Transcript
Page 1: Vlerick alumni presentation chief economists debate_final

HOW IS THE BELGIAN ECONOMY MANAGING THE CRISIS IN EUROPEAN AND GLOBAL PERSPECTIVE?

Frank Smets – Director General, DG Research at European Central Bank

Peter Vanden Houte – Chief Economist, ING

Edwin De Boeck – Chief Economist, KBC Bank

Frank Lierman – Chief Economist, Belfius

Bart Van Craeynest – Chief Economist, Petercam

Moderator: Dirk Selleslagh – News Manager, Tijd.TV

4 February 2013

Vlerick Finance Alumni partner:

Page 2: Vlerick alumni presentation chief economists debate_final

How to excel in networking MBA Alumni 7 Feb 2013

Buying your own company Platform for Entrepren. Buyouts 21 Feb 2013

Alum. Nights All alumni sections 21 Feb 2013

Latest science on Burn-out MGM Alumni 26 Feb 2013

Improving a CV/Cover Letter MBA Alumni 27 Feb 2013

Sustainability at your company Exec Alumni 5 Mar 2013

Meet the Industry: Shipping Finance Alumni 14 Mar 2013

Visit ThromboGenics Exec Alumni 20 Mar 2013

Entering the job market MBA Alumni 20 Mar 2013

Meet the industry: Media Finance Alumni Apr/May 2013

Event Controllership Finance Alumni 22 May 2012

Workshop on family businesses Finance Alumni Jun 2013

UPCOMING EVENTS

Vlerick Finance Alumni partner:

Page 3: Vlerick alumni presentation chief economists debate_final

GLOBAL OVERVIEW

Peter Vanden Houte Chief Economist, ING

Vlerick Finance Alumni partner:

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World Economic Update From half empty to half full Peter Vanden Houte Chief economist ING Belgium

February 2013

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What do investors consider to be the biggest “tail risk”?

Source BoA-ML Global Fund Manager Survey January 2013

Should be settled in next 3 months

Downgrade Spain? Elections Italy

Cyprus (elections 17 Feb, bail-out?)

Seems OK

Elections Iran in June

Page 6: Vlerick alumni presentation chief economists debate_final

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OECD Leading indicator

2008 2009 2010 2011 2012 2013 93

94

95

96

97

98

99

100

101

102

103

104

US

China

EMU

Belgium

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US housing sector is recovering strongly

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 -30

-25

-20

-15

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-10

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5

10

15

20

US Case-Shiller house price yoy%

US residential construction yoy%

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Chinese economy is picking up

2006 2007 2008 2009 2010 2011 2012 2013 94

96

98

100

102

104

106

108

30

35

40

45

50

55

60

65

70

China new order index

China real estate climate index

Page 9: Vlerick alumni presentation chief economists debate_final

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An improvement in sentiment is not enough in Europe

The Governing Council continues to

expect euro area economic activity

to recover, albeit very gradually, in

the course of 2012, supported by

developments in global demand,

very low short-term interest rates

and all the measures taken to

support the functioning of the

financial sector.(ECB Jan 2012) 2011 2012

-0.40

-0.20

0

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0.40

0.60

0.80

ECB report

EMU quarterly GDP growth

Remember 2012...

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Divergence within Eurozone remains huge...

-25

-20

-15

-10

-5

0

DE FI AT BE EA ES FR NL GR IT PT CY

Economic sentiment indicator: divergence from lt-average (Jan 2013)

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...but population still euro supportive

0

10

20

30

40

50

60

FI

NL

LU

IE

DE

FR

BE

AT

GR

ES

IT

PT

EU

27

CY

Balance of opinion in favour of EUR

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12 12 12 12

2011 2012 2013 2014

USA 1.8 2.3 1.7 2.3

Eurozone 1.5 -0.5 0.0 1.2

Belgium 1.8 -0.2 0.2 1.2

Japan -0.7 2.1 1.3 1.5

China 9.2 7.7 9.0 8.4

Growth outlook

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The US energy bonanza

2004 2005 2006 2007 2008 2009 2010 2011 2012 0

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Zeebrugge

London

Henry Hub

Natural gas price in euro (January 2004 = 100)

