6th Chief Economist Debate - Event 3 February 2015

Vlerick Chief

Economists Debate

2015

6th edition

2

Why Start from Scratch? Buy Your Own Company

© Vlerick Business School

BUY YOUR OWN COMPANY CONFERENCE - 26 February 2015 Learn from successful buyout and buy-in entrepreneurs: • Dieter Penninckx (FNG Group: Fred & Ginger, Van Hassels,…) • Jo Van Steenvoort (Medio) • Harry Christiaens (Pharmavize) • Wiet Van de Velde (Palletkraft, RED,…) and many more

Get academic background from • Prof Hans Crijns (Growth Management) • Prof Gino Van Ossel (Retail Management) • Prof Mike Wright (Entrepreneurship) and others

KEYNOTE ON NEGOTIATING POWER by PROF KATIA TIELEMAN

SCHEDULE PRIVATE MEET-UPS ING, VD&P Corporate Finance, SDM-Valorum, Winx, Fibizpartners, Finactor, MNA, Vista Capital, Common Grounds, Sherpad, Sequensis, KBC, Belfius, Greenpark Investment Partners, PMV, Capital@Rent, Down2Earth, Buysse & Partners, KeBek, QAT, Think2Act, O.B.A., Vectis Participaties

© Vlerick Business School

THE GOLDEN TICKETS FOR THE BUYOUT CONFERENCE

Keynote Speakers

Chief Economists Debate Speaker Function and Company

Mr. Edwin De Boeck Chief Economist, KBC Bank

Mr. Peter De Keyzer Chief Economist, BNP Paribas Fortis

Mr. Geert Gielens Chief Economist, Belfius

Mr. Peter Vanden Houte Chief Economist, ING

Mr. Prof. Dr. Koen Schoors Moderator

How unsustainable is Greek debt?

Source: Bruegel

6

ING BELGIUM

Direct impact of a Grexit should be smaller

Banks’ exposure to Greece much lower Official sector has biggest exposure to Greek public debt

Foreign banking claims on Greece Composition of central government debt has changed dramatically

But contagion effects would still be huge as euro would prove not to be “irreversible”

0

20

40

60

80

100

120

140

160

180

200

Q1-2011 Q2-2014

On the Greek non-bank private sector On the Greek public sector

On Greek banks

USD bn

0

50

100

150

200

250

300

350

400

Q1-2011 Q3-2014

Bonds Notes Loans

EUR bn

7

Divergence in money growth between US and

Eurozone

8

5yr 5yr forward break-even inflation rate

9/24/11 9

ING BELGIUM

ECB QE programme

• Open-ended plan: €60 Bln per month until

September 2016 and at least until there is a

sustained adjustment in the path of inflation which

is consistent with the aim of achieving inflation

rates below, but close to, 2% over the medium

term.

• Risk sharing: 20% mutualised (mostly supra-

nationale bonds) and 80% non-mutualised

10

ING BELGIUM

ECB bond buying targets

>100%

25% issue limit 148.5

29.9

23.7

14.0

171.1

106.7

48.3

0.8

217.1

15.2

21.0

4.2

1.8

9.3

24.5

2.4

5.0

3.4

2.3

0 25 50 75 100 125 150 175 200 225

Italy

Belgium

Austria

Ireland

France

Spain

Netherlands

Malta

Germany

Finland

Portugal

Slovenia

Cyprus

Slovakia

Greece

Luxembourg

Lithuania

Latvia

Estonia

Allocation of €850bn worth of sovereign bond purchases based on ECB capital keys

9.0%

9.4%

11.0%

12.0%

12.8%

14.7%

14.7%

15.9%

18.2%

19.0%

19.1%

22.5%

28.8%

28.6%

36.8%

38.6%

48%

89.6%

0.0% 25.0% 50.0% 75.0%

Italy

Belgium

Austria

Ireland

France

Spain

Netherlands

Malta

Germany

Finland

Portugal

Slovenia

Cyprus

Slovakia

Greece

Luxembourg

Lithuania

Latvia

Estonia

Central government bonds to be purchased by country (EUR bn) Target amount as a share of current outstandings (%)

