Global Economic Outlook 2015 - sbf.org.sg Business Outlook for... · Global Economic Outlook 2015 Near-term Challenges, Long-term Goals Francis Tan ... Uni Mich 1y-ahead infl exp

Produced by UOB Global Economics & Markets ResearchJanuary 2015 1

Disclaimer

This presentation was prepared for informational purposes only and shall not be copied, orrelied upon by any other person for whatever purpose. The information provided herein isbased on publicly available information. Although believed to be reliable, UOB Group makesno representation as to the accuracy or completeness. This presentation must be viewed inconjunction with the oral presentation provided by UOB and/or its officially appointeddistributors/agents. Nothing in this presentation constitutes accounting, legal, regulatory, taxor other advice. The reader(s) of this document should consult his/their own professionaladvisors about the issues discussed herein. This presentation is not intended as an offer orsolicitation with respect to the purchase or sale of any investment product and nothing hereinshould be construed as a recommendation to transact in any investment product. To invest,please refer to the prospectus (where applicable) for details.

Global Economic Outlook 2015Near-term Challenges, Long-term Goals

Francis TanUOB Global Economics & Markets Research

16th Jan 2015


Near Term: Global Growth Conditions1

Mid Term: US Interest Rate Normalisation2

Long Term: Singapore’s Growth Prospect3


Source: Bloomberg (Daily Data)

Report Card 2014: Performance By Asset Classes

52.9

6.2

13.3 13.0

7.6

-2.6

35.4

-45.9

12.8

-4.7

-12.0

-60

-50

-40

-30

-20

-10

0

10

20

30

40

50

60

Equities Sovereign FXCredit Commodities


UOB 1Q 2015 Economic Outlook Report


SBF Survey 2015


10

9

8

7

6

5

4

3

2

1

Anton CaseyHong Kong protest CPF contribution rate

XiaomiSouth Korea ferry MCE

Jennifer LawrenceScotland SG vs Juventus

InterstellarGaza SG Sports Hub

PSI SingaporeUkraine Pioneer Gen Package

Robin WilliamsISIS Westgate Mall

MH17Ebola NDP 2014

iPhone 6ALS SG Budget 2014

World Cup 2014MH17 GST voucher 2014

MH370MH370 PSI Singapore

Rank SG SearchesGlobal News SG News

Source: Google (Annual Data)

Top “Concerns” of 2014


There’s a Giant Contradiction at the Heart of the U.S. EconomyBy NEIL IRWINNovember 21, 2014

0

20

40

60

80

100

120

140

160

1983 1988 1993 1998 2003 2008 2013

US$/barrel

West Texas Intermediate Crude Oil

Bloomberg West Texas

Intermediate

-3

-2

-1

0

1

2

3

4

5

6

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

YoY

US Inflation and Expectations

CPI YoY

Uni Mich 1y-ahead infl exp

Ave (1992-2014)

x

0

50

100

150

200

250

300

350

400

450

500

2003 20042005 2006 2007 2008 2009 20102011 201220132014

Prices

Copper/Lumber

Lumber Copper

0

0.5

1

1.5

2

2.5

3

3.5

4

2011 2012 2013 2014 2015

%US 10Y Bond Yield

US 10Y Bond Yield



0

500

1000

1500

2000

2500

0

2

4

6

8

10

12

199219941996199820002002200420062008201020122014

S&PYoY

S&P and M2 Money Supply

M2 Money Supply YoY

S&P 500

Dot-com Lehman

BrothersQE

0

2

4

6

8

10

12

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1991 1996 2001 2006 2011

Profit

Margin, %

Dividend

Yield, %

U.S. Corporate Profits and Dividends

Dividend Yield

Profit Margin

0

1

2

3

4

5

6

0

5

10

15

20

25

1998 2003 2008 2013

Price to

BookPrice to

Cash Flow

U.S. Corporate Valuations

P/CF Ratio

P/B Ratio

✓

100

200

300

400

500

600

700

800

1967 1972 1977 1982 1987 1992 1997 2002 2007 2012

No. (thous)

US Initial Jobless Claims since 1967

Recessions MA(4week)

325k

375k


Why?


