Global Economic Outlook and Strategy - Kadin Indonesia

More documents

Recommendations

Info

February 28, 2008 Global Economic Outlook and Strategy Michael Saunders (44-20) 7986-3299 michael.saunders @citi.com Tina Mortensen (44-20) 7986-3284 tina.mortensen @citi.com Tina Mortensen (44-20) 7986-3284 tina.mortensen @citi.com Tina Mortensen (44-20) 7986-3284 tina.mortensen @citi.com Switzerland Swiss GDP will probably continue to grow at an above-average pace this year but may moderate slightly. In light of upbeat employment prospects, domestic demand will probably remain the main growth engine in 2008. However, the net contribution of exports to GDP growth could decline on the back of a slowdown in global economic activity. The Swiss National Bank will probably keep its key rate on hold at 2.75%, unless there is a clear deterioration in the inflation outlook through a sharp weakening of the Swiss franc and a surge in imported inflation. Sweden The Swedish economy is shifting into low gear with signs of slowing activity, fading employment growth, and a leveling out of unemployment. Nevertheless, private consumption will continue to benefit from a loose fiscal policy and healthy disposable income growth, partly offsetting weaknesses in exports and capital spending. The Riksbank lifted the policy rate in February amid rising cost pressures, a tight labor market, and low productivity growth. However, the ongoing credit crisis and weakening U.S. and global economic growth will likely turn the Bank more dovish eventually. We expect the next move to be a cut, probably late this year. Denmark Growth is set to moderate further this year, reflecting the persistent sluggishness in the housing market, the lagged effect of rising interest rates, and lower growth among Denmark’s key export markets. Lower domestic demand growth is a welcome development in Denmark because of the historically tight labor markets and the elevated risks of outsized wage demands. The big challenge in coming years will be to find a way to increase the labor supply while coping with age-dependent retirement. The central bank is expected to continue to shadow the ECB, with a 25-basis-point interest rate spread, leading to two rate cuts this year. Norway Intensifying capacity strains, lower global growth, the lagged effect of higher domestic interest rates, and a cooler housing market will cap Norwegian growth this year. The combination of rising cost pressures and a cyclical slowdown in productivity will lift unit labor costs markedly in 2008 and, in turn, domestic inflation. But subdued import prices will remain an offset. The ongoing credit crisis, a slowing global economy, and a strong NOK prompted the Norges Bank to lower its rate path in October, indicating a 50% chance of a final rate hike next quarter. However, intensifying cost pressures might force the Bank to lift the policy rate further, unless external factors derail Norwegian growth prospects or cause the NOK to strengthen sharply. Figure 31. Switzerland, Sweden, Denmark, and Norway — Economic Forecast, 2007-09F Switzerland Sweden Denmark Norway 2007F 2008F 2009F 2007F 2008F 2009F 2007F 2008F 2009F 2007F 2008F 2009F Real GDP a YoY 2.6% 2.2% 2.0% 2.7% 2.3% 2.2% 1.7% 1.6% 1.6% 6.0% 4.0% 3.0% Public Consumption YoY -0.8 0.0 0.2 0.6 1.0 0.7 1.6 1.8 1.7 3.2 3.2 3.1 Private Consumption YoY 1.8 1.6 1.7 3.1 2.5 2.4 2.1 1.7 1.7 6.5 4.1 3.7 Investment (Ex Stocks) YoY 3.9 3.0 3.2 8.0 3.7 2.5 4.9 2.5 2.3 9.8 5.3 3.6 Exports YoY 8.3 3.8 4.0 5.0 4.4 5.1 3.9 4.0 4.4 3.1 1.8 2.1 Imports YoY 3.9 4.3 4.4 9.0 6.0 5.3 5.5 4.7 4.8 8.6 4.7 4.0 CPI (Average) YoY 0.7 1.5 0.8 2.2 3.4 2.3 1.7 2.3 2.0 0.7 3.4 2.5 Unemployment Rate % 2.8 2.5 2.3 6.2 5.7 5.7 3.4 3.2 3.5 2.6 2.5 2.5 Current Account % of GDP 15.1 19.0 26.4 6.2 6.3 6.9 1.4 1.3 1.2 16.1 16.2 16.2 General Govt Balance % of GDP -0.4 0.8 0.2 2.8 2.5 2.4 4.3 3.6 3.0 17.3 16.0 16.0 General Govt Debt % of GDP 50.9 49.7 48.4 42.0 39.0 35.0 25.0 21.0 16.0 40.5 37.0 35.0 a For Norway, mainland GDP. F Citi forecast. YoY Year-on-year growth rate. Source: Citi. 26
