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Performance through Focus Quarterly Press Conference 27 January 2009 2009 OUTLOOK: INVESTING IN A SLOW-GROWTH WORLD.

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Presentation on theme: "Performance through Focus Quarterly Press Conference 27 January 2009 2009 OUTLOOK: INVESTING IN A SLOW-GROWTH WORLD."— Presentation transcript:

1 Performance through Focus Quarterly Press Conference 27 January OUTLOOK: INVESTING IN A SLOW-GROWTH WORLD

2 2 Economic Outlook: Rian le Roux Chief Economist, OMIGSA “The global slowdown and its impact on SA”

3 SA closely linked to the global economic cycle Fit has tightened since the end of isolation from early 90’s Source: SA Reserve Bank SA leading indicators Trading partner leading indicators 3

4 Transmission mechanism from global to SA via commodity prices, export volumes, rand and interest rates SA’s big 4 commodity export price index, % ch Trading partner leading indicators, % ch

5 SA export volumes & global GDP growth SA export volume growth (ex gold)World GDP growth

6 SA car exports: Global slump starting to show ’s per month 6

7 SA interest rates and the global cycle Early rise in local rates probably prevented an acute rate crunch Prime rate Trading partner leading indicators

8 Current account deficit remains a risk to the rand and interest rate outlook Current account as % of GDP

9 ▲ Deep and broad-based recession (across sectors and economies): - Some really shocking real economy numbers - Round 2 of the financial crisis? ▲ Classic forecasting error occurring: - Trend predicted correctly (downturn), extent hugely underestimated - Causing ongoing financial market concern Current global picture 9

10 Japan machinery orders, yen trn Some shocking numbers reflect the unexpected severity of the global slump US retail sales, nominal $ bn Total: -10% from peak Ex autos/gas: -4½% from peak

11 Global trade collapses External trade growth 11

12 G7Developing world GDP forecasts for 2008 & 2009 Despite deep forecast cuts, risks remain to the downside 12

13 World GDP & consensus forecasts % ch Developed World Emerging economies

14 Current global picture From inflation worries to deflation panic 14

15 Global inflation: falling fast Y-o-y % change Germany UK USA Italy France Sweden Greece Japan Switzerland Belgium Australia Canada

16 Current global picture Policymakers pulling out all the stops 16

17 Rates cut aggressively over a broad front Fiscal packages close to 2% of Global GDP Euro USA UK Australia Japan Poland China Korea Hong Kong SA

18 Current global picture ▲ Key questions: - Will it work? - If so, when will things start to stabilise? - How deep the downturn in the meantime?: Big worries here ▲ History suggests that sudden & deep slumps are typically followed by sharp recoveries – will this one be different? 18

19 Recoveries, when they come, can be quick Significant obstacles this time, but surprise potential is rising Risk is more severe weakness first US employment (% change)

20 World GDP Consensus forecasting reasonable recovery in 2010 % change Developed World Emerging economies

21 SA Outlook for 2009 ▲ No escaping the global downturn, but SA is partly isolated: - No local financial sector crisis or serious credit crunch - Exchange rate lends welcome protection - Infrastructure drive will lend crucial support to the economy - Falling inflation will boost real household incomes - Lots of policy firepower available (monetary and fiscal) ▲ Difficult conditions in H1: - Some sectors in deep recession (motor, residential construction, mining, exporters, small business) ▲ Some improvement in H2: - Lower interest rates, lower petrol price, lower general inflation & fiscal measures should support consumer spending - Government infrastructure drive to maintain momentum 21

22 Downside risks can not be ignored, though ▲ Severe export slump ▲ Private investment slump ▲ Job shedding ▲ Rand slump ▲ Policy error 22

23 SA vs Global GDP growth No escaping the global slump, but SA a little better protected this time World GDP growthSA GDP growth

24 Welcome support from investment World GDP growthSA GDP growthInvestment growth

25 Welcome support from investment 25

26 SA Inflation picture CPIX petrol CPIX CPIX excl food & petrol Food

27 SA Inflation outlook CPIX petrol Food CPIX CPIX excl food & petrol

28 Food inflation: Stabilising? Stats SA ERU Y-o-y % change Meat, vegetables & fruit

29 Inflation forecast Forecast with new weights & rebasing Assumptions: Rand: 9.75 end ’09 Oil: $60/bbl end ’09 Food: 8% end ’09 Eskom: 30% ’09; 30% ‘

30 Interest rate outlook 350 bps of cuts in the cycle – risk is faster & more cuts Prime rate & Base Case forecast Alternative Scenario

31 SA Macro forecasts for updated : Indicator HCE GFCF GDP C/A : GDP R/$ : y/e CPIX : y/e Prime : y/e

32 Performance through Focus Regulatory Information 32 Old Mutual Investment Group (South Africa) (Pty) Limited Physical Address: Mutualpark, Jan Smuts Drive, Pinelands, 7405 Telephone number: Old Mutual Investment Group (South Africa) (Pty) Limited is a licensed financial services provider, FSP 604, approved by the Registrar of Financial Services Providers (www.fsb.co.za) to provide intermediary services and advice in terms of the Financial Advisory and Intermediary Services Act 37 of Old Mutual Investment Group is a wholly owned subsidiary of Old Mutual (South Africa) Limited. Reg No 1993/003023/07. The investment portfolios may be market-linked or policy based. Investors’ rights and obligations are set out in the relevant contracts. Market fluctuations and changes in rates of exchange or taxation may have an effect on the value, price or income of investments. Since the performance of financial markets fluctuates, an investor may not get back the full amount invested. Past performance is not necessarily a guide to future investment performance. Personal trading by staff is restricted to ensure that there is no conflict of interest. All directors and those staff who are likely to have access to price sensitive and unpublished information in relation to the Old Mutual Group are further restricted in their dealings in Old Mutual shares. All employees of Old Mutual Investment Group are remunerated with salaries and standard short-term and long-term incentives. No commission or incentives are paid by Old Mutual Investment Group to any persons. All inter-group transactions are done on an arms lengths basis. In respect of pooled, life wrapped products, the underlying assets are owned by Old Mutual Life Assurance Company (South Africa) Limited who may elect to exercise any votes on these underlying assets independently of Old Mutual Investment Group. In respect of these products, no fees or charges will be deducted if the policy is terminated within the first 30 days. Returns on these products depend on the performance of the underlying assets. Old Mutual Investment Group has comprehensive crime and professional indemnity insurance. For more detail, as well as for information on how to contact us and on how to access information please visit


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