It’s allOverseas

DistortedMarkets

USSlowing

EurozoneJapanChinaBrazil Risks ↑

Deflation ↑ Commod ↓

Bonds ↑

Equities ↑

Bonds ↑

QE ↑

Demand ↓

Commod ↓

Supply ↑

✓x ?

Commod ↓

Bonds ↑

AD ↓Indicates

IndicatesRisks ↑


Crude Oil Prices (Brent and WTI)

Key Events That May Have Influenced Crude Prices Lower

01 Jan 08, 96.00

03 Jul 08, 145.29

01 Aug 08, 125.10

23 Jul 14, 107.62

26 Sep 14, 93.54

0

20

40

60

80

100

120

140

160

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

US$/barrel

WTI Crude Brent

Since Jun14: IEA cut 2015 demand forecast

by 800k bpd

Late Jun14: Permission granted to export US oil1 Jul: Libyan rebels agreed to open Es Sider & Ras

Lanuf (key export terminals closed for 1 year)

Sep14: Saudi, Iran, Kuwait gave discounts

Late Nov14: OPEC kept production unchanged

US Oil Production : From 4.7m bpd (crude) In Aug 2008 Up To 8.9m bpd (crude+shale) in Sep 2014 OPEC Oil exports to US: From 180.6m bpm in Aug 2008.... Fell to Just 8.7m bpm in Sep 2014QE Dates: QE 1: 25 Nov 2008 QE 2: 3 Nov 2010 Op Twist: 3 Nov 2011 QE 3: 12 Dec 2013

13 Jan 15, 44.5

-59%

Source: Bloomberg (Daily data)


3

4

5

6

7

8

9

10

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

mil

barrels/day

DOE Crude Oil Total Production Data

13th Jan 15: 9.312

+83%

US Domestic Crude Oil Total Production US Petroleum Trade Balance (US$ bn)

Source: Bloomberg, US Department of Energy Source: CEIC

-450

-400

-350

-300

-250

-200

-150

-100

-50

00

50

100

150

200

250

300

350

400

450

500

2007 2008 2009 2010 2011 2012 2013 2014*

US Petroleum Exports

US Petroleum Imports

US Petroleum Trade Balance (RHS)

Path To Oil Self Sufficiency In The US


Source: CEIC, UOB Global Economics & Markets Research est

Oil trade balance (% GDP)

Asian Net Oil Importers Are Going To Benefit As Oil Gets Cheaper, But Over-Reliance On Cheap Oil Is Bad

Oil trade balance (% GDP)

Malaysia Indonesia China S. Korea Japan Hong Kong Singapore Thailand

2009 2.2 -1.5 -1.9 -4.5 -1.7 -4.1 -3.8 -6.9

2010 1.7 -1.7 -2.4 -5.1 -2.1 -5.2 -3.7 -7.4

2011 1.1 -2.4 -2.9 -6.0 -2.6 -5.8 -3.8 -9.1

2012 0.5 -2.6 -2.9 -6.5 -2.9 -5.5 -6.7 -9.4

2013 0.2 -3.2 -2.5 -5.9 -3.2 -5.1 -5.7 -9.8


Source: Asian Productivity Organisation (Annual data)

Is World Growth More Decoupled?

