5TH CHIEF ECONOMIST DEBATE:
2014 – RECOVERY OR NEW BUBBLE?
Theme I:

International Environment - Peter Vanden Houte: Chief...
INTERNATIONAL ENVIRONMENT
Peter Vanden Houte
Chief Economist, ING

Vlerick Finance Alumni partner:
2014: Walking on eggshells
Peter Vanden Houte
Chief Economist ING Belgium
Western world recovering, emerging countries lagging

US

Eurozone

4
US government was a drag on growth

5
Debt payments US households have fallen back strongly

6
US construction sector continues to boom

7
Shale gas remains a game changer

Gas price Europe

Gas price US

8
Shale oil is making energy market less tight

9
No Fed hike expected in 2014…

• The Committee now anticipates, based on its
assessment of these factors, that it likely w...
…but what about 2015?

11
US yield curve will steepen in the course of 2014

12
Emerging world remains vulnerable
Weak credit

Too much credit

10
8
Average current
account balance
2010-12
(percent of G...
Chinese economy is stabilizing

14
EUROPE’S CHALLENGES
Frank Lierman
Chief Economist, Belfius

Vlerick Finance Alumni partner:
More or less inflation in the euro area?
That’s the question!

Frank Lierman, Chief Economist
Vlerick Finance Alumni
Bruss...
More or less inflation in the euro area?
That’s the question!

1.
2.
3.
4.

17

More than a bottoming out?
Towards deflati...
More or less inflation in the euro area?
That’s the question!

1.
2.
3.
4.

18

More than a bottoming out?
Towards deflati...
1. More than a bottoming out?
Increased confidence, prelude for economic rebound?
Euro Area
6

120

4

110

2

100

0

90
...
1. More than a bottoming out?
Consumer spending as driving force?
Euro Area
4

5

3

0

2

-5

1

-10

0

-15

-1

-20

-2...
1. More than a bottoming out?
Turnaround of industrial production?
Euro Area
20

86

15

84

10

82

5
80
0
78
-5
76
-10
7...
1. More than a bottoming out?
International trade crucial for sustainable recovery?
Euro Area
15

10

5

0

-5

-10

-15

...
1. More than a bottoming out?
Ceiling for unemployment in euro area, decrease elsewhere
13
12
11
10
9
8
7
6
5
4
3
'00

'01...
1. More than a bottoming out?
Sustainable decrease of public deficit?
0

Governm ent Net Lending, As A Percentage Of Gdp -...
1. More than a bottoming out?
Worrying increase of government debt
95

General Governm ent Gros s Debt, % Of Gdp, - Euro A...
More or less inflation in the euro area?
That’s the question!

1.
2.
3.
4.

26

More than a bottoming out?
Towards deflati...
2. Towards deflation?
Inflation on the way to 0%?
4,5
4
3,5
3
2,5
2
1,5
1
0,5
0
-0,5
-1
'99

'00

'01

'02

'03

'04

'05
...
20
10
-0
20 8
10
-1
20 0
10
-1
20 2
11
-0
20 2
11
-0
20 4
11
-0
20 6
11
-0
20 8
11
-1
20 0
11
-1
20 2
12
-0
20 2
12
-0
20 ...
2. Towards deflation?
Money supply decreases even in a LTRO’s environment
14

12

10

8

6

4

2

0

-2
00

01

02

03

04...
2. Towards deflation?
Accelerated decrease of LTRO’s due to reimbursement of banks

30
2. Towards deflation?
Disappointing evolution of credit to the economy (% / year)
20

15

10

5

0

-5
2004

2005

2006

2...
20
10
-0
20 8
10
-1
20 0
10
-1
20 2
11
-0
20 2
11
-0
20 4
11
-0
20 6
11
-0
20 8
11
-1
20 0
11
-1
20 2
12
-0
20 2
12
-0
20 ...
2. Towards deflation?
Stagnation of oil price between 100 and 120 USD/Barrel
Crude Oil, Brent ($/bbl) - Clos e

160

140

...
2. Towards deflation?
Remarkable strength of euro
1,7

1,6

1,5

1,4

1,3

1,2

1,1
'04

'05

'06

'07

FX Rate - Spot Mid...
More or less inflation in the euro area?
That’s the question!

