1. society
2. work
3. unemployment

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…
Page 13
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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