Is the world headed towards
another financial catastrophe?
Dato’ Abdul Rauf Rashid
Malaysia Managing Partner and
ASEAN Assurance Leader
EY
24 September 2014
Considerations
1
Emerging global concerns
2
Leading global indicators
3
Closer to home – the realities
Page 2
Is the world headed towards another financial catastrophe?
Emerging global concerns
Why a new global financial crisis could be on the way:
8 scenarios
Stock
market
bubbles
Banking
NPLs in
China
Corporate
failures
Geopolitical
crisis
Energy
crisis
New real
estate
bubble
Poverty
crisis
Cash crisis
(QE and
hyperinflation)
Source: 8 reasons why a new global financial crisis could be on the way (IMD: Professor Arturo Bris), Nasdaq, 23 August 2014
Page 3
Is the world headed towards another financial catastrophe?
Some leading indicators are turning
positive though
Page 4
Is the world headed towards another financial catastrophe?
1. Growth re-balancing towards expansion
►
►
Within UK’s low inflation recovery, its economy has started to rebalance from
consumption to investment;
Two key drivers central to this recovery:
► Rising employment rather than wages
► Rebound of business investment and ultimately exports, particularly
services
Source: UK Economic Forecast, Summer 2014, EY
Page 5
Is the world headed towards another financial catastrophe?
2. Global CFO’s cautiously confident in
global recovery
View 5 signs:
60%
40%
see the global economy
improving
80%
see overall corporate
earnings to be strong; and
58% expect stability
view credit availability as stable
5 out of 7
IT tops capex priorities
economic regions expect GDP growth
to be stable or improving
Source: CNBC Global CFO Council, 2014; and Asia-Pacific CFO Hot Topics – Optimizing capital , EY
Page 6
Is the world headed towards another financial catastrophe?
Global job creation continues - all regions
anticipate positive change
►
Confidence runs high
►
Recruiting transcends borders
►
Technology drives job creation
►
Technology drives strategic
growth
►
Technology improves
competitiveness and employee
mobility
►
Growing industries generate
good-paying jobs
Source: Global job creation survey, June 2014, EY
Page 7
Is the world headed towards another financial catastrophe?
Closer to home - the realities
Page 8
Is the world headed towards another financial catastrophe?
Malaysia’s economy growing @ 5%, in tandem
with ASEAN and global economic growth
2013e
2014f
Average 2015 2017
World
3.0
3.6
3.9
Euro area
-0.5
1.2
1.5
Emerging and
developing Europe
2.8
2.4
3.1
United States
1.9
2.8
2.9
Emerging and
developing Asia
6.5
6.7
6.7
ASEAN-5
5.2
4.9
5.5
Malaysia
4.7
5.2
5.0
Area/
GDP % (constant
prices)
Source: World Economic Outlook, April 2014, IMF
Page 9
Is the world headed towards another financial catastrophe?
Malaysia on stable footing – room for
cautious optimism
Source: Rapid growth markets, July 2014, EY
Page 10
Is the world headed towards another financial catastrophe?
Malaysia “leap-frogs” its international
rankings
24
20
IMD world competitiveness
Yearbook
Ease of Doing Business, World Bank
The Global Competitiveness Report,
WEF
Source: KL Calling 3rd edition , 2014, EY
Page 11
Is the world headed towards another financial catastrophe?
Malaysia within lowest risk segment of
RGM’s heat map
Risk concerns on
Malaysia include:
► Government debt
► External debt
► Inflation
► Credit growth
► Currency change
8 economies with
highest risk
9 economies with
medium risk
9 economies with
lowest risk
Source: Rapid growth markets, July
2014, EY
Page 12
Is the world headed towards another financial catastrophe?
But, BNM vigilant on rising household debt…
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Is the world headed towards another financial catastrophe?
And, fiscal balance is a “WIP”…
Selected countries: Public debt and fiscal balance
(in percent of GDP; 2013)
Malaysia can improve:
►
Reverse the upward
trajectory of local
government debt
►
Set reform of intergovernment fiscal
relations
►
Structural reform of
highly subsidized
industries
Source: Regional Economic Outlook: Asia and Pacific, IMF
Page 14
Is the world headed towards another financial catastrophe?
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