1.
2.
3.
4.

35

More than a bottoming out?
Towards deflati...
3. Social pack as missing link?
German unemployment at bottom, while other countries reached a
ceiling
12
11
10
9
8
7
6
5
...
3. Social pack as missing link?
Increasing and or huge unemployment is often linked to
 Too high fiscal burden
 High emp...
3. Social pack as missing link?
Key success factors for a reform
 Limitation of unemployment allowances
 Decrease or at ...
3. Social pack as missing link?
The European 7 stages plan to reduce youth unemployment
 Employment guarantee (within 4 m...
More or less inflation in the euro area?
That’s the question!

1.
2.
3.
4.

40

More than a bottoming out?
Towards deflati...
4. Banking Union, the ultimate solution?
Three pillars
 European prudential surveillance
 ECB from November 2014 on
 As...
4. Banking Union, the ultimate solution?
Three pillars (2)
 European resolution mechanism and fund
 Each bank has to pre...
4. Banking Union, the ultimate solution?
Three pillars (3)
 European deposit guarantee
 100.000 euro per individual per ...
MAJOR CHALLENGES OF THE BELGIAN ECONOMY
Edwin De Boeck
Chief Economist, KBC Bank

Vlerick Finance Alumni partner:
Major challenges of the
Belgian economy

Edwin De Boeck
Chief Economist KBC Group
January 28th 2014
Financial & economic crisis

Belgium weathered the crisis reasonably well

Real GDP Q4 2007 – Q3 2013

Employment Q4 2007 ...
Marked improvement in sentiment

Moderate recovery in Belgium leading to +/-1.2% growth in 2014

Producer confidence
2.0

...
Long-term potential growth
Estimated at well below 2%

Belgium - Declining trend of productivity growth

Flanders loosing ...
Still substantial slack in the economy

Wave of unemployment & bankruptcies probably to continue for a while

Unemployment...
Labour market

Labour mismatch hinders the increase in employment rate

Both a large pool of unfilled job vacancies
and pe...
External position

Deterioration of cost competitiveness…

Relative unit labour costs

Current account balance

(vs. EU-15...
Industrial activity

…adds to the process of desindustrialisation

Share manufacturing sector
(excluding construction & en...
Public finances

Fiscal consolidation has been ‘back-loaded’
Projected structural budget balance

Budgetary consolidation
...
Belgium
Ageing strikes

Public pension and healthcare
benefits
12%

Projected change of ageing-related
expenditures
(in % ...
Belgium
Ageing costs - Worrying, but not (yet) unsustainable

Gross public debt in % of GDP after 2016

Public pension and...
Belgium
Poor government, wealthy households

Net household wealth

Gross public debt

(in % of GDP)
550

140

500

Net fin...
Housing market

Sales transactions & new mortgages declining, prices not (yet) cooling off
Recent property price developme...
www.kbceconomics.be

58
FINANCIAL MARKETS OUTLOOK
Bart Van Craeynest
Chief Economist, Petercam

Vlerick Finance Alumni partner:
Institutional
Asset Management

Titre de la présentation
Vlerick Alumni Debate
Tuesday 28 January 2014

21-09-2011

60/25
Global recovery
15

102
Global industrial production (annual change)

OECD leading indicator (rhs)

10

101

5

100

0

99...
An extended period of low bond yields
16
14
12
10
8
6
4
2
US bond yield
0
Jan-00 Dec-09 Dec-19 Dec-29 Dec-39 Dec-49 Dec-59...
Financial repression
Business confidence

63
28-01-2014 | Petercam Macro Presentation |
Recovering equity markets
130
US

Europe

EM

120
110
100
90
80
70

60
50
Index (start 2008 = 100)

40
Jan-08

Jul-08

Jan...
Bubbles?
US equities

50
45

Valuation S&P500 (Shiller PE)

