Global Economic Outlook and Strategy - Kadin Indonesia

More documents

Recommendations

Info

February 28, 2008 Global Economic Outlook and Strategy José Luis Alzola (44-20) 7986-3281 jose.alzola @citi.com Jürgen Michels (44-20) 7986-3294 juergen.michels @citi.com Tina Mortensen (44-20) 7986-3284 tina.mortensen @citi.com Euro Area: Others Spain Spanish GDP growth remained surprisingly strong at 0.8% in the fourth quarter (not annualized). However, a number of activity indicators declined sharply in December and January, suggesting a significant loss of momentum, particularly of domestic demand. Residential construction continues to moderate and probably will be a drag on overall GDP growth later this year. Higher mortgage rates, which impinge on elevated household indebtedness, also are limiting spending power by consumers. On the favorable side, exports remain relatively dynamic (especially to emerging markets). In addition, the government achieved a budget surplus of 2.2% of GDP last year, providing some room for the automatic stabilizers to cushion the economic downturn and, perhaps, for some expansionary measures after the March 9 elections. Benelux Thanks to a strong increase in net exports, Dutch GDP growth surprised again on the upside in the fourth quarter. Furthermore, consumption accelerated at the end of last year, and ongoing job creation, in combination with some wage acceleration, is likely to support consumption in 2008. However, private consumption growth will be overstated this year by about one-half percentage point due to reform of the public health plan. Facing tighter financial conditions, investment growth is likely to slow and exports should moderate. In Belgium, the government crisis has not had substantial negative repercussions for the economy so far. While the interim government has managed to propose a 2008 budget, targeting a balanced position, the country’s large parties made some progress in reforming the constitution. However, if these talks fail, the political crisis probably will escalate again at the end of March. Finland The pace of Finnish growth is expected to ease further this year, in line with the global growth slowdown, as consumer demand is capped by intensifying price pressures and less stimulus from the housing market. The tight labor market is fueling wage pressures, suggesting upside inflation risks. The government will continue to strive for a prudent fiscal policy stance, with the focal point being an improvement of long-term growth prospects via enhanced job creation and tax cuts. However, high pay increases in recent wage agreements pose a minor setback to planned income tax cuts. Figure 29. Spain, Belgium, the Netherlands, and Finland — Economic Forecast, 2007-09F Spain Belgium The Netherlands Finland 2007F 2008F 2009F 2007F 2008F 2009F 2007F 2008F 2009F 2007F 2008F 2009F Real GDP YoY 3.8% 2.1% 2.2% 2.6% 1.7% 1.9% 3.5% 2.8% 1.8% 4.3% 2.5% 2.9% Final Dom. Demand YoY 4.4 2.4 1.6 2.8 2.1 2.3 2.9 2.5 1.7 3.7 3.2 2.3 Public Consumption YoY 5.1 4.5 4.4 1.7 1.8 1.8 2.9 2.0 1.6 1.5 1.7 1.4 Private Consumption YoY 3.1 1.8 1.7 2.5 1.9 1.9 2.1 2.4 1.2 3.9 3.3 2.6 Investment (excl. Stocks) YoY 6.3 2.3 2.3 5.0 2.9 3.8 4.9 3.3 2.9 5.3 4.4 2.4 Exports YoY 5.3 4.1 4.0 4.6 4.2 3.7 6.4 4.6 3.7 6.2 4.5 4.9 Imports YoY 6.6 4.5 3.9 4.9 4.6 4.2 5.6 4.7 3.9 3.5 4.1 3.8 CPI (Average) YoY 2.7 3.4 2.3 1.8 2.6 1.8 1.6 2.1 2.5 2.5 2.8 2.1 Unemployment Rate % 8.1 8.4 8.8 7.5 7.2 7.1 4.6 4.5 4.5 6.8 6.3 6.0 Current Account % of GDP -9.6 -8.9 -7.5 3.0 2.5 2.4 7.6 7.3 7.2 6.1 5.7 5.4 General Govt. Balance % of GDP 2.2 1.2 0.0 -0.2 -0.3 -0.3 -0.2 0.2 0.7 4.4 4.5 4.3 General Govt. Debt % of GDP 37.3 35.8 34.4 83.7 80.0 77.9 45.7 43.5 41.0 36.5 34.0 33.0 F Citi forecast. YoY Year-on-year growth rate. The forecasts for GDP and its components are calendar adjusted. Source: Citi. 24