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It’s a gas, gas, gas

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Spare capacity oil producers is rising

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1

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7

1Q

20

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4Q

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3Q

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2Q

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1Q

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4Q

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3Q

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2Q

2006

1Q

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4Q

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07

3Q

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2Q

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14 0

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40

60

80

100

120

140

Spare Capacity WTI Real Price (GDP Deflated, Rhs)

Source:EIA

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RESPONSES TO THE CRISIS

Frank Lierman Chief Economist, Belfius

Vlerick Finance Alumni partner:

Page 17: Vlerick alumni presentation chief economists debate_final

Responses to the crisis :

Japanese and European

experience. Frank Lierman, Chief Economist

Vlerick Finance Alumni

Brussels, February 4, 2013

Page 18: Vlerick alumni presentation chief economists debate_final

Towards a japanisation of the eurozone ?

The European initiatives.

Responses to the crisis : Japanese and

European experience.

18

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Towards a japanisation of the eurozone ?

19

General context before the crisis.

Japan

1992

Eurozone

2008 Financial liberalisation and deregulation √ √

Abundant liquidity via interbankmarket √ √

Sharp increase of credit (mainly real estate, SME,

consumers) √ (2 x GDP growth) √ (2 x GDP growth)

Relaxation credit conditions (smaller margins,

longer duration, …) √ √

Explosion bank balance sheets, but also off

balance volumes √ √

Increased risk appetite √ √

Increase of currency (resp. JPY en EUR) √ √

Increase stock markets √ (topnr 38.916 pt on

19.02.89) √ (top middle 2007)

Real estate bubble √ √ (especially Anglo-saxo and

South European land’s)

Tightening monetary policy √ (from 30.06.89) √ (summer 2008)

Recommandations to limit real estate credits √ (from 2710.89) √ (afterwards)

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GDP (% over 1Y)

20

Eurozone 04-13 = or ≠ Japan 88-97.

Export (% over 1 Y)

-5

-3

-1

1

3

5

7

1988 /

2004

1989 /

2005

1990 /

2006

1991 /

2007

1992 /

2008

1993 /

2009

1994 /

2010

1995 /

2011

1996 /

2012

1997 /

2013

Japan 1988 - 1997

Eurozone 2004 - 2013

-13

-8

-3

2

7

12

1988 /

2004

1989 /

2005

1990 /

2006

1991 /

2007

1992 /

2008

1993 /

2009

1994 /

2010

1995 /

2011

1996 /

2012

1997 /

2013

Towards a japanisation of the eurozone ?

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Inflation (% over 1Y)

21

Unemployment

0

2

4

6

8

10

12

14

1988 /

2004

1989 /

2005

1990 /

2006

1991 /

2007

1992 /

2008

1993 /

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1994 /

2010

1995 /

2011

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1997 /

2013

Japan 1988 - 1997

Eurozone 2004 - 2013

Towards a japanisation of the eurozone ?

-1

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1988 /

2004

1989 /

2005

1990 /

2006

1991 /

2007

1992 /

2008

1993 /

2009

1994 /

2010

1995 /

2011

1996 /

2012

1997 /

2013

Eurozone 04-13 = or ≠ Japan 88-97.

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Budget balance

(% of GDP)

22

Public debt

(% of GDP)

-8

-6

-4

-2

0

2

1988 /

2004

1989 /

2005

1990 /

2006

1991 /

2007

1992 /

2008

1993 /

2009

1994 /

2010

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2011

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2012

1997 /

2013

55

65

75

85

95

105

1988 /

2004

1989 /

2005

1990 /

2006

1991 /

2007

1992 /

2008

1993 /

2009

1994 /

2010

1995 /

2011

1996 /

2012

1997 /

2013

Japan 1988 - 1997

Eurozone 2004 - 2013

Towards a japanisation of the eurozone ? Eurozone 04-13 = or ≠ Japan 88-97.