Correlation Of Real GDP Growth (1990-2000)


Source: Asian Productivity Organisation (Annual data)

Answer: No. The World Is Ever More Inter-linked

Correlation Of Real GDP Growth (2000-2012)


Emerging Markets Closing In On The Growth Gap

Source: Markit (Monthly Data) Source: Markit (Monthly Data)

Global PMI & Economic Growth Developing vs Emerging World


40 42 44 46 48 50 52 54 56 58

Greece

France

Spain

Japan

Italy

Eurozone

Czech Republic

European Union

Austria

Poland

Indonesia

Germany

South Korea

Vietnam

Netherlands

Ireland

Canada

United Kingdom

World

Taiwan

Russia

Emerging Markets

China

Brazil

India

Turkey

Mexico

United States

46 48 50 52 54 56 58

France

Indonesia

Italy

Russia

Austria

Greece

China

South Korea

Taiwan

Brazil

Eurozone

Emerging Markets

European Union

Germany

Turkey

World

Japan

United Kingdom

Vietnam

Poland

Czech Republic

Netherlands

Spain

Canada

United States

India

Mexico

Ireland

Dec 2014

Worldwide Recovery In Manufacturing Sectors

Source: Markit (Monthly Data)

PMI (Jan 2013)


PMI (Dec 2014)



US Mfg Decoupling From The World

Manufacturing PMI (US vs ROW)


Source: Markit (Monthly Data) Source: Markit (Monthly Data)

US Mfg Decoupling From The World

Employment PMI (US vs ROW) Output Prices PMI (US vs ROW)


y = -2.4169x + 1003.3

R² = 0.588

-1,000

-800

-600

-400

-200

0

200

400

600

200 300 400 500 600 700

Nonfarm

Payrolls MoM

Net Change SA

Initial Jobless Claims SA

Recessions

Healthy Employment Situation Underpinning US Recovery

Note: Shaded regions denote U.S. recessionary years. A number persistently under 375k signals recovery. For a meaningful jump in payrolls, the number should remain below 325k

Source: Bloomberg (Weekly Data)

Note: The R2 refers to the Goodness-of-fit of the set of observations.

Source: Bloomberg (Monthly and Weekly Data)

Payrolls Dec: 252k

Jobless ClaimsDec: 298k

Current

Initial Jobless Claims (4wma) Claims & Nonfarm Payrolls (Since 1990)

100

200

300

400

500

600

700

800

1967 1972 1977 1982 1987 1992 1997 2002 2007 2012

No. (thous)Recessions MA(4week)

325k

375k


-25

-20

-15

-10

-5

0

5

10

15

20

2001 2003 2005 2007 2009 2011 2013 2015

% YoY

S&P/Case-Shiller Composite-20 City Home Price Index YoY

US Existing Home Sales Median Price YOY Percent Change 0

10

20

30

40

50

60

70

80

90

0

200

400

600

800

1,000

1,200

1,400

1,600

1980 1985 1990 1995 2000 2005 2010

IndexNum (Ann.)

Houses Sold SAAR (LHS)

NAHB Home Builders Market Index (RHS)

Source: Bloomberg, (Monthly Data)

Rising Home Prices/Sales �� “+” Wealth Effect

U.S. Home Price Indices U.S. New Home Sales



0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

0

2

4

6

8

10

12

1980 1985 1990 1995 2000 2005 2010

ForeclosuresDelinquencies

Delinquencies As % Of Total Loans SA

Foreclosures As % Of Total Loans NSA

Foreclosures (Average)

Source: Mortgage Bankers’ Association

… While Delinquencies/Foreclosures = Lower

American Home Loans Delinquencies & Foreclosures As % Of Total Loans



Rebounding Property Prices Adds to Household Equity

American Households’ Equity in Real Estate



Household Net Worth Surging �� Positive For Consumption

US Household Net Worth As % of Disposable Income


20

40

60

80

100

120

140

160

1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Indices

US RECESSION

Conference Board Consumer Confidence SA 1985=100

University of Michigan Survey of Consumer Confidence Sentiment


Rising Consumer Confidence…

US Consumer Confidence


0

2

4

6

8

10

1240

50

60

70

80

90

100

110

120

1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Unemployment Rate %

(inverted)

Confidence Index

US Consumer Confidence & Unemployment Rate

University of Michigan Survey of Consumer Confidence Sentiment (12m forward)

