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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PowerPoint Presentation5th 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 Reception28 January 2014Vlerick Finance Alumni partner:1INTERNATIONAL ENVIRONMENTPeter Vanden HouteChief Economist, INGVlerick Finance Alumni partner:22014: Walking on eggshells Peter Vanden HouteChief Economist ING Belgium1/28/20143Western world recovering, emerging countries lagging4USEurozone45US government was a drag on growth56Debt payments US households have fallen back strongly6US construction sector continues to boom778Shale gas remains a game changerGas price EuropeGas price US89Shale oil is making energy market less tight910No Fed hike expected in 2014The 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 goal10but what about 2015?1111US yield curve will steepen in the course of 2014121213Emerging world remains vulnerableHungaryUkrainePolandIndiaThailandMalaysiaPhilippinesColombiaBrazilIndonesiaTurkeyChinaRussiaRomaniaSouth AfricaMexicoChile-10-8-6-4-20246810-8-6-4-20246810121416Weak creditToo much creditCapital surplusCapital shortageReal credit growth in excess of GDP growth, average, 2010-12 (percent)Average currentaccount balance 2010-12 (percent of GDP)Source:IMF1314Chinese economy is stabilizing14EUROPES CHALLENGESFrank LiermanChief Economist, BelfiusVlerick Finance Alumni partner:15More or less inflation in the euro area? Thats the question!Frank Lierman, Chief EconomistVlerick Finance AlumniBrussels, January 28, 201416More than a bottoming out?Towards deflation?Social pack as missing link?Banking Union, the ultimate solution?More or less inflation in the euro area? Thats the question!1717More than a bottoming out?Towards deflation?Social pack as missing link?Banking Union, the ultimate solution?More or less inflation in the euro area?Thats the question!1818191. More than a bottoming out?Increased confidence, prelude for economic rebound?Euro Area1919201. More than a bottoming out?Consumer spending as driving force?Euro Area2020211. More than a bottoming out?Turnaround of industrial production?Euro Area2121221. More than a bottoming out?International trade crucial for sustainable recovery?Euro Area2222231. More than a bottoming out?Ceiling for unemployment in euro area, decrease elsewhere23241. More than a bottoming out?Sustainable decrease of public deficit?24251. More than a bottoming out?Worrying increase of government debt25More than a bottoming out?Towards deflation?Social pack as missing link?Banking Union, the ultimate solution?More or less inflation in the euro area?Thats the question!2626272. Towards deflation?27Inflation on the way to 0%?27282. Towards deflation?28Underlying inflation decreases alsoBelgiumEuro area28292. Towards deflation?29Money supply decreases even in a LTROs environment29302. Towards deflation?Accelerated decrease of LTROs due to reimbursement of banks30312. Towards deflation?Disappointing evolution of credit to the economy (% / year)3131322. Towards deflation?32Lower energycost is welcomeBelgiumEuro area32332. Towards deflation?33Stagnation of oil price between 100 and 120 USD/Barrel33342. Towards deflation?Remarkable strength of euro3434More than a bottoming out?Towards deflation?Social pack as missing link?Banking Union, the ultimate solution?More or less inflation in the euro area?Thats the question!3535363. Social pack as missing link?German unemployment at bottom, while other countries reached a ceiling36373. Social pack as missing link?Increasing and or huge unemployment is often linked toToo high fiscal burdenHigh employers and personal contributionsExpensive rules of lay offsInflexible wage negotiationsLow qualification of workersLow employment rateShort careersBut also influence of Overcapacity of production equipmentInsufficient internal demandNecessity to reduce debt of householdsIncreased precautionary savings of householdsDecreased competitiveness37383. Social pack as missing link?Key success factors for a reformLimitation of unemployment allowances Decrease or at least slower increase of salaries Decrease of fiscal and parafiscal burden on labour revenuesReduction of employment in public sectorIncreased flexibility Active employment policy Activation of unemployed peopleEducation and trainingPremiumsSubsidised employmentMeasures to stimulate the creation of companies 38393. Social pack as missing link?The European 7 stages plan to reduce youth unemploymentEmployment 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 capitalInitiatives to stimulate employment for youth: 6 bn EUR in 2014 and 2015Stimulation of mobility within EU via European Employment NetworkEuropean alliance for trainings, Erasmus+, European labour market via transfer of pension rights, professional qualifications, rights of mobile workers, Help to SMEs 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)39More than a bottoming out?Towards deflation?Social pack as missing link?Banking Union, the ultimate solution?More or less inflation in the euro area?Thats the question!4040414. Banking Union, the ultimate solution? Three pillarsEuropean prudential surveillanceECB from November 2014 