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Japan

1992 Eurozone 2008

Increase impairments √ √

Erosion collateral √ √

Decline value portfolio equities √ √

Lower ratings √ √

Sharp increase funding cost √ √

Increase corporate bonds √ √

Failure of banks From 1995 on

Immediately (mainly

smaller), but some “too big

to fail”

Mergers of banks From 1995 on From 2009

Accounting rules Japanese GAAP- problems

hidden

IFRS – mark to market

problems instant known

Direct consequences for banking sector.

Towards a japanisation of the eurozone ?

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Reaction of central banks.

Japan Eurozone

Base rate

- from 8 to 0,5% (between ‘92 and ‘95)

- 0% (between Feb ‘99 and July ’06)

- from 4,25 to 1% (between Oct ’08 an

May ’09)

- 0,75% (since July ’12)

Liquidity injection

- QE (between March ’01 and March

’06)

- Buying bank equity from Febr ’02

(max 3 trilj JPY)

-covered bonds (in ‘10 and ‘12)

- SMP (between Spring ‘10 and

Autumn ‘11)

- LTRO with durations of 3,6m (‘08),

12m (‘09), 3Y (Dec ’11 and Febr’12)

’12)

- OMT (max 3Y)

Towards a japanisation of the eurozone ?

Page 25: Vlerick alumni presentation chief economists debate_final

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Japan Eurozone

Stimulative measures for

economy

- 10 packages between Aug ’91 and

Oct ’99 (124.4 trilj JPY)

- European Commission and national

governments (in ’09, some are

extinct)

Injection tax payers money

- coop company to buy credits (Jan

’93)

- rules bad loans (Febr ’04)

- resolution for housing loans (Dec

’95 and June ’96)

- injection money:

o 685 mia JPY (1995)

o 1,8 trilj JPY (1998)

o 7,5 trilj JPY (1999)

Some 83,2 bn EUR

- ESRB (Jan ’10)

- ESFS (Jan ’10) met EBA, EIOPA en

ESMA

- between ’08 and ’11 227,6 bn EUR

for recapitalisation; 761,2 bn EUR for

guarantees and 204,8 bn EUR for

asset rellief and liquidity;

Total : 1 196,6 bn EUR

Towards a japanisation of the eurozone ? Reaction of governments.

Page 26: Vlerick alumni presentation chief economists debate_final

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Japan Eurozone

Regulation

- Deposit guarantee (Febr ’98)

- Financial stability function (Febr ’98)

-Commission for financial

reconstruction (March ’99)

-EFSF (May ’10) –ESM (Oct ’12)

- Depositguarantee 100 000 EUR

(2008)

- Pact stronger EUR (March ’11)

- Six pack (Dec ’11)

- Two pack (July ’12)

- Treaty for stability, coordination and

governance in EMU (March’02) with

fiscal compact

- Banking Union (June - Dec’12)

- Growth pact (June ’12)

- Liikanen report (Sept ’12)

- Rescue of Greece, Ireland, Portugal,

Cyprus (2010-2012)

- Recapitalisation of Spanish banks

(Dec ’12)

- …

Towards a japanisation of the eurozone ? Reaction of governments. (2)

Page 27: Vlerick alumni presentation chief economists debate_final

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Japan Eurozone

National crisis

Credit economic banking

crisis.

No panic, bankprofits sufficient to

cover credit losses due to Japanese

accounting rules. Bad debtors were

hidden during some 5 years.

Deflation and positive real interest

rate consumption decline

savings stimulated.

European crisis

Credit- and bankingcrisis

economic debtcrisis.

Sense of urgency immediately due

to IFRS rules (mark to market).

Inflation and negative real interest

rate consumption decline

savings stimulated.

Towards a japanisation of the eurozone ? Major differences.

