aim 2007 jimoneill

7/31/2019 AIM 2007 JimONeill

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1

The Modern Relevance ofEmerging Markets

Goldman Sachs

Jim ONeill

Managing Director &Head of Global Economic Research

April 2007


2/25

Summary

1. World being transformed by globalisation.

2. BRICs should be regarded as big enough tobe globally relevant.

3. Big emerging market countries that are willingand prepared to change have great prospects.


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3

Updated Estimates for theEquity Risk Premium*

Real GDP

Growth

Real

Earnings

Growth +

Dividend

Yield =

Expected

Real

Return -

Real

Bond

Yield =

Implied

ERP

Expected

Inflation

Expected

Nominal

Return

US 3.0 3.0 1.9 4.9 2.2 2.6 2.0 6.9

Japan 1.5 1.5 1.1 2.6 1.1 1.5 0.5 3.1

UK 2.5 2.5 3.0 5.5 1.9 3.6 2.0 7.5

Europe ex UK 2.3 2.3 2.3 4.6 1.9 2.7 2.0 6.6

World 2.5 2.5 2.1 4.6 1.9 2.6 1.8 6.3

Optimistic World 4.0 4.0 2.1 6.1 1.9 4.1 1.8 7.8

*Calculated as of 11 April 2007.


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4

The Largest Economies in 2006

0

2,000

4,000

6,000

8,000

10,000

12,00014,000

Unite

dSt

ates

Japan

Germ

anyCh

ina

Unite

dKi

ngdo

m

Fran

ce Italy

Cana

daBr

azil

Russia In

dia

2006 GDP

US$ bn


5/25


0

10,000

20,000

30,000

40,000

50,000

60,000

70,00080,000

China

Unite

dSt

ates

India

Brazil

Russ

ia

Japa

n

Unite

dKi

ngdo

m

Germ

any

Fran

ce

Cana

da Italy

2006 GDP

US$ bn


6/25

6

BRICs & N11 Economic Snapshot

GDP

(US$bn)

2001-06

Average GDP

Growth Rate

(%)

GDP Per Capita

(US$)Population ( mn)

Urbanisation

(% Total)*

Trade

openness (%

GDP)*

FDI (%

GDP)*

Current

Account

(% GDP)

Inflation

(% yoy)

Bangladesh 63 5.7 427 155 25.0 36.7 1.1 -0.3 6.8

Brazil 1,064 2.3 5,085 187 84.2 22.7 1.7 1.4 4.2

China 2,682 9.8 2,041 1,314 40.5 63.4 3.2 8.6 1.5

Egypt 101 4.2 1,281 72 42.3 56.8 6.4 1.8 7.3

India 909 7.2 696 1,110 28.7 29.3 0.8 -2.4 5.6

Indonesia 350 4.8 1,510 222 47.9 51.2 1.9 2.4 13.1Iran 245 5.7 3,768 71 68.1 51.5 0.0 10.0 14.0

Korea 887 4.5 18,484 49 80.8 68.5 0.9 0.7 2.2

Mexico 851 2.3 7,915 107 76.0 57.4 2.3 -0.4 3.6

Nigeria 121 5.6 919 150 48.3 71.9 3.4 15.7 9.4

Pakistan 129 5.3 778 155 34.8 35.5 2.0 -3.9 7.9

Philippines 117 5.0 1,314 86 62.6 90.7 1.2 3.1 6.3

Russia 982 6.2 6,908 142 73.3 44.2 1.9 10.3 9.9

Turkey 390 4.6 5,551 73 67.3 51.8 2.7 -8.0 10.2

Vietnam 55 7.6 655 84 26.7 132.2 3.9 0.1 7.6* 2005 data; ** Latest reportedSource: IMF, World Bank, UN, GS