U-3 US Unemployment Rate Total in Labor Force Seasonally Adjusted


Consumer Confidence As A Predictor Of Unemployment

US Consumer Confidence & Unemployment Rate (12m Lead)


1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

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

YoY

US Avg Hourly Earnings Private Nonfarm Payrolls In Nominal Dollars YoY SA

Average since 2000

2.9 Average: %


Wage Growth Remains Slow, But Trending Higher…

US Wage Growth

2.04%






0

5

10

15

20

25

1971 1976 1981 1986 1991 1996 2001 2006 2011

%

US RECESSION Federal Funds Target Rate US

Aug 2007

Tech bubble Global financial crisisGulf War

Longest period of economic growth

Iran/energy crisisOil crisis

From 2014 SBF Seminar: The US is still in its longest period of extremely low interest rates


Liquidity Trap

US Economic Growth and Monetary Policies


Federal Reserve’s Actions

2007

Fed Funds rate from 5.25% to

0-0.25%

2012

QE3(12th Dec 2012)

US$85bn/mth, open-ended

2010

QE2(3rd Nov 2010)

Bonds: $600b($75b/mth)

2011

Op Twist(3rd Nov 2011)

Bonds: $400b+$267b

Recap: Timeline of Fed’s Actions Since Global Financial Crisis

2008

QE1(25th Nov 2008)

MBS: $600b+$750bBonds: $300b

Quantitative EasingInterest Rates


Europe, 147.0

U.S., 503.5

U.K., 441.1

Japan, 296.0

100

150

200

250

300

350

400

450

500

550

2008 2009 2010 2011 2012 2013 2014

Jun08=100

Recap: Central banks accumulated financial assets as a result of monetary easing

Source: Bloomberg (Monthly Data)

Central Banks’ Assets Index (Jun 2008 = 100)


Europe, 21.32%

U.S., 25.56%

U.K., 22.46%

Japan, 63.24%

0%

10%

20%

30%

40%

50%

60%

70%

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

Total Assets % of GDP Global Financial Crisis 2008

Recap: But As % Of GDP…


Tapering Starts

Central Banks’ Assets (% of GDP)


0

20

40

60

80

100

120

140

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15

VolatilityBond Yields (%)

USGG10YR Index

GTSGD10Y Govt

MOVE

Source: Bloomberg (Weekly Data)Note: MOVE Index = Merrill Option Volatility Expectations

22nd May 2013

2015: US Sovereign Yields Volatility Are Picking Up Again

US/SG Bond Market And US Interest Rate Implied Volatility


Source: IMF (daily data)

Bond Yield

Equity Price

Real + +

Money + -

Expected Rise In Bond Yields Due To Real Economic Growth?

Decomposition Of Real And Money Shocks In US Treasury Yield Movements


Source: IMF (daily data)

y/y %

Real Shocks Are Positive For US Economic Data…

Impact Of US Treasury Yield Movements On US Industrial Production


In Oct 13, IMF Expected Rate Hike Cycle To Start On Mar 2015

Source: IMF WEO Oct 2013

Market-Implied Interest Rate Pricing Vs Historical Cycles


)()(**

ttytttttyyaari −+−++= πππ

π

Nominal i/r Current Inflation rate Equilibrium

real i/r

Log(real GDP)

Potential o/p

Desired Inflation

rate

)]())(1[(][***

ttyttttt yyaari −+−+++= ππππ

Deviation from Neutral RateNeutral Rate

*

tπAdding and subtracting on the RHS:

Due to policy inertia:

)]}([)])(1[]){[1(***

1 ttyttttttyyaarii −+−+++−+=

−πππρρ

π

The Taylor Rule


-4

-2

0

2

4

6

8

10

12

14

1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014

%

US FFTR vs Taylor Rule

FED Rate Taylor Rule Estimate

-4

-2

0

2

4

6

8

1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014

% Spread (Fed-Taylor)