Page 28: Vlerick alumni presentation chief economists debate_final

Towards a japanisation of the eurozone ?

The European initiatives.

Responses to the crisis : Japanese and

European experience.

28

Page 29: Vlerick alumni presentation chief economists debate_final

European Systemic Risk Board (January 2010)

European System of Financial Supervisors (January 2010)

EBA

EIOPA

ESMA

EFSF (May 10, 2010)

Rescue packages for Greece (May 2010, July2011 and Decembeer

2012), Ireland (December 2010), Portugal (May, 2011) and Cyprus

(Q1, 2013)

A pack for a stronger euro (March, 24-25, 2011)

ESM (March 24-25, 2012, start in October 2012)

Liikanen report on bankstructures (September 2012)

Recapitalisation of Spanish banks (December 2012)

29

Risk management and rescue measures.

The European initiatives.

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Governance.

Sixpack Twopack TSCG(¹)

What? 5 EU Regulationds and 1 EU Directive

2 EU Regulations (currently being negotiated)

International treaty

Who ? UE-27 (with some distinction between the euro area countries and the others)

Euro area countries UE-25 (excluding UK and CZ)

Date of entry

into force 13 December 2011 Expected : summer 2012

(after the trialogue procedure)

After ratification by at least 12 euro area countries (target: January 2013)

Content

° stricter and broader fiscal

surveillance (e.g. operational

debt criterion and expenditure

rule)

° broader macroeconomic

surveillance

° new decision-making

procedures

° minimum requirements for

national budgetary frameworks

° more advanced fiscal

surveillance and coordiantion in

the euro area

° independent national

institutions responsible for

monotoring compliance with the

fiscal rules

° precise timetable for the

annual budget and preliminary

review by the EC

o tougher surveillance regime for

countries with financial difficulties

(automatic for those receiving

assistance)

° limit on the structural deficit,

preferably enshrined in the

constitution

° the euro area countries comit

to accepting in principe the EC’s

recommendations regarding the

excessieve deficit prodecure(²)

° role for the European Court of

Justice

° provides for enhanced

coordination

(¹) Treaty on Stability, Coordination and Governance in the Economic and Monetary Union. The term ‘fiscal contact’ is often

used to refer to the fiscal issues whch it includes.

(²) The euro area countries agree to accept any EC recommendation concerning the existence of an excessive deficit unless

the recommendation is rejected by a qualified majority.

Source : NBB

The European initiatives.

Page 31: Vlerick alumni presentation chief economists debate_final

Proposals for stronger EMU (June 26, 2012)

an integrated financial system

bank supervision (ECB as of March 2014)

bank resolution fund

deposit guarantee scheme

an integrated budget

stability and growth pact (revisited)

treaty for stability, coordination and governance

budget union

Euro bonds

solidarity

European Finance Commissioner

an integrated economic management

European semester

Euro plus act

enforcement of democracy

31

The European initiatives.

Page 32: Vlerick alumni presentation chief economists debate_final

ACTIONS AND RESPONSES BY THE ECB

Frank Smets Director General, DG Research at European Central Bank and Professor International Economics at the Centre for Economic Studies at the KU Leuven

Vlerick Finance Alumni partner:

Page 33: Vlerick alumni presentation chief economists debate_final

ECB monetary policy in

challenging times

Frank Smets

Vlerick Alumni Chief Economists Debate

4 February 2013

The views expressed are my own and not necessarily those of the ECB.

Page 34: Vlerick alumni presentation chief economists debate_final

Euro area HICP inflation elevated esp. due to indirect tax and

energy price increases – but expected to decline to < 2% in 2013

Sources: Eurostat and ECB.

Latest observation: September 2012 for overall HICP and August 2012 for HICP excluding food and energy.

(annual rates of change)

34

Page 35: Vlerick alumni presentation chief economists debate_final

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Inflation expectations are in line with price stability

Sources: Thomson Reuters, ECB, Consensus. Latest observation: 04 Jan 13

Euro area swap-implied HICP path (% p.a.)