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The N11 vs BRICs

1995

Variable N-11 N-11 ex Korea BRICs BRIs BRICs

Share of Global Output, % 7.1 5.2 12.5 6.4 7.2

Average Income, US$ 3,069 2,357 2,359 2,318 905

Share of Global Trade, % 8.3 5.7 10.4 3.6 5.6

Share of Trade in GDP, % 60.4 57.4 46.8 31.6 27.2

Share of Global Energy Consumption, % 8.7 6.7 25.6 12.2 22.3

FDI Inflows as % of World 6.0 5.2 11.9 4.0 13.6

FDI Inflows as % of GDP 1.9 2.3 2.3 1.5 2.2

Population, bn 1.24 1.20 2.78 1.46 2.39

Urbanisation, % 48.9 47.5 40.5 40.4 35.1

Source: IMF, EIA, UNCTAD, UN World Population Prospects Database, GS calculations

Current (Latest available)


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The N-11 & BRICs: Today vs 2050

GDP (US$ bn) GDP per cap (US$) GDP (US$ bn) GDP per cap (US$)

China 2,682 2,041 70,710 49,650

Brazil 1,064 5,657 11,366 49,759

Russia 982 6,909 8,580 78,576

India 909 817 37,668 20,836

Korea 887 18,161 4,083 90,294

Mexico 851 7,918 9,340 63,149

Turkey 390 5,545 3,943 45,595

Indonesia 350 1,508 7,010 22,395

Iran 245 3,768 2,663 32,676

Pakistan 129 778 2,085 7,066

Nigeria 121 919 4,640 13,014

Philippines 117 1,312 3,010 20,388

Egypt 101 1,281 2,602 20,500

Bangladesh 63 427 1,466 5,235Vietnam 55 655 3,607 33,472

2006 2050


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The World in 2050

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

China

Unite

dSt

atesIndiaBrazilM

exico

Russia

Indo

nesia

Japan

Unite

dKi

ngdom

Germ

anyNi

geriaFr

anceKo

reaTu

rkey

Vietn

am

Canada

Philip

pines Italy IranEg

ypt

Pakis

tan

Bangla

desh

GDP 2006 US$ bn


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Actual Growth vs Assumptions

Actual

2000-2006 2000-2015 2000-2050

Brazil 3.0 3.5 3.6

Russia 6.8 5.4 3.4

India 7.0 6.7 6.1

China 9.6 8.5 5.3

Assumed


11/2511

Overtaking the G7

Overtaking the G7: When BRICs' and N-11's GDP Would Exceed G7

05 08 11 14 17 20 23 26 29 32 35 38 41 44 47 50

China

India

Brazil

Mexico

Russia

Indonesia

Nigeria

Korea

Turkey

Vietnam

Philippines

Note: Cars indicate w hen BRICs and N-11 US$GDP exceeds US$GDP in the G7. The N-11 countries not included in the chart do not overtake any of the G7 countries over the

projection horizon. Source: GS

Canada

Canada

Canada

Canada

Canada

Canada

Canada

USJapan

Japan

Japan

Japan

Japan

Japan

France

France

Germany

Germany

Germany

Germany

UK

Germany

Italy

Italy

Italy

Italy

Italy

Italy

Italy

Italy

Italy

France

France

UK

France

France

UK

GermanyUK

Canada

UKCanada France


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BRICs & the N-11:Rising Shares of Global Output

BRICs and N-11: Rising Shares of Global

Output

2

4

6

8

10

12

14

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07

%

World

BRICs

N-11

N-11 ex KoreaBRICs ex China

Source: IMF, GS calculations

GDP in current US$ share of world GDP


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A Large High-Income PoolCould Emerge in the BRICs

0 50 100 150 200 250

Italy 2025 Total Population

France 2025 Total Population

UK 2025 Total Population

Germany 2025 Total Population

Japan 2025 Total Population

New People With Incomes Above

$15,000 in the BRICs by 2025

Number, millions


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World in 2025 (incl wealth)

The World in 2025

0

5,000

10,000

15,000

20,000

25,000

UnitedS

tates

Chin

a

Japa

nInd

ia

German

y

Russia

United

King

dom

Fran

ceBr

azilIta

ly

Mexic

o

Korea

Cana

da

Indo

nesia

Turke

yIra

n

Vietn

am

Nige

ria

Philip

pines

P

akist

an

Egypt

Bangla

desh

GDP 2006

US$ bn Income per Capita in 2025

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

United

States

Unite

dKing

dom

Ca

nada

Franc

eJa

pan

German

yIta

ly

Korea

Rus

sia

MexicoBr

azil

China

Turke

yIra

n

Vietn

am

Indone

sia

Philippine

s

EgyptInd

ia

Nige

ria

Pakis

tan

Bangl

adesh

2006 US$

E i th C diti f


15/25

Ensuring the Conditions forGrowth

Sound, stable macroeconomic policies

Strong, stable political institutions

Openness

High and broad levels of education

Miracle conditions are not needed.


