Web Conference: European and African Economic Outlook 2013

European and African Economic OutlookEuropean and African Economic Outlook

Gaining Momentum in 2013: When will the regional growth Gaining Momentum in 2013: When will the regional growth engines ignite?engines ignite?

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Q&A Regional Trends: Europe

3

Regional Trends: Europe

€€ €

1EURO

4

Vinnie Aggarwal

Chief Economist

€€€

High Hopes for the Future?

5

Sink or Swim?Many European Emerging Markets Have Performed Well in 2013 Despite Challenges

1.0

1.5

2.0

2.5

3.0

GD

P G

row

th (

%)

GDP Growth Comparison - Emerging and Continental Europe 2012-2014

GDP Growth Through Recessionary Periods, Continental Europe, Three Year Comparison

-6.0

-4.5

-3.0

-1.5

0.0

1.5

3.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

GD

P G

row

th (

%)

2008 2009 2010

6

-1.0

-0.5

0.0

0.5

1.0

2012 2013 2014

GD

P G

row

th (

%)

Emerging Europe Continental Europe-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

GD

P G

row

th (

%)

2012 Financial Crisis2009 Recession

Longer period of downturn and longer period to recovery expected

Sources: GET-IT and Frost & Sullivan

2011 2012 2013

Pockets of Economic Growth will Move Europe Forward

Pockets of Growth in Europe, 2013 and 2014

Western EuropeAutomotive sales are up for the first time in

19 months, led by Germany and UK

Eastern EuropeSignificant investment in

energy projects

7

Even though economic growth prospects have been downgraded for Europe there are still regions and industries where innovation or investment will drive development


TurkeyEuropean growth

engine

RomaniaLocal automotive industry focus on budget cars will

appeal to emerging markets

Regional Trends: Europe (United Kingdom)

₤₤ ₤

8

Gary Jeffery

Partner & Director, Europe

₤₤₤

Gaining Momentum, with Recovery in SightProspects look positive for future growth in energy and chemicals. GDP set to show positive growth in 2013.

GDP Growth to Remain Modest in 2013

•GDP growth picking up with average of 0.5% growth expected for 2013

•Consumer confidence grows as new car sales expected to average 3.0 per cent growth in 2013

1.0

1.2

1.4

1.6

GD

P G

row

th (

y/y

%)

9


•The UK is expected to be one of the top 5 destinations for investment in the next 2 years

• Inflation prospects are down, but no further central bank quantitative easing expected in 2013

• Increased tax revenue will give additional fiscal support 0.0

0.2

0.4

0.6

0.8

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

GD

P G

row

th (

y/y

%)

2011 2012 2013

Could Shale Gas Potentially Deliver Much Needed Stimulus to the UK’s Manufacturing Sector?

•Coal prices decrease, changing electricity supply mix and will lead to increased carbon costs in the short-term

•Renewable energy requirements to raise wholesale electricity price

6,000

8,000

10,000

12,000

14,000

Natu

ral G

as P

rod

ucti

on

an

d Im

po

rts (

mcb

)

With Decreases in Local Production, Natural Gas Imports Have Increased Substantially from 2008 to 2013

10

Shale gas has the potential to serve one-third of the UK’s energy needs. This is likely to give local manufacturers competitive advantage as electricity costs rise globally.

electricity price

•The UK’s natural gas supply mix is changing

Sources: EIA and Frost & Sullivan

-

2,000

4,000

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Natu

ral G

as P

rod

ucti

on

an

d Im

po

rts (

mcb

)

Domestic Production Gas Imports (Pipeline) Gas Imports (LNG)

2008 2009 2010 2011 2012 ‘13

Continental Europe

11

Jan E. Kristiansen


The Key Questions: When and How?Growth will remain stagnant in 2013 with key industries breaking ground

Growth Revival Expected in H2 2013 for Many Developed Economies in Europe, 2013

•Growth revival expected in H2 2013

•Fiscal consolidation expected in the next 12 months

•Structural consolidation measures expected to slow in 2014

(2.5)

(1.5)

(0.5)

0.5

1.5

2.5

France Germany Italy Spain United Kingdom

GD

P G

row

th (

y/y

%)

2013 Q1

2013 Q2

2013 Q3

2013 Q4

12

•Fiscal deficits expected to fall but debt-to-GDP ratios will increase

•Possible slowdown in structural reform

•High unemployment could lead to social influence on policy

(5.0)

(4.0)

(3.0)

(2.0)

(1.0)

0.0

1.0

2.0

2013 Q1 2013 Q2 2013 Q3 2013 Q4

IIP

Gro

wth

(%

)

France Germany Italy Spain United Kingdom

Manufacturing Growth is Expected to Lag Economic Growth Recovery as Regional Interdependencies Continue to Stifle

Export Orders, Europe, 2013

German manufacturing growth leads the way in

Europe’s recovery


Europe’s Economic Engine Needs the Growth Spark

20142014Further

quantitiative easing?