0,0

1,0

2,0

3,0

4,0

2010 2011 2012 2013 2014 2015 2016 2017

Realised y-o-y HICP inflation

Swap-implied HICP inflation path (6 Sep 12)

Swap-implied HICP inflation path (30 Nov 12)

Swap-implied HICP inflation path (4 Jan 13)

Consensus (Nov-12 survey for '12 and '13 and Oct-12 for rest)

Page 36: Vlerick alumni presentation chief economists debate_final

Systemic stress in the euro area (CISS)

Source: Hollo, Kremer and Lo Duca (2012)

Page 37: Vlerick alumni presentation chief economists debate_final

Standard monetary policy: Policy-controlled interest rates and EONIA

Page 38: Vlerick alumni presentation chief economists debate_final

• Standard monetary policy in ‘normal’ times:

o Changes in policy-controlled rates …

o translate into money market rates and longer-term

interest rates and asset prices and …

o affect aggregate demand and thus the inflation outlook.

• If some of the links in the transmission process are

impaired due to the financial crisis, standard monetary

policy becomes less effective:

o Changes in policy interest rates do not produce the

desired impact on inflation and …

o risk to price stability ensue.

Why non-standard measures?

38

Page 39: Vlerick alumni presentation chief economists debate_final

• Non-standard measures (NSMs) are the tools we use to

address malfunctioning financial markets and offset

impairments in the monetary transmission mechanism:

o NSMs’ immediate objective is to restore the effectiveness

of our standard policy tool, so that it can produce its

normal effects

o NSMs’ ultimate objective is to maintain price stability;

without deploying them, we would have lost control over

inflation

o The precise features of the NSMs have changed over

time, so as to address the particular impairment prevailing

at any point

Why non-standard measures? (cont.)

39

Page 40: Vlerick alumni presentation chief economists debate_final

• Key disruption: freeze of the interbank market; need for

banks to obtain liquidity from other sources

o risks of hasty assets liquidation; through lower asset

prices, spill overs to whole banking system (“fire sale”) …

o … and of a sharp reduction in credit (“credit crunch”)

o through a credit crunch, risk of a fall in aggregate

demand and production; downward pressure on prices

• Non-standard response mainly targeted at banking

sector

o Fixed-rate full allotment

o Expansion of eligible collateral list

o Longer maturity LTROs (up to 12 months)

o Covered bond purchase programme

o USD funding programme

ECB non-standard measures: Phase 1

40

Page 41: Vlerick alumni presentation chief economists debate_final

0

0,5

1

1,5

2

2,5

0

0,5

1

1,5

2

2,5

2004 2005 2006 2007 2008 2009 2010 2011 2012

pe

rce

nt

pe

r an

nu

m

US & Euro Area 3-month spreads

Euribor-OISspread

USD Libor-USD OIS

Risk premia in the interbank market

Page 42: Vlerick alumni presentation chief economists debate_final

-2

-1

0

1

2

3

4

5

6

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

2007 2008 2009 2010 2011 2012 2013

% change in ECB BS (8 week moving average) RHS

Crisis threshold

Composite indicator of systemic stress (CISS)

Source: Rostagno; Euro area CISS from Hollo, Kremer and Lo Duca (2012): "CISS - A Composite Indicator of Systemic Stress in the

Financial System", ECB Working Paper No. 1426. Balance sheet data from ECB. Own calculations.

Note: Weekly data. Last observation: 9 Nov 2012. - Developments in the CISS can be decomposed into contributions from five stress

subindices (relating to money market, bond market, equity market, financial intermediaries, FX market) and the overall contribution from the

cross-subindex correlations.

Systemic stress and liquidity support

Page 43: Vlerick alumni presentation chief economists debate_final

• Key disruption: Persistently elevated sovereign bond

yields in selected euro area Member States; partly driven

by self-fulfilling expectations and redenomination risk

o Pass-through of high sovereign yields to lending rates to

firms and households, hence downward pressure on

aggregate demand and prices and …

o mutually reinforcing interaction with fragile banking

systems and risk of financial fragmentation.