40
35
30
25
20
15
10
5
0
Jan-00 Dec-09 Dec-19 Dec-29 Dec-39 De...
Global equities still offer return potential
MSCI World

14

0

Return over the next 10y (annual average, in %)

12

Price...
Rotation towards equity
1400
Investments of US mutual funds (cumulative, bn dollar)
1200

Equities

Bonds

Jan-08

Jan-09
...
Japanese equity is very much geared to global recovery

68
28-01-2014 | Petercam Macro Presentation |
Global asset class outlook
Expected returns 2014
30
25
19%

20
17%
15
10

8%
6%

4.5%

5
2.1%

1.8%

0.3%

0
US Eq

Euro E...
Petercam N.V.
Sint Goedeleplein 19
1000 Brussel
Tel.: +32 (0)2 229 63 11
Fax : +32 (0)2 229 65 98

Bart Van Craeynest
Chie...
INTERACTIVE DEBATE
Chief Economists
and Audience
Moderator:

Alain Deneef: Senior Portfolio Manager,
Private Banking, Bank...
UPCOMING EVENTS
Career Testimonial
Round table with Yves Leterme
Pecha Kuncha - student event
Marketing Shower: Customer I...
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Vlerick Alumni: 5th Edition of the Vlerick Chief Economists Debate

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5th Edition of the Vlerick Chief Economists Debate - 28/01/2014
- Mr. Peter Vanden Houte: Chief Economist, ING
- Mr. Edwin De Boeck: Chief Economist, KBC Bank
- Mr. Frank Lierman: Chief Economist, Belfius
- Mr. Bart Van Craeynest: Chief Economist, Petercam

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Vlerick Alumni: 5th Edition of the Vlerick Chief Economists Debate

