2.5 0.0 0.1
1-Year Lending Rate 4.4 4.4 4.4 4.4 4.9 0.0 0.0
▪ The economy has slowed down gradually in ▪ The slowdown in global demand growth
2018, with average Q1–Q3 growth at 6.7% and higher US tariffs → Rising importance
▪ Rising trade tensions with the US and the of China’s domestic demand. But there are
associated uncertainty have been a key signs of a slowdown in consumption
factor in a worsening outlook ▪ The main factor driving the slowdown
remains declining catch-up potential, as
China’s economy continues to converge
with advanced economies
CHINA 30
China forecast risks
China Real GDP Growth Forecast

9
Falling consumer De-escalation of the
8
confidence and stock current trade conflict with
7 market prices the US
+ +
6
Rising US tariffs on Chinese Rising consumer
5 exports, confidence
4
Euromonitor baseline + →
Optimistic scenario
Pessimistic scenario
Declining inter-bank market GDP growth accelerates
3 Major Downturn financing conditions to 6.8–7.8% in 2019, and
2 → 5.8–7.2% in 2020.
Slower aggregate demand Probability: 15–25% at
1 2017 2018 2019 2020 growth 1-year horizon
0 +
Declining borrowing
conditions
→
GDP growth declines to
4–5.2% in 2019 and
4.4–6% in 2020.
Probability: 15–25% at
1-year horizon
CHINA 31
China economic activity
China Economic Activity Indicators, y-o-y Growth

▪ Industrial production growth has declined %
11
moderately to slightly above 6% year-on-year 10
2015 2016 2017 2018
since the summer. Real retail sales growth has 9

declined more significantly to less than 7% 8
6.8
year-on-year 7
6
▪ Consumption continues to dominate growth 6.1
5 Real retail sales
outlook, accounting for 78% of GDP growth in Industrial production index
2018. But Consumer confidence has declined 0

significantly since the beginning of 2018 → Source: Euromonitor International from national statistics
Slowdown will also affect consumption growth China Confidence Indices, Standardised
Index
5
▪ Investment more heavily affected by 2015 2016 2017 2018
4
slowdown, but mostly for SOEs and Business
3.2
3 Consumer
infrastructure investment. Private investment 2
1.2
growth is better 1
-1
-2
Source: Euromonitor International from national statistics
Note: Values above zero indicate confidence above long-term average
CHINA 32
China stock markets
▪ Chinese stock markets declined by almost 15% China Stock Markets vs. Global Stock Markets
December 31 2014=100
180
in October after earlier declines since the
160
summer MSCI China index
MSCI World index
140
▪ Fundamental factors behind the decline: 120
higher global interest rates, concerns about 100
123.7
US-China trade war escalation and a slowdown 80
111.8
2015 2016 2017 2018
in China’s economy 60
Source: Euromonitor International from MSCI and Black Rock
Note: MSCI China includes large and mid capitalisation Chinese companies’ stocks
▪ The Chinese stock market is also more accounting for 85% of Chinese stock market value. MSCI All Country World Index is the
most comprehensive index of both advanced and emerging market stock markets.
vulnerable to irrational pessimism, due to the
high proportion of inexperienced individual
investors and high market inefficiency
▪ The importance of the stock market for
business financing and household wealth
remains limited → Impact of the stock market
declines on overall economic growth are likely
to remain small
33
Russia
RUSSIA 34
Russia: Growth boosted by higher oil prices,

but effect unlikely to last
▪ The dynamics of oil prices had a favourable Russia Baseline Macro Forecasts: 2016–2022
effect on the economy in mid-2018. Average
Brent price in Q2–Q3 2018 was about USD75
per barrel. But oil prices have recently
declined towards USD60 per barrel
▪ The rapid growth of real wages (+7.2% year on
year in Q3 2018) and decreasing interest rates
have led to a revival in consumer lending and
faster consumption growth
▪ The Ruble has continued to weaken due to
new US sanctions. Together with VAT increase
in 2019 this leads to higher forecast inflation in
2019, stabilizing at around 4% after 2020
RUSSIA 35
Russia forecast risks
Russia Real GDP Growth Forecast

6
2017 2018 2019 2020 Decline in oil prices to USD Oil prices rise to
45–55 per barrel in 2019 USD80–90 per barrel
4
Euromonitor baseline + in 2019
Optimistic scenario New economic sanctions +
Pessimistic scenario
→ Easing of economic
Deteriorating external sanctions
2
conditions increase capital +
outflow and push a new Higher private sector
wave of ruble depreciation confidence
0 → →
Economic growth declines Real GDP growth rises
significantly in the medium to exceed 3.0% in
-2 term due to falling business 2019–2020. Probability:
confidence and renewed 5–10% at 1-year horizon
downturn in domestic
demand. Probability:
5–15% at 1-year horizon
36
Brazil
BRAZIL 37
Brazil: Lack of measures to kick

start the economy
▪ Economic recovery slow and uneven, real GDP Brazil Real GDP Growth
%
growth forecast downgraded to 2.2% in 2019 3
2 1.3%
▪ Large budget deficit, high unemployment, 1
pressure to raise interest rates 0