• Non-standard measures extended to include direct

intervention in financial markets

o Securities Market Programme (SMP)

o 3-year LTRO; decrease of required reserve ratio; ACCs

o Outright Monetary Transactions (OMT)

ECB non-standard measures: Phase 1I

43

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0

50

100

150

200

250

300

350

400

450

500

0 50 100 150 200 250 300 350 400 450 500

Ban

k C

DS

Sovereign CDS

10Q1

10Q2

10Q3

10Q4

11Q1

11Q2

11Q3

11Q4

12Q1

12Q2

12Q3

12Q4

Interaction sovereign and banking risks

Page 45: Vlerick alumni presentation chief economists debate_final

Positive impact of the 3-year LTROs and OMT announcement on

sovereign yield spreads and interbank credit risk

Sovereign yield spreads in Italy and Spain and interbank credit risk

(basis points, daily data)

Source: Bloomberg and ECB calculations.

Note: Daily data, last observation is 21 Dec 2012. The sovereign yield spreads are calculated vis-à-vis the 10-year

German Bund. Vertical lines represent the 3-year LTRO announcement and Draghi London speech (December

2011 and July 2012).

0

25

50

75

100

125

150

175

200

0

100

200

300

400

500

600

700

800Ja

n/0

7

Jun

/07

No

v/0

7

Ap

r/0

8

Sep

/08

Feb

/09

Jul/

09

De

c/0

9

May

/10

Oct

/10

Mar

/11

Au

g/1

1

Jan

/12

Jun

/12

No

v/1

2

10-yr IT sovereign spreads 10-yr ES sovereign spreads

3-month EURIBOR-OIS (rhs)

Draghi's London speech

3-year LTROs announcement

Page 46: Vlerick alumni presentation chief economists debate_final

INTERACTIVE DEBATE

Chief Economists and Audience Moderator: Dirk Selleslagh – News Manager, Tijd.TV

Vlerick Finance Alumni partner:

Page 47: Vlerick alumni presentation chief economists debate_final

HOW IS THE BELGIAN ECONOMY MANAGING THE CRISIS?

Edwin De Boeck Chief Economist, KBC Bank

Vlerick Finance Alumni partner:

Page 48: Vlerick alumni presentation chief economists debate_final

The Belgian economy - Outlook & challenges -

Vlerick Alumni, 4 February 2013

Edwin De Boeck

Chief Economist KBC Group

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49

Business cycle Belgian economy stagnating since the beginning of 2011

Real GDP

(Q4 2007 = 100)

93

94

95

96

97

98

99

100

101

102

103Belgium

Germany

Netherlands

France

Euro-periphery (*)

(*) Euro-periphery = Portugal, Ireland, Italy , Greece & Spain

10

11

12

13

14

15

16

17

18

19

20

98

99

100

101

102

103

104

105

106

Real private consumption (Q4 2007 = 100)

Real household disposable income (Q4 2007 = 100)

Household savings rate (rhs)

Consumption indicators

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5

6

7

8

9

10

11

-20

-10

0

10

20

30

40

50

60

70

80Unemployment expectations +12M (consumer survey)

Unemployment rate (rhs)

Confidence still very weak ….but consumers seem too negative

-3,5

-2,5

-1,5

-0,5

0,5

1,5

Employment outlook mfg. (NBB-survey)

Employment outlook services (NBB-survey)

Households' employment expectations (rhs)

Employment expectations

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8/03/2013 51

External trade Exports suffering from European slowdown & deteriorating

competitiveness

Real exports

(Q4 2007 = 100)

80

85

90

95

100

105

110

115

Belgium

Germany

EMU (ex. Germany)

98

100

102

104

106

108

110

112

114

Belgium

Germany

Netherlands

France

Nominal unit labour costs

(Q4 2007 = 100)