  1. 1. 5TH CHIEF ECONOMIST DEBATE: 2014 – RECOVERY OR NEW BUBBLE? Theme I: International Environment - Peter Vanden Houte: Chief Economist, ING Theme II: Europe's Challenges - Frank Lierman: Chief Economist, Belfius Theme III: Major Challenges of the Belgian Economy - Edwin De Boeck: Chief Economist, KBC Bank Theme IV: Financial Markets Outlook - Bart Van Craeynest: Chief Economist, Petercam Q&A Moderator - Alain Deneef: Senior Portfolio Manager, Private Banking, Bank Degroof Networking Reception 28 January 2014 Vlerick Finance Alumni partner:
  2. 2. INTERNATIONAL ENVIRONMENT Peter Vanden Houte Chief Economist, ING Vlerick Finance Alumni partner:
  3. 3. 2014: Walking on eggshells Peter Vanden Houte Chief Economist ING Belgium
  4. 4. Western world recovering, emerging countries lagging US Eurozone 4
  5. 5. US government was a drag on growth 5
  6. 6. Debt payments US households have fallen back strongly 6
  7. 7. US construction sector continues to boom 7
  8. 8. Shale gas remains a game changer Gas price Europe Gas price US 8
  9. 9. Shale oil is making energy market less tight 9
  10. 10. No Fed hike expected in 2014… • The Committee now anticipates, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal 10
  11. 11. …but what about 2015? 11
  12. 12. US yield curve will steepen in the course of 2014 12
  13. 13. Emerging world remains vulnerable Weak credit Too much credit 10 8 Average current account balance 2010-12 (percent of GDP) Capital surplus Malaysia 6 Russia Philippines 4 China 2 Hungary Mexico Thailand 0 -2 Chile Romania India South Africa Poland Ukraine -4 -6 Indonesia Brazil Colombia -8 Capital shortage Turkey -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 Real credit growth in excess of GDP growth, average, 2010-12 (percent) Source:IMF 13
  14. 14. Chinese economy is stabilizing 14
  15. 15. EUROPE’S CHALLENGES Frank Lierman Chief Economist, Belfius Vlerick Finance Alumni partner:
  16. 16. More or less inflation in the euro area? That’s the question! Frank Lierman, Chief Economist Vlerick Finance Alumni Brussels, January 28, 2014
  17. 17. More or less inflation in the euro area? That’s the question! 1. 2. 3. 4. 17 More than a bottoming out? Towards deflation? Social pack as missing link? Banking Union, the ultimate solution?
  18. 18. More or less inflation in the euro area? That’s the question! 1. 2. 3. 4. 18 More than a bottoming out? Towards deflation? Social pack as missing link? Banking Union, the ultimate solution?
  19. 19. 1. More than a bottoming out? Increased confidence, prelude for economic rebound? Euro Area 6 120 4 110 2 100 0 90 -2 80 -4 70 -6 60 00 01 02 03 04 05 06 07 Euro Area Economic Sentiment Indicator (Right) Euro Area GDP (% YoY) (Left) 19 08 09 10 11 12 13
  20. 20. 1. More than a bottoming out? Consumer spending as driving force? Euro Area 4 5 3 0 2 -5 1 -10 0 -15 -1 -20 -2 -25 -3 -30 -4 -35 -5 -40 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 Euro Area Retail trade, except of motor vehicles and motorcycles (MOV 3M, % 1 YR) (Left) Euro Area Consumer Confidence Indicator (Right) 20 '13
  21. 21. 1. More than a bottoming out? Turnaround of industrial production? Euro Area 20 86 15 84 10 82 5 80 0 78 -5 76 -10 74 -15 72 -20 70 -25 -30 68 00 01 02 03 04 05 06 Euro Area Capacity Utilization (%) (Right) Euro Area Industrial Production (% YoY) (Left) 21 07 08 09 10 11 12 13
  22. 22. 1. More than a bottoming out? International trade crucial for sustainable recovery? Euro Area 15 10 5 0 -5 -10 -15 -20 '02 '03 '04 '05 '06 '07 Euro Area Exports of goods & services (% YoY) Euro Area Imports of goods & services (% YoY) 22 '08 '09 '10 '11 '12 '13
