World in 2050 talk - portugal - dec08

World in 2050 talk - portugal - dec08 - The World in 2050...

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The World in 2050 Does the global financial crisis change the long-term outlook? John Hawksworth Head of Macroeconomics PricewaterhouseCoopers LLP Porto, 12 December 2008
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Slide 2 PricewaterhouseCoopers LLP 12 December 2008 Agenda 1. Global financial crisis and short-term economic outlook 2. Key results from PwC long term economic growth model: - Relative growth rates and size of economies by 2050 - China vs India - other key emerging economies 3. Implications for European business: - potential winners and losers in next 10 years - longer term shift to a low carbon economy 4. Summary
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Slide 3 PricewaterhouseCoopers LLP 12 December 2008 0 1 2 3 4 5 6 7 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Source: World Bank up to 1997, IMF for 1998-2009 (using market exchange rates to aggregate world GDP) Real growth (%) Long-run average = 3.2% World GDP growth has been above trend since 2004 …
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Slide 4 PricewaterhouseCoopers LLP 12 December 2008 0 1 2 3 4 5 6 7 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Source: World Bank up to 1997, IMF for 1998-2007, PwC for 2008-9 (using market exchange rates to aggregate world GDP) Real growth (%) Long-run average = 3.2% … but is now expected to move sharply below trend due to the global financial crisis Forecast
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Slide 5 PricewaterhouseCoopers LLP 12 December 2008 Anatomy of a Crisis : Stage 1 – global boom driven by easy credit and low prices of goods from China/E7 (2004 to mid-2007) E7* growth high G7 growth high Credit boom Housing bubbles Interest rates low Inflation down Goods prices down *E7 = largest seven emerging economies
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Slide 6 PricewaterhouseCoopers LLP 12 December 2008 Anatomy of a Crisis : Stage 2 – double hit from credit crunch and rising commodity prices (mid-2007 to mid-2008) E7 growth still high G7 growth slowing Credit crunch Housing bust Interest rate dilemma Inflation up Commodity prices up ? - ? + -
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Slide 7 PricewaterhouseCoopers LLP 12 December 2008 Anatomy of a Crisis : Stage 3 – banking crisis deepens while commodity prices fall back (September 2008 to date) E7 growth falls sharply G7 move into recession Banking crisis House prices fall further Interest rates down Inflation down Commodity prices down ? - - +/? - +/?
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Slide 8 PricewaterhouseCoopers LLP 12 December 2008 Broad-based decline in global growth now expected -2 0 2 4 6 8 10 China Russia Brazil US Euro area Source: IMF, PwC Annual % growth 2007 2008 2009 Risks clearly weighted to the downside in the short term
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Slide 9 PricewaterhouseCoopers LLP 12 December 2008 How long will the effects of the global financial crisis last? Short term (1-2 years)
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World in 2050 talk - portugal - dec08 - The World in 2050...

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