Spread: FED - Taylor


Jun 2013

US FFTR & Taylor Rule Prescription

According To Taylor Rule, FFTR Should Be Higher


-2

-1

0

1

2

3

4

5

6

1998 2001 2004 2007 2010 2013

%

ECB Rate vs Taylor Rule

ECB Rate Taylor Rule Estimate

-4

-2

0

2

4

1998 2001 2004 2007 2010 2013

% Spread (ECB-Taylor)

Spread: ECB - Taylor


Aug 2012

ECB Rates & Taylor Rule Prescription

While The Opposite Is True For The Euro Area


-3

-2

-1

0

1

2

3

4

5

6

1998 2000 2002 2004 2006 2008 2010 2012 2014

%

United States

Eurozone

United Kingdom

0

1

2

3

4

5

6

7

1998 2000 2002 2004 2006 2008 2010 2012 2014

%United States

Eurozone

United Kingdom


Although Interest Rates Remained Low, Inflation Went Down Too

Nominal Interest Rates Inflation Rates


Deflationary Zone



Eurozone Real Interest Rates

-3

-2

-1

0

1

2

3

4

1998 2000 2002 2004 2006 2008 2010 2012

%EZ Recessions Eurozone

Key Worry: Rising Real Rates In The Eurozone


175

128 128123

112105

92 92 91 9181 79 77 73 72 69

57 56 5546 45 41 39 38 38

2419

10

130

84

116

6459

97

79

54

80

67 69

8075

67

35

61

5144

36 3541 43

2924

37

16 157

0

20

40

60

80

100

120

140

160

180

200% Debt/GDP

Nov-14

Jan-10


Eurozone % Debt To GDP, Nov 2014 vs Jan 2010

Key Worry: Rising Real Rates In The Eurozone

Rank Cty % chg

1 Slovenia 104%

2 Ireland 91%

3 Cyprus 91%

4 Spain 71%

5 Romania 63%

6 Slovakia 56%

7 Portugal 53%

8 Luxembourg 52%

9 Estonia 41%

10 UK 35%


0.6

0.8

1.0

1.2

1.4

1.6

1.8

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

EURUSD

EURUSD

Descending Triangle


EURUSD

Depressing EUR


Normalisation Of Interest Rates: Why Shall We Worry?


4.33.2

1.5 1.50.7 0.5

-0.1 -0.5 -1.4 -2.0

-12.4

-6.7

-14.9

-11.4

0.6

-22.4

-8.2

0.0

-8.5 -8.7

-1.7

-26.2

-30

-25

-20

-15

-10

-5

0

5

10

THB MYR INR CNY IDR PHP HKD SGD TWD KRW JPY

%

Jan 2013 to 8 May 2013

Jan 2013 to 14 Jan 2015

Concerns on interest rates normalisation led to the weakening of Asian currencies


HOT MONEY

Asian currencies’ performance against USD From 1 Jan 2013 To Date


17.6

11.9

5.84.3

2.9

-1.8

-5.9-4.8

-2.0

-4.3

4.1

2.23.2

1.82.1

-3.2-2.1

1.0

-1.8-1.3

2.4

15.2

-10

-5

0

5

10

15

20

Singapore Taiwan Korea Malaysia Philippines Thailand Hong Kong China Japan India Indonesia

% of GDP

2014 1997

Source: IMF, UOB Economic-Treasury Research

Current account balance in Asia mostly better except India and Indonesia

Current Account As % Of GDP


114%

92% 85%

42% 41% 41%31% 27% 25%

14% 11%25%

6%5%13%15%25%

14%

34%32%

88%

53%

0%

20%

40%

60%

80%

100%

120%

Hong Kong Singapore Taiw an Malaysia China Thailand Philiippines Korea Japan India Indonesia

% of GDP

2013 1998

Source: IMF, UOB Economic-Treasury Research

Asia in Better External Positions to Manage Liquidity Outflow

Asian Foreign Reserves

Asian Foreign Reserves As % of GDP

3,821

1,202

417 346 311 273 269 159 130 8499145 203 90 49 90 75 27 28 25 24 11-

1,000

2,000

3,000

4,000

5,000

China Japan Taiw an Korea Hong Kong Singapore India Thailand Malaysia Indonesia Philiippines