  23. 23. 1. More than a bottoming out? Ceiling for unemployment in euro area, decrease elsewhere 13 12 11 10 9 8 7 6 5 4 3 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 Harmonized Unemployment Rate, Both Sexes, All Ages, Sa - Euro Area Harmonized Unemployment Rate, Both Sexes, All Ages, Sa - United Kingdom Unemployment Rate, Sa - United States Unemployment Rate, Sa - Japan 23 '11 '12 '13
  24. 24. 1. More than a bottoming out? Sustainable decrease of public deficit? 0 Governm ent Net Lending, As A Percentage Of Gdp - Euro Area -1 -2 -3 -4 -5 -6 -7 '02 24 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
  25. 25. 1. More than a bottoming out? Worrying increase of government debt 95 General Governm ent Gros s Debt, % Of Gdp, - Euro Area (17 Countries ) 90 85 80 75 70 65 '02 25 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
  26. 26. More or less inflation in the euro area? That’s the question! 1. 2. 3. 4. 26 More than a bottoming out? Towards deflation? Social pack as missing link? Banking Union, the ultimate solution?
  27. 27. 2. Towards deflation? Inflation on the way to 0%? 4,5 4 3,5 3 2,5 2 1,5 1 0,5 0 -0,5 -1 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 Euro Area Harmonized CPI (% YoY) Euro Area Core inflation (Overall Index, Excluding Energy and Unprocessed Food) (% YoY) 27 '13
  28. 28. 20 10 -0 20 8 10 -1 20 0 10 -1 20 2 11 -0 20 2 11 -0 20 4 11 -0 20 6 11 -0 20 8 11 -1 20 0 11 -1 20 2 12 -0 20 2 12 -0 20 4 12 -0 20 6 12 -0 20 8 12 -1 20 0 12 -1 20 2 13 -0 20 2 13 -0 20 4 13 -0 20 6 13 -0 20 8 13 -1 20 0 13 -1 2 2. Towards deflation? Underlying inflation decreases also Onderliggende inflatie 2,5 2 1,5 1 0,5 0 Belgium België 28 Euro area Eurozone
  29. 29. 2. Towards deflation? Money supply decreases even in a LTRO’s environment 14 12 10 8 6 4 2 0 -2 00 01 02 03 04 05 06 07 08 Euro Area Grow th Rate M3 (% YoY; 3 Month Moving Average) 29 09 10 11 12 13
  30. 30. 2. Towards deflation? Accelerated decrease of LTRO’s due to reimbursement of banks 30
  31. 31. 2. Towards deflation? Disappointing evolution of credit to the economy (% / year) 20 15 10 5 0 -5 2004 2005 2006 2007 2008 2009 Euro Area Loans to Households (% YoY) Euro Area Loans To Non-Financial Corporations (% YoY) 31 2010 2011 2012 2013
  32. 32. 20 10 -0 20 8 10 -1 20 0 10 -1 20 2 11 -0 20 2 11 -0 20 4 11 -0 20 6 11 -0 20 8 11 -1 20 0 11 -1 20 2 12 -0 20 2 12 -0 20 4 12 -0 20 6 12 -0 20 8 12 -1 20 0 12 -1 20 2 13 -0 20 2 13 -0 20 4 13 -0 20 6 13 -0 20 8 13 -1 20 0 13 -1 2 2. Towards deflation? Lower energycost is welcome Energiedragers 20 15 10 5 0 -5 -10 Belgium België 32 Euro area Eurozone
  33. 33. 2. Towards deflation? Stagnation of oil price between 100 and 120 USD/Barrel Crude Oil, Brent ($/bbl) - Clos e 160 140 120 100 80 60 40 20 0 '85 33 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13
  34. 34. 2. Towards deflation? Remarkable strength of euro 1,7 1,6 1,5 1,4 1,3 1,2 1,1 '04 '05 '06 '07 FX Rate - Spot Mid - US Dollar per Euro 34 '08 '09 '10 '11 '12 '13
  35. 35. More or less inflation in the euro area? That’s the question! 1. 2. 3. 4. 35 More than a bottoming out? Towards deflation? Social pack as missing link? Banking Union, the ultimate solution?
  36. 36. 3. Social pack as missing link? German unemployment at bottom, while other countries reached a ceiling 12 11 10 9 8 7 6 5 4 3 2 '04 '05 '06 '07 '08 '09 Harmonized Unemployment Rate, Both Sexes, All Ages, Sa Harmonized Unemployment Rate, Both Sexes, All Ages, Sa Harmonized Unemployment Rate, Both Sexes, All Ages, Sa Harmonized Unemployment Rate, Both Sexes, All Ages, Sa 36 '10 '11 - Germany - Netherlands - France - Belgium '12 '13
  37. 37. 3. Social pack as missing link? Increasing and or huge unemployment is often linked to  Too high fiscal burden  High employers and personal contributions  Expensive rules of lay offs  Inflexible wage negotiations  Low qualification of workers  Low employment rate  Short careers  … But also influence of  Overcapacity of production equipment  Insufficient internal demand  Necessity to reduce debt of households  Increased precautionary savings of households  Decreased competitiveness  … 37