Growth expectations

20132013Austerity timelines

reconsidered

Unemployment at record high of 12.1%

Could the elections in

20122012Strong austerity measures

Unemployment at 11.0%

Budget deficits decreasing, debt-to-GDP ratios increasing

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expectations positive for 2014

Could the elections in Germany influence

policy?

• European leaders sign fiscal compact

• 530 Billion Euros allotted to almost 800 banks

• Financial support requested by Cyprus and Spain

• Significant downgrade in 2013 growth forecasts following Q1 poor performance

• Questioning austerity measures lead to protest and social discord - youth unemployment at 40.5% in Italy

What will bring the growth spark?

Many consider the worst to be over...

Emerging Europe Roundup

14

Aroop Zutshi

Global President & Managing Partner

Increased Importance of Emerging Economies

GDP Growth During the Debt Crisis Remained Resilient in Emerging Europe and Is Expected to Assist Developed

Economies in 2014 •Natural gas market integration is essential to lower energy prices as the U.S. shale-gas revolution widens the EU’s cost gap

• Increased financial integration will make emerging economies more vulnerable to flow reversals-1.0

0.0

1.0

2.0

3.0

4.0

5.0

2011 2012 2013 2014

GD

P G

row

th (

%)

Developed Europe Emerging Europe

15

German Exports to Emerging Europe Increased During the Period of the Financial Crisis - This Trend is Expected To

Continue

0

100

200

300

400

2010 2011 2012

Exp

ort

s (

$ B

illio

n)

Developed Europe Emerging Europe

18.3% increase

since 2010

4.2% increase since 2010


•Labour mobility has increased interdependencies

•Trade is shifting to more lucrative markets in the region

•Linkages with global emerging markets have increased during the current crisis

Poll Question

Africa

17

Hendrik Malan

Operations Director, Africa

The African Renaissance Will Become Reality in the Next 10 Years - Will You be Ready?

GDP Growth

1990’s 2000’s

FDI Inflows

2.2% 5.5%

1990 2010

1990’s 2000’s

$66.32bn $342.51bn

• Agriculture & Agro-processing

• Agricultural chemicals

• Oil extraction and investment in refining capability

• Construction

• Transport, energy, water

Nigeria

Ethiopia

DRC

Ghana

Countries with High Growth and Investment Potential in Africa, 2013-2015

Africa to Average 4.8% GDP Growth

in 2013

Africa to Average 4.8% GDP Growth

in 2013

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To take advantage of this long-awaited growth cycle, early entry is vital to ensure competitive positioning - the time is now!

Source: Frost & Sullivan

Civil Wars15 5

Foreign Debt to GDP

1990’s 2000’s

61.8% 37.4%

• Transport, energy, water supply/treatment

• Healthcare Zambia

DRC

Note: Countries based on score determined from

weighted average of per capita GDP and potential

growth, GDP & GDP potential growth, FDI stock and

growth, export and import growth potential, and

population size and population growth potential

• Retail and financial services

Leveraging the GIL-100 Index with a Focus on Emerging Market Opportunities

Leveraging the GIL-100 Index for HC

20

Dorman Followwill


Emerging Markets Contribute Almost 30% to Leading Pharmaceutical and Healthcare Companies’ Revenue

Achievers

Leaders

Best Practice

Sales

21

Emerging Opportunities

• Biologics and biosimilars; Vaccines; Molecular diagnostics

• Diagnostics imaging

• Health Information Exchange

• Technologies to support long-term care

• Medical tourism

Note: Country banding is done with a specific GDP bracket.

GIL-100 Index for Healthcare : Structuring your Emerging Market Strategy

• How should your company prioritize emergingmarkets beyond BRIC countries based on the

factors most relevant to your company and

products?

• Which countries make the most sense asmanufacturing centers based on IP protection,labor costs and access to export markets?