US$ bn

2013 1998


Central banks are also implementing different interest rate policies

0

1

2

3

4

5

6

7

8

2006 2008 2010 2012 2014

% US RECESSION Japan Singapore United Kingdom United States Austra l ia Eurozone


Global financial crisis

Record Long Period Of Record Low Int Rates

UOBForecast

Interest rates of selected economies


Foreign direct investment

Pte Resid Property Price Index

Country House Price-to-Income Ratio

United States 2.16

Germany 4.78

United Kingdom 6.73

Japan 6.99

Singapore 25.38


Affordability Comparison (2012)Rule-of-Thumb for affordability in global city-states is 4x for overall system, and 7-8x for private residential

DescriptionSingapore HDB BTO

Singapore HDB Resale

Singapore Condominium

Hong KongClass B**

Malaysia KL Condominium

Price per sqm S$3,583 S$5,453 S$11,976 HK$99,079 RM5,120

Average House Size (sqm) 90* 90* 110 56 120

Assumed House Cost S$322,500 S$490,774 S$1,317,360 HK$5,548,424 RM614,386

Average Monthly Household Income S$6,712*** S$9,515*** S$14,137*** HK$40,600 RM8,000

House Price vs Income Ratio

4.0 4.3 7.8 11.4 6.4

DescriptionChina

NationalChinaBeijing

ChinaTianjin

ChinaShanghai

Taiwan Taipei City

Price per sqm RMB5,430 RMB16,553 RMB8,010 RMB13,870 NT$93,000

Average House Size (sqm) 90 90 90 90 124

Assumed House Cost RMB488,700 RMB1,489,770 RMB720,900 RMB1,248,300 NT$11,532,000

Average Monthly Household Income

RMB5,476 RMB7,253 RMB5,491 RMB7,459 NT$73,360

House Price vs Income Ratio

7.4 17.1 10.9 13.9 13.1

Source: Singapore Department of Statistics, UOB Economic-Treasury Research

Assume 2 working adults in a household where household income data is not available.*Ave 4-room HDB

**Ave private residences in HK, Kowloon and New Territories ***Singapore -- Based on national median income, average national income and median resident household income for those living in condos and pte flats/houses respectively






1965-78:

Export Oriented

Industrialisation

1979-85:

Industrial

Restructuring

1986-97:

Economic

Committee

1998-2002:

Committee on

Singapore’s

Competitiveness

2003-10:

Economic Review

CommitteeUS$’000

US$53,852

Source: CEIC

0

10

20

30

40

50

60

1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011

Singapore Came A Long Way Since Independence

US$533

2010-20: Economic

Strategies

Committee

Singapore Gross National Income (Per Capita, US$)


Source: Bloomberg, UOB Global Economics & Markets Research (Annual Data)

A Level Shift Down In Growth Rates…

Singapore’s GDP Growth

3.32.9

-4

-2

0

2

4

6

8

10

12

14

16

18

1976 1980 1984 1988 1992 1996 2000 2004 2008 2012

% y/y

1976-1984

Ave: 8.70%

1986-1997

Ave: 8.50%

1999-2008

Ave: 6.00%

2011-2015f

Ave: 3.70%


Source: Bloomberg, UOB Global Economics & Markets Research (Monthly Data)