February 28, 2008 Global Economic Outlook and Strategy Michael Saunders (44-20) 7986-3299 michael.saunders @citi.com United Kingdom The U.K. economy continues to show signs of economic slowdown, and further marked weakness is likely in coming months as the credit crunch and last year’s rate hikes bite. We expect GDP growth this year to be about 1¾%, with consumption growth the weakest since 1992. The MPC has already made two 25-basis-point cuts, and we expect the MPC to cut by an additional 100 basis points over the course of the year. The gradual pace of easing is recognition that, with rising near-term inflation and a sharp recent pickup in inflation expectations, the MPC wants to allow a disinflationary cushion of economic weakness to build up. Easing aims to limit the extent of the slowdown, not prevent it from happening. In turn, this lack of aggressive early stimulus raises the likelihood that growth remains subdued and interest rates stay low in 2009. The United Kingdom is especially sensitive to the crisis in money and credit markets because of the interplay between high private debt, low private savings, the massively overstretched housing market, and the big role played by wholesale lenders in the mortgage market. Housing demand is dropping amid tightening lending standards and widening mortgage spreads. Commercial property values also are plunging, with the sharpest drop since data began more than 20 years ago. In turn, consumer spending is now starting to slow as savings begin to rise and surveys of retailers show marked weakness. Given that sales usually lag housing by about six months, retail sales growth is likely to slow a lot more in coming months. The labor market remains quite strong so far but usually lags the economy by a quarter or two. Hence, employment will probably start to weaken around midyear. The MPC faces a tricky job in balancing downside risks to growth against upside inflation risks. Recent surveys suggest that firms are very confident in their ability to raise selling prices, and food and energy price increases are likely to lift CPI inflation to about 3.0% this year. Inflation expectations already are elevated, and there is a risk that rapid easing, amid rising inflation, could destabilize inflation expectations further and worsen the growth-inflation tradeoff. Balancing these risks suggests that easing will be gradual. Figure 30. United Kingdom — Economic Forecast, 2007-09F 2007 2008 2007F 2008F 2009F 2Q 3QF 4QF 1QF 2QF 3QF 4QF Real GDP YoY 3.1% 1.7% 1.9% 3.2% 3.2% 3.0% 2.5% 1.9% 1.3% 1.2% SAAR 3.3 2.9 2.5 1.3 0.8 0.6 2.1 Domestic Demand YoY 3.8 1.6 1.4 3.4 4.0 3.9 3.0 2.3 0.7 0.4 (Incl. Inventories) SAAR 2.6 6.2 2.8 0.4 -0.1 -0.4 1.7 Consumption YoY 3.1 0.9 1.4 2.7 3.6 3.0 2.1 1.3 0.3 0.0 SAAR 2.9 4.5 1.5 -0.3 -0.5 0.6 0.3 Investment YoY 6.6 4.6 1.5 6.4 6.0 4.9 4.8 6.7 4.3 2.5 SAAR -3.0 9.8 9.1 3.9 4.3 0.1 1.9 Exports YoY -4.6 4.0 6.9 -11.7 2.1 2.4 3.7 4.3 3.4 4.7 SAAR 1.0 8.1 1.6 4.4 3.3 4.3 7.0 Imports YoY -2.3 3.4 4.7 -10.3 4.3 5.3 5.2 5.7 1.1 1.6 SAAR -1.9 20.0 3.3 0.8 0.1 0.5 5.3 Unemployment Rate % 5.4 5.5 5.8 5.4 5.4 5.4 5.4 5.4 5.5 5.6 CPI Inflation YoY 2.3 2.5 2.0 2.6 1.8 2.1 2.4 2.3 2.7 2.4 Merch. Trade £bn -86.2 -90.1 -81.0 -19.3 -22.4 -24.7 -25.2 -22.4 -21.4 -21.1 % of GDP -6.2 -6.2 -5.3 -5.6 -6.4 -7.0 -7.0 -6.2 -5.8 -5.7 Current Account £bn -72.1 -66.2 -51.0 -13.7 -20.0 -21.8 -21.0 -16.1 -14.8 -14.3 % of GDP -5.2 -4.5 -3.3 -4.0 -5.7 -6.1 -5.9 -4.4 -4.0 -3.8 PSNB £bn FY -42.9 -48.8 -54.6 % of GDP -3.0 -3.3 -3.5 General Govt. Balance % of GDP -3.0 -3.4 -3.6 Public Debt % of GDP 42.9 44.2 45.8 Gross Nonoil Trading Profits YoY 13.2 5.9 5.8 F Citi forecast. SAAR Seasonally adjusted annual rate. YoY Year-to-year growth rate. Investment excludes inventories. Source: Citi. 25
Page 1 and 2: See the Disclosure Appendix for the
Page 3 and 4: February 28, 2008 Global Economic O
Page 23: February 28, 2008 Global Economic O
Page 43 and 44: ANALYST CERTIFICATION Disclosure Ap

Global Economic Outlook and Strategy - Kadin Indonesia

Create successful ePaper yourself

Delete template?

Save as template?