  38. 38. 3. Social pack as missing link? Key success factors for a reform  Limitation of unemployment allowances  Decrease or at least slower increase of salaries  Decrease of fiscal and parafiscal burden on labour revenues  Reduction of employment in public sector  Increased flexibility  Active employment policy  Activation of unemployed people  Education and training  Premiums  Subsidised employment  …  Measures to stimulate the creation of companies 38
  39. 39. 3. Social pack as missing link? The European 7 stages plan to reduce youth unemployment  Employment guarantee (within 4 months after school leave or start unemployment)  European Social Fund and European Structural and Investment Fund: 25% of their capital (80 bn EUR) to invest in human capital  Initiatives to stimulate employment for youth: 6 bn EUR in 2014 and 2015  Stimulation of mobility within EU via European Employment Network  European alliance for trainings, Erasmus+, …  European labour market via transfer of pension rights, professional qualifications, rights of mobile workers, …  Help to SME’s and micro companies to hire young persons via European Regional Development Fund, EIB (yearly budget of 12,5 bn EUR which could increase up to 37,5 bn EUR via co financing and indirect credits) 39
  40. 40. More or less inflation in the euro area? That’s the question! 1. 2. 3. 4. 40 More than a bottoming out? Towards deflation? Social pack as missing link? Banking Union, the ultimate solution?
  41. 41. 4. Banking Union, the ultimate solution? Three pillars  European prudential surveillance  ECB from November 2014 on  Assessment of broad risk factors on liquidity and funding (Winter 2014)  Asset Quality Review (Spring 2014)  Stress test (Summer 2014)  Only for some 130 of the 6000 European banks (85% of euro area banking systems) (min 30 bn EUR or balance sheet of more than 20% of GDP or having received state aid)  Forced recapitalisation: who pays the bill?  National government  Private shareholders  ESM  …? 41
  42. 42. 4. Banking Union, the ultimate solution? Three pillars (2)  European resolution mechanism and fund  Each bank has to prepare recovery plan  European resolution council (EC, ECB, national surveillance authorities)  Resolution fund: 1% of covered deposits via contributions of banks (up to 2026) (goal 55 bn EUR)  Resolution mechanism: steps  8 % of liabilities (equity capital, reserves, unsecured bonds, deposits above 100.000 EUR)  National resolution fund  European resolution fund  ESM  National budgets 42
  43. 43. 4. Banking Union, the ultimate solution? Three pillars (3)  European deposit guarantee  100.000 euro per individual per bank  Current, saving and term accounts plus saving bonds  National funds (0,8% of covered deposits)  Merger of the national funds in 2026. 43
  44. 44. MAJOR CHALLENGES OF THE BELGIAN ECONOMY Edwin De Boeck Chief Economist, KBC Bank Vlerick Finance Alumni partner:
  45. 45. Major challenges of the Belgian economy Edwin De Boeck Chief Economist KBC Group January 28th 2014
  46. 46. Financial & economic crisis Belgium weathered the crisis reasonably well Real GDP Q4 2007 – Q3 2013 Employment Q4 2007 – Q3 2013 (% change) (% change) -25 -20 -15 -10 -5 0 5 10 15 20 -25 Germany Austria Belgium France EMU Netherlands Finland Spain Portugal Ireland Italy Greece 46 -20 -15 -10 -5 0 5
  47. 47. Marked improvement in sentiment Moderate recovery in Belgium leading to +/-1.2% growth in 2014 Producer confidence 2.0 (standard deviation from LT-average) Consumer confidence 2.0 1.5 1.5 1.0 1.0 0.5 0.5 0.0 0.0 -0.5 -0.5 -1.0 -1.0 -1.5 -1.5 -2.0 -2.5 Belgium -2.0 Germany -2.5 Euro-periphery (*) -3.0 47 -3.0 (*) Euro-periphery = Portugal, Ireland, Italy, Greece & Spain (standard deviation from LT-average)