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-4

-2

0

2

4

6

8

Belgium

Germany

France

Deficit (-)/surplus (+) on the current

account balance

(in % of GDP)

External position Watch out for the negative trend

70

75

80

85

90

95

100

105

110

115

120

Belgium

Germany

France

Development of market share on

the country’s export markets

(1999 = 100)

Page 53: Vlerick alumni presentation chief economists debate_final

53

60

70

80

90

100

110

120

130

Belgium (KBC calculation) (*)

Belgium (Stability Programme Spring 2012)

Euro Area

6.5 53.6

Public debt ratio

(% of GDP)

(*) Under unchanged policy assumption for 2014-2015

Budget balance under

unchanged policy

Budget balance total Belgian government

(in % of GDP)

Public finances The road of fiscal austerity

-5,9 -4,8 -3,6 -2,8 -2.15 -1,1 0,0

-6

-5

-4

-3

-2

-1

0

Realised figures Target Stability Programme (April 2012)

Need for extra savings

(KBC estimate)

4.7 bn.

0.7 bn.

Page 54: Vlerick alumni presentation chief economists debate_final

8/03/2013 54

25

30

35

40

45

2010 2015 2020 2025 2030

2012 Ageing Report EC

2009 Ageing Report EC

2006 Ageing Report EC

2003 Ageing Report EC

Belgium - Old-age dependency ratio

(population aged 65+ in % of 15-64)

20

25

30

35

2010 2015 2020 2025 2030

Belgium - Total public sector expenditure

resulting from ageing (in % of GDP)

Public finances LT-sustainability still at risk given unfavourable ageing costs

Source: EC (Ageing Reports)

Page 55: Vlerick alumni presentation chief economists debate_final

95

96

97

98

99

100

101

102

103

104

105

106

107

Belgium (ECB-index)

Belgium (FOD-index)

Belgium (Eurostat-index)

EMU (Eurostat-index)

Recent development Belgian property prices

(2011Q1 = 100)

Housing market Prices not (yet) cooling off, on the contrary

-60

-40

-20

0

20

40

60

80

Change in credit conditions

Change in mortgage loan demand

Tightening of banks’ lending standards for

housing loans (lending survey NBB)

(*) A negative sign indicates at a strengthening of the lending criteria

resp. a decline in mortgage loan demand (and vice versa)

Page 56: Vlerick alumni presentation chief economists debate_final

-0,2

0

0,2

0,4

0,6

0,8

1

1,2

1,4

1,6

1,8

Consensus forecast made in month

EMU

Germany

Belgium

Belgium (KBC)

8/03/2013 56 56

Growth outlook 2013 & 2014 (in%) Evolution of consensus forecasts of

real GDP growth in 2013 (in %)

2013 Belgium EMU Germany

EC 0.7 0.1 0.8

OECD 0.5 -0.1 0.6

IMF 0.3 0.1 0.9

NBB -0.1 -0.9/0.3 -

Consensus 0.1 -0.1 0.7

4 Belgian banks 0.3 - -

KBC 0.5 0.0 0.9

2014 Belgium EMU Germany

EC 1.6 1.4 2.0

OECD 1.6 1.3 1.9

IMF 1.0 1.2 1.4

KBC 1.5 1.4 1.9

Growth outlook 2013 & 2014

Page 57: Vlerick alumni presentation chief economists debate_final

57

Interest rates

Declining credit spreads

(in basis points)

0

50

100

150

200

250

300

350

400

Interest differential vs.10 Y. Bunds

CDS 5Y Sovereign Premium

Political crisis

June 2010 -

November 2011

Yield 10-year government bonds

(in %)

0

1

2

3

4

5

6US

Germany

Belgium

KBC outlook

End of year (in %)