onAssessment 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 governmentPrivate shareholdersESM ?41424. Banking Union, the ultimate solution?Three pillars (2)European resolution mechanism and fundEach bank has to prepare recovery planEuropean 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: steps8 % of liabilities (equity capital, reserves, unsecured bonds, deposits above 100.000 EUR)National resolution fundEuropean resolution fundESMNational budgets42434. Banking Union, the ultimate solution?Three pillars (3)European deposit guarantee100.000 euro per individual per bankCurrent, saving and term accounts plus saving bondsNational funds (0,8% of covered deposits)Merger of the national funds in 2026.43MAJOR CHALLENGES OF THE BELGIAN ECONOMYEdwin De BoeckChief Economist, KBC BankVlerick Finance Alumni partner:44Major challenges of the Belgian economyEdwin De BoeckChief Economist KBC GroupJanuary 28th 2014#28/01/201445Real GDP Q4 2007 Q3 2013 (% change)Employment Q4 2007 Q3 2013 (% change)Financial & economic crisisBelgium weathered the crisis reasonably well #46Marked improvement in sentimentModerate recovery in Belgium leading to +/-1.2% growth in 2014(*) Euro-periphery = Portugal, Ireland, Italy, Greece & Spain Producer confidence (standard deviation from LT-average)Consumer confidence (standard deviation from LT-average)#47Flanders loosing its growth advantage (regional GDP-growth, in % per year, period averages)Long-term potential growthEstimated at well below 2%Belgium - Declining trend of productivity growth (GDP per worker, YoY-growth in %)#48Still substantial slack in the economy Wave of unemployment & bankruptcies probably to continue for a whileUnemployment rate(harmonized and seasonally adjusted, in %)Belgium - Bankruptcies#49Employment rate (employed people in % population aged 20-64) EU2020 Strategy Belgium 73.2%EU2020 Strategy Flanders 76%Both a large pool of unfilled job vacanciesand persistent unemploymentUnemployment rate (unemployed as a % labour force)Job vacancy rate (unfilled vacancies as a % labour force)Labour marketLabour mismatch hinders the increase in employment rate Beveridge curve Belgium#50Current account balance (in % of GDP)(*) Euro-periphery = Portugal, Ireland, Italy, Greece & Spain Devaluation BEFIntroduction health index???External position Deterioration of cost competitiveness Relative unit labour costs (vs. EU-15, 2005 = 100) #51Employment in manufacturing (2000 = 100)Share manufacturing sector (including construction & energy, in % of GDP)Share manufacturing sector (excluding construction & energy, in % of GDP)Industrial activity adds to the process of desindustrialisation#52Projected structural budget balance (in % of GDP)Public financesFiscal consolidation has been back-loadedBudgetary consolidation (structural effort, as a % of GDP)#53Projected change of ageing-related expenditures (in % of GDP, 2010-2030)Source: Ageing Report, EC 2012BelgiumAgeing strikes#54BelgiumAgeing costs - Worrying, but not (yet) unsustainableGross public debt in % of GDP after 2016 (Stability Program until 2016) #55BelgiumPoor government, wealthy households#56Recent property price development (all types of dwellings, 2011Q1 = 100)Housing market Sales transactions & new mortgages declining, prices not (yet) cooling off#57www.kbceconomics.be#58FINANCIAL MARKETS OUTLOOKBart Van CraeynestChief Economist, PetercamVlerick Finance Alumni partner:5960/2521-09-2011Titre de la prsentationTuesday 28 January 2014InstitutionalAsset ManagementVlerick Alumni Debate Global recovery#28-01-2014 | Petercam Macro Presentation |Click to edit Master title styleAn extended period of low bond yields#28-01-2014 | Petercam Macro Presentation |Click to edit Master title styleFinancial repressionBusiness confidence#28-01-2014 | Petercam Macro Presentation |Click to edit Master title styleRecovering equity markets#28-01-2014 | Petercam Macro Presentation |Click to edit Master title styleBubbles?US equities#28-01-2014 | Petercam Macro Presentation |Click to edit Master title styleGlobal equities still offer return potentialMSCI World#28-01-2014 | Petercam Macro Presentation |Click to edit Master title styleRotation towards equity67#28-01-2014 | Petercam Macro Presentation |Click to edit Master title styleJapanese equity is very much geared to global recovery#28-01-2014 | Petercam Macro Presentation |Click to edit Master title styleGlobal asset class outlookExpected returns 2014Returns in local currency#28-01-2014 | Petercam Macro Presentation |Click to edit Master title styleBart Van CraeynestChief Economistbart.vancraeynest@petercam.beTel.: +32 (0)2 229 62 32My blog:https://insights.petercam.comTwitter: @BVanCraeynestPetercam N.V.Sint Goedeleplein 19 1000 BrusselTel.: +32 (0)2 229 63 11Fax : +32 (0)2 229 65 98Brussels Frankfurt London - Luxemburg - Madrid - Geneva#/2528-01-2014 | Petercam Macro Presentation |#Click to edit Master title styleInteractive DebateChief Economistsand AudienceModerator: Alain Deneef: Senior Portfolio Manager, Private Banking, Bank Degroof Vlerick Finance Alumni partner:71Thank youYou are kindely invited to the networking receptionVlerick Finance Alumni partner:Upcoming events7273