16/2516

BRICs & N11. 2006 GrowthEnvironment Score (GES)

0

1

2

3

4

5

6

7

8

Kore

a

Chin

a

Mexi

co

Viet

nam

Iran

Russ

ia

Braz

il

Turk

eyIn

dia

Egyp

t

Phili

ppin

es

Indo

nesi

a

Bang

lades

h

Pakis

tan

Nige

ria

IndexOverall Index

Mean (Developing Countries)


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Ranking the N-11 Today and in 2025

US$ bn Rank US$ bn Rank US$ Rank US$ Rank 2001-06 2007-2025 Index Rank

Korea 887 1 1,861 2 18,161 1 36,813 1 4.5 3.4 6.9 1

Mexico 851 2 2,303 1 7,918 2 17,685 2 2.3 4.3 4.6 2

Turkey 390 3 965 4 5,545 3 11,743 3 4.6 4.1 4.0 5

Indonesia 350 4 1,033 3 1,508 5 3,711 6 4.8 4.7 3.4 8

Iran 245 5 716 5 3,768 4 9,328 4 5.7 4.2 4.4 4Pakistan 129 6 359 9 778 9 1,568 10 5.3 5.0 3.1 10

Nigeria 121 7 445 7 919 8 2,161 9 5.6 5.8 2.7 11

Philippines 117 8 400 8 1,312 6 3,372 7 5.0 5.1 3.6 7

Egypt 101 9 318 10 1,281 7 3,080 8 4.2 5.0 3.7 6

Bangladesh 63 10 210 11 427 11 1,027 11 5.7 5.1 3.2 9

Vietnam 55 11 458 6 655 10 4,583 5 7.6 7.2 4.5 3

Average Growth GES2006 GDP 2025 GDP 2006 Income per capita 2025 Income per capita


18/2518

10

20

30

40

50

60

70

80

90

02 03 04 05 06 07 08

$/bbl

Forwards

GSForecast

Source: GS Commodities Research

Oil Price Forecasts


19/25


20/25

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

98 99 00 01 02 03 04 05 06 07 08

BBoP

Current Account

*Forecast for 2007

% of GDP4-quarter Mov. Avg.

US: Broad BoP

*

*

T d i US B l f P t


21/25

Trends in US Balance of Payments(% of GDP)

Last 3 Years 5 Years 10 Years Better/Worse

Current Account -6.0 -5.4 -4.2 Worse

Net FDI -0.2 -0.4 0.1 Mixed/Worse

Narrow Basic Balance -6.2 -5.8 -4.1 Worse

Net Equity -0.2 -0.2 -0.1 Worse

Net US Treasuries 0.8 0.9 0.6 Mixed/Better

US Overseas Bonds -0.6 -0.3 -0.3 Worse

Foreign US Corporates 2.4 2.1 1.8 Better

Foreign US Agencies 0.6 0.5 0.4 Better

Net Portfolio 3.0 3.0 2.4 Mixed/Better

Broad Basic Balance -3.2 2.8 -1.6 Worse


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BRICs BBoP vs Current Account

-1

0

1

2

3

4

5

6

78

97 98 99 00 01 02 03 04 05

% GDP

Current Account

BBoP


23/25

China BBoP

0

2

4

6

8

10

12

95 96 97 98 99 00 01 02 03 04 05

% GDP

Current Account

BBoP


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World Top 10 FX Reserves

0

200

400

600

800

1,000

1,200

China

Japan

Russia

Korea India

Sing

apore

Hong

KongBrazil

Mal

aysiaM

exico

US$ bn

* As of February; for China as of January. Source: IMF


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Copyright 2007 by Goldman, Sachs & Co.

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aim 2007 jimoneill

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