Top Line GrowthBottom Line

Growth

Sales Attractiveness

Investment Attractiveness

Growth Drivers

22

Sales Attractiveness

Investment Attractiveness

?Tier II

Poland, Malaysia, Mexico, Philippines

Tier IChina, India, Brazil

Companies are shifting toward emerging markets for manufacturing and also to penetrate high growth domestic markets

Leveraging the GIL-100 Index for Energy

23

John Raspin

Partner & Director, Energy &

Environment, Europe

Energy Trends Will Shape the Future of Economic Growth Potential

Key Energy Emerging

Economies Drive

• Solar prices are dropping

• Shale gas is here to stay

• Energy management systems

• Large-scale investment in energy supply infrastructure in emerging economies will drive growth

55% 65%

En

erg

y D

em

an

d

Sh

are

(%

)

World Share of Energy Demand, 2010 and 2025

24

Key Energy Industry Trends

Economies Drive Global Energy

Markets

systems

• Energy fuel mix to drastically change by 2025

European dependence on Russian imports of natural gas will increase as climate change regulations come into effect. This will leave these countries

vulnerable to supply shocks and limited competition in the market.

45% 35%

55% 65%

2010 2025

En

erg

y D

em

an

d

Sh

are

(%

)

OECD Non-OECD

Source: Frost & Sullivan

GIL-100 Index for Energy : Structuring your Emerging Market Strategy

2000 2010 2040

Energy Consumption 27% 30%

Renewable Energy

100% ?%

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Supply Side Index

Demand Side IndexGrowth

Drivers

GIL-100 Energy Intensive Industries Attractiveness Indices

We help companies:

• Make analytical decisions about optimal markets forsales and investment in Energy Intensive Industries

•Move away from a narrow BRIC (Brazil, Russia, India,and China) focus to find a broader set of untappeddynamic countries

•Understand the broader set of factors includinginnovation and political factors

Poll Question

Macro

EMI’s ‘Macro to Micro’ Insight into Emerging Markets will help you Look at Unexplored Markets

Emerging Market Growth Monitor (EMGM)

Global Economic Tracker- Insights and Trends (GET-IT)

� Integrated emerging market country industry forecasts

� Economic insights

27

Micro

Workshops

� Quarterly updates on economic trends and industry indicators

� Specific insights from emerging market experts. Economic and industry correlations

� On site or virtual workshops customized to business needs

� Facilitates development of a country pipeline

Emerging Market Growth - Executive Insights Briefings –Schedule for 2013

Region Spotlight Countries Live Date of Session

Emerging Europe Turkey 10 April 2013

Africa Nigeria 23 April 2013

Emerging Asia Pacific Myanmar 17 July 2013

28

Latin America Panama 25 July 2013

Emerging Europe Czech Republic & Romania 20 August 2013

Emerging Asia Pacific Philippines & Vietnam 25 August 2013

Africa & Middle East Egypt & Saudi Arabia 19 November 2013

Growth Innovation and Leadership: Upcoming Events

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GIL 2013: Africa

15 August 2013

GIL 2013: France

17 October 2013

GIL 2013: Germany

19 November 2013

Growth Innovation and Leadership Congress, November 17th, Frankfurt, Germany

EMI Track at GIL 2013: Germany - Emerging Market Innovation: A Best

Practices Approach to developing your Emerging Markets Strategy

GIL 2013: Frankfurt, Germany

30

19 November 2013

gil-events.gilcommunity.com

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Q & A

Presenters and Contact Details

Dr. Vinod Aggarwal

Chief Economist

Vinnie.aggarwal.frost.com

Dr. Vinod Aggarwal

Chief Economist

Vinnie.aggarwal.frost.com

Jan E. Kristiansen

Partner & Director

Jan.kristiansen.frost.com

Jan E. Kristiansen

Partner & Director

Jan.kristiansen.frost.com

Gary Jeffery

Partner & Director,

Europe

[email protected]

Gary Jeffery

Partner & Director,

Europe

[email protected]

Aroop Zutshi

Global President &

Aroop Zutshi

Global President & Hendrik Malan

Operations Director,

Hendrik Malan


Dorman Followwill,

Partner & Director,

Dorman Followwill,

Partner & Director, Global President &

Managing Partner

Aroop.zutshi.frost.com

Global President &

Managing Partner

Aroop.zutshi.frost.com


Africa

[email protected]


Africa

[email protected]

Partner & Director,

Europe

[email protected]

Partner & Director,

Europe

[email protected]

John Raspin, Partner &

Director, Energy &

Environment, Europe

[email protected]

John Raspin, Partner &

Director, Energy &

Environment, Europe

[email protected]

For Additional Information

Chiara CarellaHead of Corporate Communications

Europe, Israel, Africa +44 (0) 207 343 8314 [email protected]

Samantha James Marketing & Corporate Communications Executive

South Africa+27 (0)21 680 3574

[email protected]

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Web Conference: European and African Economic Outlook 2013