… But Recent “Deflation” Is Not A Risk

Singapore’s Headline & Core Inflation

-2

-1

0

1

2

3

4

5

6

7

8

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

% y/y

Headline Inflation % y/y

Core Inflation % y/y

Accomodation and Car prices

-10

-5

0

5

10

15

20

25

30

Jan-

10

Jul-

10

Jan-

11

Jul-

11

Jan-

12

Jul-

12

Jan-

13

Jul-

13

Jan-

14

Jul-

14

% y/yAccomodation

Pte Rd Tpt


10.8

6.1

4.3 4.3

1.7

6.1

3.2

4.5

7.3

3.4 3.1 2.7 2.4 2.3 2.01.3

0

2

4

6

8

10

12

Finance &

Insurance

Construction Business

Services

Infocomms Manufacturing Wholesale &

Retail Trade

Transport &

Storage

Accomodation &

Food Services

% y/y

2013 2014

2013 Share 11% 5% 13% 4% 20% 18% 8% 2%

of GDP

Source: Bloomberg, UOB Global Economics & Markets Research (Annual Data)

Report Card 2014: Weaker Growth Across Industries In SG

Singapore’s GDP Growth By Industries

▼ ▲▼ ▼ ▼▼ ▼ ▼


Manufacturing To Move Up Value Chain

Manufacturing Smile Curve

Source: Stan Shih, Former Chairman of Acer Group, 1992

Time

Value-Added/Unit

R&D

Design

Procurement

Production

LOGISTICS

Marketing

Sales/Services

DistributionCONCEPT

Global Competition Area Competition


Source: Bloomberg, UOB Global Economics & Markets Research (Quarterly Data)

Low Unemployment Rates…

Singapore’s Unemployment Rate (Total) SA

09/03, 4.80

0

1

2

3

4

5

6

1987 1990 1993 1996 1999 2002 2005 2008 2011 2014

%

SG Recessions

Unemployment Rate SA


… While Labour Market Remains Tight

Source: CEIC (Quarterly Data)

Job Vacancy-to-Unemployed Ratio

Source: CEIC (Quarterly Data)

Singapore’s Beveridge Curve

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1997 1999 2001 2003 2005 2007 2009 2011 2013

RatioSG Recess ions

Job Vacancy to Unemployed Pers on Ratio: sa

y = 0.332x2 - 2.6486x + 6.7049

R2 = 0.6358

0

1

2

3

4

5

6

0 1 2 3 4 5 6

Unemployment Rate, SA

Job Vacancy

Rate

45

deg

2010-

14

Expansion

High vacancies

Low

Unemployment

Recession

Low vacancies

High

Unemployment


Source: Bloomberg, UOB Global Economics & Markets Research (Quarterly Data)

We Bought Some “Time” By Increasing LFPR

Singapore’s Labour Force Participation Rates (Residents)

0

10

20

30

40

50

60

70

80

90

100

15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69

Age Groups

%

1991 2001 2011 201419912001

2011

2014


Sharp Rise In Female Participation In Workforce

Source: CEIC (Annual Data)

LFPR (Male Residents)

Source: CEIC (Annual Data)

LFPR (Female Residents)

15-19, 13.20

20-24, 63.20

25-29, 89.00

30-34, 97.20

35-39, 97.50

40-44, 97.10

45-49, 96.1050-54, 94.00

55-59, 87.60

60-64, 75.00

65-69, 53.40

0

20

40

60

80

100

120

1991 1994 1997 2000 2003 2006 2009 2012

%

15-19, 10.20

20-24, 59.90

25-29, 88.00

30-34, 83.70

35-39, 79.40

40-44, 75.4045-49, 73.10

50-54, 66.50

55-59, 59.10

60-64, 44.20

65-69, 27.90

0

10

20

30

40

50

60

70

80

90

100

1991 1994 1997 2000 2003 2006 2009 2012

%


Source: UN Population to 2030, UN World Population Prospects

RECAP From 2014 Seminar

Demographic ‘Sweet Spot’


-40

-30

-20

-10

0

10

20

30

40

50

60

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

% y/y Singapore Recessions Private Residential Property Price Index

Source: Bloomberg, UOB Global Economics & Markets Research (Monthly Data)

Property Prices Have “Cooled”

Singapore’s Property Price Index (Private Residential)