  48. 48. Long-term potential growth Estimated at well below 2% Belgium - Declining trend of productivity growth Flanders loosing its growth advantage (GDP per worker, YoY-growth in %) (regional GDP-growth, in % per year, period averages) 6% 6 Flanders 5 Wallonia 4% Brussels 4 Euro Area 2% 3 0% 2 -2% 1 -4% 0 1960-73 48 1974-81 1982-89 1990-99 2000-12
  49. 49. Still substantial slack in the economy Wave of unemployment & bankruptcies probably to continue for a while Unemployment rate Belgium - Bankruptcies (harmonized and seasonally adjusted, in %) 22 20 18 16 14 Belgium France Germany Netherlands Euro-periphery (*) 15 Absolute number (rhs) Per 1000 active businesses (lhs) Ratio of new businesses to bankruptcies (lhs) 13000 12000 13 11000 11 10000 12 10 9 8 6 8000 7 7000 4 2 49 9000 5 6000
  50. 50. Labour market Labour mismatch hinders the increase in employment rate Both a large pool of unfilled job vacancies and persistent unemployment Employment rate (employed people in % population aged 20-64) 2.5 EU2020 Strategy Flanders 76% EU2020 Strategy Belgium 73.2% 70 65 60 55 50 Flanders Wallonia Brussels Belgium Job vacancy rate (unfilled vacancies as a % labour force) 75 2 1.5 2005 2000 1 1970 0.5 1995 1985 1990 1975 1982 0 1 50 2012 Beveridge curve Belgium 2 3 4 5 6 7 8 9 Unemployment rate (unemployed as a % labour force) 10 11 12
  51. 51. External position Deterioration of cost competitiveness… Relative unit labour costs Current account balance (vs. EU-15, 2005 = 100) (in % of GDP) 8 120 6 Devaluation BEF 115 4 2 110 0 105 -2 -4 100 -6 Germany -8 Euro-periphery (*) 95 Belgium -10 90 51 (*) Euro-periphery = Portugal, Ireland, Italy, Greece & Spain Introduction ‘health index’ ???
  52. 52. Industrial activity …adds to the process of desindustrialisation Share manufacturing sector (excluding construction & energy, in % of GDP) 25% 45 Share manufacturing sector (including construction & energy, in % of GDP) 40 22% 35 30 25 19% 20 190 16% Belgium Germany Employment in manufacturing (2000 = 100) 160 Flanders 130 100 13% 70 52 Wallonia
  53. 53. Public finances Fiscal consolidation has been ‘back-loaded’ Projected structural budget balance Budgetary consolidation (in % of GDP) (structural effort, as a % of GDP) 2 6 1.25 1.0 1 0.75 0.6 0.3 0.75 5 0.4 0 0 -0.2 -1 -2 4 3 -1.8 2 1 -3 0 -4 53 Realised balance Target Stability Program 2013-2016 EC Autumn projection (no policy change) Structural budget adjustments 2009-2013 To be realised before 2016
  54. 54. Belgium Ageing strikes Public pension and healthcare benefits 12% Projected change of ageing-related expenditures (in % of GDP, 2010-2030) (in % of GDP) Portugal Italy 10% Spain Pensions Greece 8% Other UK France Sweden 6% Ireland Germany 4% Denmark Healthcare Austria Netherlands 2% Pensions Luxemburg Finland 0% Belgium -2 54 -1 0 1 2 Source: Ageing Report, EC 2012 3 4 5 6
  55. 55. Belgium Ageing costs - Worrying, but not (yet) unsustainable Gross public debt in % of GDP after 2016 Public pension and healthcare benefits (in % of GDP) 12% 150 140 130 (Stability Program until 2016) Scenario 1: primary surplus remains at 2016 level (+3.4% of GDP) 120 10% 110 100 8% 90 80 6% 70 60 50 4% 40 Healthcare 30 Pensions 2% 20 10 0 0% 55 Scenario 2: primary surplus decreases by ageing cost after 2016
  56. 56. Belgium Poor government, wealthy households Net household wealth Gross public debt (in % of GDP) 550 140 500 Net financial assets 450 Real estate 400 Total 120 100 350 80 In % of GDP 300 250 200 60 40 150 100 50 56 20 0 In % net household wealth