10-year rates

+6m +12m

US 2.25 2.75

Germany 1.75 2.25

Belgium 2.45 2.95

Page 58: Vlerick alumni presentation chief economists debate_final

IMPACT OF THE OUTLOOK FOR INVESTORS

Bart Van Craeynest Chief Economist, Petercam

Vlerick Finance Alumni partner:

Page 59: Vlerick alumni presentation chief economists debate_final

59/25 21-09-2011

Titre de la présentation

Monday 4 February 2013

Institutional Asset Management

Vlerick Alumni Debate

Page 60: Vlerick alumni presentation chief economists debate_final

60/25 04-02-2013 | Petercam Macro Presentation |

60

Goldilocks is back (for now)

-4

-3

-2

-1

0

1

2

-15

-10

-5

0

5

10

15

Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

Global Industrial production (yoy)

Global leading indicator (rhs)

Global growth accelerates

Global growth is picking up

Inflation remains under control

Monetary policy remains supportive

Political risks have eased

Page 61: Vlerick alumni presentation chief economists debate_final

61 04-02-2013 | Petercam Macro Presentation |

Government bonds getting very expensive

0

2

4

6

8

10

12

14

16

Jan-50 Jan-55 Jan-60 Jan-65 Jan-70 Jan-75 Jan-80 Jan-85 Jan-90 Jan-95 Jan-00 Jan-05 Jan-10

US bond yield

Page 62: Vlerick alumni presentation chief economists debate_final

62 04-02-2013 | Petercam Macro Presentation |

Bonds have had a spectacular run

0

1

2

3

4

5

6

7

8

9

Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13

A Indu 5yr Yld UST 5yr Yld IG credit spread

0

2

4

6

8

10

12

14

Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13

BB Indu 5yr Yld UST 5yr Yld HY spread

Investment Grade credit High yield

Page 63: Vlerick alumni presentation chief economists debate_final

63 04-02-2013 | Petercam Macro Presentation |

Bonds very expensive relative to equity

0

2

4

6

8

10

12

14

16

Jan-50 Jan-55 Jan-60 Jan-65 Jan-70 Jan-75 Jan-80 Jan-85 Jan-90 Jan-95 Jan-00 Jan-05 Jan-10

Bond yield Dividend yield

Page 64: Vlerick alumni presentation chief economists debate_final

64 04-02-2013 | Petercam Macro Presentation |

You can fool some people sometimes, but…

-600

-400

-200

0

200

400

600

800

1000

1200

1400

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12

Into equity Into bonds

US mutual fund flows (cumulative, bn usd)

Page 65: Vlerick alumni presentation chief economists debate_final

65 04-02-2013 | Petercam Macro Presentation |

Global economic activity is key

-2

-1

0

1

2

3

4

5

6

-50

-40

-30

-20

-10

0

10

20

30

40

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

S&P500 Global GDP Annual change in %

Page 66: Vlerick alumni presentation chief economists debate_final

66/25 04-02-2013 | Petercam Macro Presentation |

66

Investment strategy

┃ Overweight Equities

Prefer Emerging markets and Europe

Cyclicals over defensives

┃ Underweight Bonds

High yield over credit and government bonds

Inflation-linked over nominals

┃ Hold positions in gold and USD

Gold as ‘insurance’

USD looks attractive

Page 67: Vlerick alumni presentation chief economists debate_final

67/25 04-02-2012 | Petercam Macro Presentation |

67

Bart Van Craeynest Hoofdeconoom [email protected] Tel.: +32 (0)2 229 62 32 https://insights.petercam.com

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

Brussels – Frankfurt – London - Luxemburg - Madrid - Geneva

Page 68: Vlerick alumni presentation chief economists debate_final

INTERACTIVE DEBATE

Chief Economists and Audience Moderator: Dirk Selleslagh – News Manager, Tijd.TV

Vlerick Finance Alumni partner:

Page 69: Vlerick alumni presentation chief economists debate_final

THANK YOU

You are kindely invited to the networking reception

Vlerick Finance Alumni partner:

Page 70: Vlerick alumni presentation chief economists debate_final

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