-1 2016 2017 2018 2019
▪ Far-right candidate Jair Bolsonaro wins -2
-3
presidential vote, investor and consumer
-4
confidence rebounds, Brazilian real recovers -5
on the news -6
Source: Euromonitor International from national statistics
▪ The new government is hoped to close Brazil’s
gaping budget deficit and carry out pension Brazil Exchange Rate and Confidence Indices
BRL per USD
reform 5
3.8
Exchange rate
4
▪ While the new government is likely to 3
2016 2017 2018
implement more private sector and investor- 0
friendly policies, it faces significant barriers to 2
Index
2016 2017 2018 -0.1
legislation due to a divided Congress 0
-2
Consumer confidence -1.4
-4 Business confidence
Source: Euromonitor International from national statistics, IMF
38
India
INDIA 39
India: Economic recovery gaining traction
▪ India has recovered from the lingering effects India Real GDP, Consumption and Investment Growth
%
of demonetisation and the GST 20
2015 2016 2017 2018
Real GDP
▪ The economy expanded at the fastest pace in 15 Private consumption
Fixed investment
two years in Q2 2018, supported by a faster
10 10.5
consumption growth 8.0
7.9
▪ Industrial output growth remains upbeat, 5
business sentiment has improved

0
▪ This has led to upwards revision in our real Source: Euromonitor International from OECD
GDP growth forecasts to 7.6% in 2019

India Foreign Trade (12-month moving sum)
▪ The economy, however, remains vulnerable to 200
USD billion
2016 2017 2018
rising fuel prices, a widening trade gap, 150
100 17.0
depreciating Indian rupee and risk of fiscal 50 13.6
slippage 0
-50
-100
-150 Trade balance
-200 Imports, y-o-y growth -175.9
Exports, y-o-y growth
-250
Source: Euromonitor International from OECD
40
Summary
SUMMARY 41
Summary
▪ Global economic growth is forecast to slow World Real GDP Growth

%
6.0
down in 2019 4.7 4.7
5.0
▪ Low-interest rates and high private confidence 4.0
3.7 3.6
to continue supporting global growth 3.0 2.3 2.1
▪ Rising trade war uncertainty and slowing global 2.0
trade pose risks to global growth 1.0

World Advanced economies Emerging economies
0.0
▪ Global debt levels remain high, though risks 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: Euromonitor International from national statistics/Eurostat/
have shifted towards emerging markets OECD/UN/IMF, World Economic Outlook (WEO)
▪ The effects of US fiscal stimulus to start fading,

trade tensions have escalated
Major Global Risks
▪ Eurozone to continue losing momentum
▪ Lingering Brexit uncertainty, risks of chaotic exit Global Downturn Emerging Market
Slowdown
▪ China remains on a slowdown path
Global Crisis
China Hard Landing Trade War Escalation

Thank you
Daniel Solomon, PhD Economist Ugne Saltenyte, Macro Analysis Manager
Daniel.Solomon@Euromonitor.com Ugne.Saltenyte@Euromonitor.com
Linkedin.com/in/bernarddanielsolomon/ Linkedin.com/in/ugnesaltenyte/

Webinar Global Economy in 2019 - Euromonitor

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Webinar:

Global Economy in 2019

Analysis closing date: December 5, 2018

This PowerPoint presentation includes proprietary information

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Global outlook: Growth to slow down

▪ Growth momentum in many World Real GDP Growth

Real GDP growth forecasts:

2018 FORECAST 2019 FORECAST

USA 2.2 2.9 2.4 2.0 1.6 0.2 -0.2

Positive global growth factors

Interest rates remain low

Private sector confidence remains high

Ongoing fiscal stimulus and recovery dynamics are still boosting

The slowdown in China remains gradual and appears under control

Unemployment at long-time lows in some advanced economies

Negative global growth factors

Increasing trade war uncertainty

Advanced economies’ private sector confidence has peaked, declining

Low-interest rates and lower effectiveness of QE → Monetary policy more

Slow labour productivity growth in advanced economies

US monetary tightening for the emerging economies

* Impact is measured as world GDP change 0

Global risk index: Outlook has deteriorated

SCENARIO GLOBAL RISK INDEX POSSIBLE TRADE WAR SCENARIOS

Eurozone Crisis 11 Baseline

Trump Adverse Policies 10 Trade War De-escalation

Main risks facing global economy

Global Downturn Emerging Market Slowdown

US: Fading fiscal stimulus and

2018 FORECAST 2019 FORECAST

US Real GDP Growth Forecast

US labour markets, income and

US Income and Employment, y-o-y Growth

▪ Real wage annual growth remains below 1% 4

▪ Labour-force participation and employment -2 Nonfarm private employment

2015 2016 2017 2018

2 Small business optimism

▪ S&P500 index declined by more than 7% in US Stock Markets

2015 2016 2017 2018

to irrational pessimism and macro shocks US Stock Market Volatility

Eurozone: Losing momentum

2018 FORECAST 2019 FORECAST

Eurozone forecast risks

Eurozone Real GDP Growth Forecast

Eurozone private sector sentiment

Eurozone monetary policy

Eurozone vs. US Monetary Policy Rates

▪ Quantitative easing programme will end in 2 US: Fed Funds rate

December 2019, though the ECB’s large

Eurozone 10-Year Government Bond Yield Spreads vs. Germany

UK: Economic activity has edged up

UK Real GDP and Components Growth

summer, but dropped again in autumn 0

Source: Euromonitor International Macro Model

▪ The Brexit negotiators have reached a draft No-Deal: 2019 Q1

withdrawal agreement, endorsed at the EU

Japan: Growth momentum fading

largest export partners 2

▪ Japan’s trade balance has been in decline for 1 0.4

Source: Euromonitor International from Ministry of Finance

China: Controlled slowdown?

2018 FORECAST 2019 FORECAST

China forecast risks