  57. 57. Housing market Sales transactions & new mortgages declining, prices not (yet) cooling off Recent property price development (all types of dwellings, 2011Q1 = 100) 70000 110 109 108 107 Belgium (Eurostat-index) Belgium (FOD-index) 65000 New production of housing loans (rhs) 160000 EMU (Eurostat-index) 140000 60000 104 103 180000 Belgium (ECB-index) 106 105 Number of home sales (lhs) 120000 55000 102 100000 101 100 50000 80000 99 98 97 45000 60000 96 95 57 40000 40000
  58. 58. www.kbceconomics.be 58
  59. 59. FINANCIAL MARKETS OUTLOOK Bart Van Craeynest Chief Economist, Petercam Vlerick Finance Alumni partner:
  60. 60. Institutional Asset Management Titre de la présentation Vlerick Alumni Debate Tuesday 28 January 2014 21-09-2011 60/25
  61. 61. Global recovery 15 102 Global industrial production (annual change) OECD leading indicator (rhs) 10 101 5 100 0 99 -5 98 -10 97 -15 Feb-95 96 Feb-97 Feb-99 Feb-01 Feb-03 Feb-05 Feb-07 Feb-09 Feb-11 Feb-13 61 28-01-2014 | Petercam Macro Presentation |
  62. 62. An extended period of low bond yields 16 14 12 10 8 6 4 2 US bond yield 0 Jan-00 Dec-09 Dec-19 Dec-29 Dec-39 Dec-49 Dec-59 Dec-69 Dec-79 Dec-89 Dec-99 Dec-09 62 28-01-2014 | Petercam Macro Presentation |
  63. 63. Financial repression Business confidence 63 28-01-2014 | Petercam Macro Presentation |
  64. 64. Recovering equity markets 130 US Europe EM 120 110 100 90 80 70 60 50 Index (start 2008 = 100) 40 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 64 28-01-2014 | Petercam Macro Presentation |
  65. 65. Bubbles? US equities 50 45 Valuation S&P500 (Shiller PE) 40 35 30 25 20 15 10 5 0 Jan-00 Dec-09 Dec-19 Dec-29 Dec-39 Dec-49 Dec-59 Dec-69 Dec-79 Dec-89 Dec-99 Dec-09 65 28-01-2014 | Petercam Macro Presentation |
  66. 66. Global equities still offer return potential MSCI World 14 0 Return over the next 10y (annual average, in %) 12 Price/trend earnings MSCI World (rhs, inverted) 10 5 10 8 15 6 20 4 25 2 30 0 35 -2 40 -4 45 -6 Jan-81 50 Jan-85 Jan-89 Jan-93 Jan-97 Jan-01 Jan-05 Jan-09 Jan-13 66 28-01-2014 | Petercam Macro Presentation |
  67. 67. Rotation towards equity 1400 Investments of US mutual funds (cumulative, bn dollar) 1200 Equities Bonds Jan-08 Jan-09 1000 800 600 400 200 0 -200 -400 -600 Jan-07 Jan-10 Jan-11 Jan-12 Jan-13 67 28-01-2014 | Petercam Macro Presentation |
  68. 68. Japanese equity is very much geared to global recovery 68 28-01-2014 | Petercam Macro Presentation |
  69. 69. Global asset class outlook Expected returns 2014 30 25 19% 20 17% 15 10 8% 6% 4.5% 5 2.1% 1.8% 0.3% 0 US Eq Euro Eq EM Eq JP Eq US Gov Euro Gov Euro Credit Euro HY Returns in local currency 69 28-01-2014 | Petercam Macro Presentation |
  70. 70. Petercam N.V. Sint Goedeleplein 19 1000 Brussel Tel.: +32 (0)2 229 63 11 Fax : +32 (0)2 229 65 98 Bart Van Craeynest Chief Economist bart.vancraeynest@petercam.be Tel.: +32 (0)2 229 62 32 My blog: https://insights.petercam.com Twitter: @BVanCraeynest Brussels – Frankfurt – London - Luxemburg - Madrid - Geneva 70 28-01-2014 | Petercam Macro Presentation | 70/25
  71. 71. INTERACTIVE DEBATE Chief Economists and Audience Moderator: Alain Deneef: Senior Portfolio Manager, Private Banking, Bank Degroof Vlerick Finance Alumni partner:
  72. 72. UPCOMING EVENTS Career Testimonial Round table with Yves Leterme Pecha Kuncha - student event Marketing Shower: Customer Intelligence Buy your own company conference - ism Vlerick Business School Meet the CEO 2014 Platform for development Experience the future: Power of the Crowd’ Brussel Brussel Gent Tervuren Elsene Brussel Leuven Brussel PUB/MGM Vlerick Alumni Marketing Marketing VBS - Finance PUB/MGM MBA PUB/MGM THANK YOU You are kindely invited to the networking reception Vlerick Finance Alumni partner: 30/01/2014 30/01/2014 3/02/2014 20/02/2014 27/02/2014 11/03/2014 12/03/2014 26/03/2014

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