11

Chief Economists Debate Europe & ECB policy

Geert Gielens, Chief Economist January 2015

12

ECB Bazooka: fighting deflation/stagnation. The ECB used its QE bazooka and it is a big one

ECB meeting of January, 22 QE: purchases of €600 bln of government bonds and ABS/Covered bonds

between march 2015 and sept 2016 (open ended!) Maturities between 2Y and 30Y (linkers and FRN incl.) In the secondary market

Bron : Belfius Capital Markets / ECB 13

ECB Bazooka: fighting deflation/stagnation. The ECB used its QE bazooka and it is a big one

Bron : Belfius Capital Markets / ECB 14

Asset inflation. The fed balance sheet is the driver behind the price increase of stocks

Bron : FACTSET 15

Low rates do not equate high growth. Low rates: a necessary, not a sufficient condition

Bron : FACTSET

I (t)= 0,46 profit (t-1) + 30080 capacity utilisation (t-1)

(8,37) (12,36)

16

Financing: not “the” pressing problem in Belgium. Demand is lacking, not supply

Source: ECB; SAFE

H2 2011 H2 2012 H2 2013 H12014

competent staff 25% 15% 14% 21%

finding

customers 17% 16% 19% 18%

production- &

labourcost 24% 24% 22% 18%

regulation 7% 16% 16% 13%

competition 13% 13% 14% 12%

financing 10% 10% 9% 11%

other 5% 6% 7% 7%

total 100% 100% 100% 100%

17

Lower oil prices

A boost to global growth in 2015?

February 2015

Edwin De Boeck

Chief Economist KBC Group

19

Oil- and commodity prices Going down…

Oil price falling more in USD than in EUR (price per barrel Brent)

20

China- Real GDP (y.o.y.-change, in %)

Lower oil- and commodity prices …reflecting some weakness of (a.o. Chinese) demand…

21

Demand & supply on the oil market (mln. barrels per day)

Source: International Energy Agency

Lower oil prices …but mainly a positive supply shock

0

2

4

6

8

10

12

US oil production (mln. barrels per day)

Tight oil production

Crude oil production (excl. tight oil)

22

Demand & supply on the oil market (mln. barrels per day)

Source: International Energy Agency

Lower oil prices …but mainly a positive supply shock

23

A ‘permanent’ or ‘temporary’ shock?

- What is the price elasticity of oil supply?

Global macro-economic impact?

- What is the net impact of an income transfer from oil producers to oil consumers?

- What is the impact on inflation (expectations) and monetary policy?

Lower oil prices Global macro-economic impact

24

Impact of a 20% oil price decrease after one year on real GDP (in %-points)

Lower oil prices Global macro-economic impact






25

Source: ECB staff

Cumulative impact of 10% oil price decrease after 3 years on real GDP

(in %-points)

Lower oil prices Impact on growth in Eurozone countries (ECB-estimates)

Oil consumption - Belgium vs. Eurozone (1980 = 100)

26

Lower oil prices Adding to deflationary pressure?






27

Investment themes 2015 ?

Buy

US-dollar

European stocks: large cap cyclicals that benefit most from lower oil prices and/or USD-appreciation

Emerging Asia

technology stocks

high dividend stocks

Underweight financials, basic materials and energy

Underweight US-stocks

Short duration

3/2/2015 | Economic Research 28

3/2/2015 | Economic Research

Slow recovery…

29


…one of a kind recession

30

GDP levels - Q1 2008 = 100


Low growth, low inflation

31


Important source of growth on its way back…

32


…and productivity growth lower

33


Not a lot of room for more public spending…

34


…but lot of room for more innovation

35


Conclusion

• Weak growth in Europe…

• …for some time to come

• Negative demographic backdrop…

• …and not a lot of fiscal space

• Growth will come from innovation and competition

36

Q&A

Finance Alumni, Your Financial Network

Thank you


Networking Drink

&

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6th Chief Economist Debate - Event 3 February 2015

Business

keyzer chief economist

boeck chief economist

ecb bazooka

geert gielens chief

ing belgium ecb bond

greek debt

ecb meeting

ecb capital keys