▼TDSR

1.76% 3.60% 2.50% 3.93%

90-96 1998 99-00 01-03 04-07

2.50%

08-09

2.25% 2.00%

10-14


Professional Economists’ Forecasts – N. America/W. Europe

November 2013

Improving Expectations For Western Economies

Austria, Canada, Norway, Switzerland and the UK Denmark, Sweden, Switzerland, Austria and Canada

November 2014

Source: BlackRock Institute Economic Cycle Survey, Nov 2013 & 2014


Professional Economists’ Forecasts – Asia

Source: BlackRock Institute Economic Cycle Survey, Nov 2013 & 2014

November 2013

Hong Kong, Japan, Malaysia, New Zealand, Singapore, the Philippines

Stable Outlook For Asian Economies

Hong Kong, Malaysia, New Zealand, Thailand, Taiwan and the Philippines

November 2014


Source: Bloomberg, IMF, UOB Global Economics & Markets Research (Annual Data)

2015 Economic Growth To Be Better For Various Countries

Selected Economies’ GDP Growth

3.8

3.2

6.5

5.85.5

3.3

5.9

7.4

3.3

2.73.0

1.4

0.8 0.7

2.9

3.63.5

0.7

3.4

5.15.4

6.0

3.53.73.94.0

5.2

7.2

1.01.11.5

2.6

0

1

2

3

4

5

6

7

8

World US

United

Kingd

om

Germ

any

Euro

zone

Japan

China

Philip

pines

Indi

a

Indo

nesia

Malay

sia

Thai

land

South

Kore

a

Hong K

ong

Taiw

an

Sing

apor

e

%

2014 2015

1.8% � 2.1%

6.2% � 6.3%

▲ ▼▲ ▲ ▲ ▲ ▲ ▲ ▲ ▲ ▲ ▲ ▲▼ ▼ ▼


In Conclusion…

EU/Japan continues QE � Currencies↓

Higher USD and interest rates from June FOMC� Asian currencies weakness

Singapore: restructuring will be a continuous effort

US economic growth = cyclical/structural strengthtearing away from global growth trendsN

EA

RM

ED

IUM

LO

NG


Thank You!

About The SpeakerFrancis is an economist with United Overseas Bank’s Global Economics & Markets Research team and covers macroeconomic research on Asia. He provides regular economics commentary on TV and is frequently quoted in the media. Before joining UOB in 2012, Francis was an investment strategist at Phillip Capital where he used macroeconomics, business cycle theories, market timing and technical analyses to develop a systematic top-down investment approach for discretionary portfolios. Prior to that, Francis served as an Investment Manager in the wealth management arm of the Royal Bank of Scotland. His career also included stints as an economist at the Ministry of Trade and Industry and the Singapore Tourism Board, where he specialised in Tourism Economics.

Francis obtained the Bachelor of Social Science (Honours) in Economics in 2002 and the Master of Social Science in Applied Economics in 2003 from the National University of Singapore. Continuing his academic interests in the field of applied economics, Francis most recently contributed a chapter titled "Tourism Demand in Singapore: Estimating Neighbourhood Effects" in the Handbook of Tourism Economics published in 2013, and had just published a paper titled “Growth and Environmental Quality in Singapore: Is There Any Trade-off?” in the “Ecological Indicators” journal in 2014.

[email protected]


This presentation was prepared for informational purposes only and shall not be copied, or relied upon by any other person for whatever purpose. This presentation must be viewed in conjunction with the oral presentation provided by UOB and/or its officially appointed distributors/agents. Nothing in this presentation constitutes accounting, legal, regulatory, tax or other advice. The reader(s) of this document should consult his/their own professional advisors about the issues discussed herein. This presentation is not intended as an offer or solicitation with respect to the purchase or sale of any investment product and nothing herein should be construed as a recommendation to transact in any investment product. To invest, please refer to the prospectus (where applicable) for details.

Disclaimers

Documents

Global Economic Outlook 2015 - sbf.org.sg Business Outlook for... · Global Economic Outlook 2015 Near-term Challenges, Long-term Goals Francis Tan ... Uni Mich 1y-ahead infl exp