February 28, 2008 Global Economic Outlook and Strategy Dana M. Peterson (1-212) 816-3549 dana.peterson @citi.com Canada Anemic U.S. final demand growth, last year’s rapid appreciation of the Canadian dollar (CAD), and ongoing financial market strains will continue to weigh on the Canadian economy over the medium term. Flagging output and moderating inflation likely will prompt an additional 100 basis points of easing by June. Tighter credit conditions, a considerable net exports drag, and slower domestic demand growth probably will result in significantly subpar growth in 2008. Accommodative policy, against a backdrop of hearty global growth, an improved U.S. outlook, healthy Canadian balance sheets, and elevated commodity prices should help place the expansion back on track by late 2009. The disinflationary effects of last year’s rapid currency appreciation and the 1% cut in the Goods and Services Tax will keep both overall and core inflation in the lower bound of the Bank of Canada’s (BoC) operational guide in 2008. Headline CPI should move back to the 2.0% target in 2009, but the core measure likely will settle just below 2.0%. Key downside risks to the inflation outlook include a protracted period of net exports drag amid a U.S. recession, the dampening effects of past and recent CAD appreciation, and a disorderly resolution to global imbalances. Furthermore, possible moderation in global growth or curbed investment by top Asian trading partners present an uncertain outlook for commodity prices — a key driver of the Canadian expansion in recent years. Meanwhile, excess consumer demand remains the main upside risk. As downside risks are likely to dominate near term, we expect the BoC to lower its policy rate to 3% before the summer. The stronger CAD and stricter lending standards are squeezing corporate profits in certain key sectors, limiting investment and hiring intentions. A peak in the housing boom this year should diminish construction spending and quell excess demand for housing-related products. But slower demand overall should alleviate capacity pressures, limiting outsized employment gains and wage inflation. In addition, we anticipate that a cooler economy will likely trigger a modest retreat in the CAD versus the USD. Figure 32. Canada — Economic Forecast, 2007-09F 2007 2008 2007F 2008F 2009F 2Q 3Q 4QF 1QF 2QF 3QF 4QF Real GDP YoY 2.5% 1.0% 1.5% 2.5% 2.9% 2.7% 1.8% 1.0% 0.6% 0.6% SAAR 3.8 2.9 0.7 0.1 0.4 1.0 0.9 Final Domestic Demand YoY 3.9 2.9 2.1 3.8 4.0 4.2 4.0 3.3 2.6 1.9 SAAR 4.9 4.6 4.4 2.2 2.1 1.6 1.7 Private Consumption YoY 4.2 3.3 2.6 4.5 4.0 4.1 4.0 3.3 3.1 2.7 SAAR 5.9 3.0 4.2 3.0 2.8 2.5 2.4 Government Spending YoY 2.9 2.7 2.4 2.3 3.4 3.4 3.5 3.2 2.3 2.0 SAAR 2.9 5.9 3.2 2.0 2.0 2.0 2.0 Private Fixed Investment YoY 4.1 1.9 0.2 3.7 4.6 4.7 4.2 3.1 0.9 -0.4 SAAR 4.4 7.6 4.7 0.1 0.2 -1.1 -0.8 Exports YoY 1.4 -0.3 3.1 2.3 2.2 0.1 -0.4 -1.2 -0.7 1.3 SAAR 3.1 2.3 -5.4 -1.5 0.1 4.0 2.7 Imports YoY 5.2 6.8 4.6 3.2 6.1 7.8 9.0 8.3 5.0 4.9 SAAR 7.7 18.6 5.5 4.9 4.9 4.9 4.9 CPI YoY 2.1 1.4 2.0 2.2 2.1 2.4 1.7 1.1 1.3 1.4 Core CPI YoY 2.1 1.1 1.9 2.4 2.2 1.6 1.2 0.9 0.9 1.4 Unemployment Rate % 6.0 6.3 6.4 6.1 6.0 5.9 6.1 6.3 6.4 6.4 Current Account Balance, SA C$bn 13.6 -2.5 -12.4 25.4 4.2 -0.5 -0.2 -5.0 -2.3 -2.6 % of GDP 0.9 -0.2 -0.8 1.7 0.3 0.0 0.0 -0.3 -0.1 -0.2 Net Exports (Pct. Contrib.) -1.7 -3.1 -0.9 -1.4 -4.9 -4.5 -2.7 -2.1 -0.7 -1.2 Inventories (Pct. Contrib.) 0.0 1.0 0.2 0.5 2.9 1.7 0.6 0.4 0.0 0.4 Budget Balance % of GDP 0.2 0.1 0.1 F Citi forecast. YoY Year-to-year percent change. SAAR Seasonally adjusted annual rate. Sources: Statistics Canada and Citi. 27
Page 1 and 2: See the Disclosure Appendix for the
Page 3 and 4: February 28, 2008 Global Economic O
Page 25: February 28, 2008 Global Economic O
Page 43 and 44: ANALYST CERTIFICATION Disclosure Ap

Global Economic Outlook and Strategy - Kadin Indonesia

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?