Allianz Se · XETR:ALV
Allianz — Investor Presentation (November 2017)
30 slides from Allianz's investor presentation, Nov 16, 2017
Slide 1: Turkey: Full of surprises?
Turkey: Full of surprises? Ludovic Subran, Chief Economist Manfred Stamer, Sr. Economist Istanbul - November 16, 2017
Slide 2: Agenda
Agenda 1 Let’s grow 2 Turkey: Full of surprises? 2
Slide 3: Turkey to benefit from accelerating world growth…
Turkey to benefit from accelerating world growth… World growth is accelerating in a more Upward revisions outweigh downward synchronized manner. revisions on growth. World GDP growth, q/q annualized Global GDP growth forecasts (%) Fragile four are Brazil, Russia, Turkey and South Africa 2015 2016 20
Slide 4: … and country risk worldwide…
… and country risk worldwide… Current account deficits decreased in deficit As a result of rebalancing or higher surpluses, economies, and surpluses even increased in country risk reversed its trend in 2017: now, it’s Asian surplus economies (except China). clearly improving. Emerging Economies: Cur
Slide 5: Global trade is back and protectionism contained
Global trade is back and protectionism contained Dollar depreciation is driving values a bit further up. Volume growth is only back to 2013-14 US protectionist measures against China have figures. increased notably in 2017. Global exports of goods and services Number of protectionist measures taken
Slide 6: Each recovery comes with its risks: Look for the invisible bank, suppliers' credit
Each recovery comes with its risks: Look for the invisible bank, suppliers’ credit Mind corporate balance sheets: insolvency Major failures increased in Retail (+15 cases in forecasts are tilted to the upside in the US in H1, +11 in the US), and Construction (+11 2018. cases, +9 in Western Europe).
Slide 7: Business cycles: not in sync but room to grow for all
Business cycles: not in sync but room to grow for all US: Close to peak growth as Eurozone: Cyclical uptick China: Stuck in the middle of its new orders and job creation reaches all-time highs cycle continue to grow Business cycles clocks: Manufacturing PMI: sub-indices (12m rolling average) Eurozon
Slide 8: Monetary policy normalization is on the horizon but should not create havoc
Monetary policy normalization is on the horizon but should not create havoc Inflation pressures should intensify: Output gaps This should go along with monetary policy in main economies are persistent, but should normalization. Along with interest rate hikes, close by 2019. global liquidity will be
Slide 9: Strong upside surprises from the Eurozone, while Emerging Markets acceleration was expected
Strong upside surprises from the Eurozone, while Emerging Markets acceleration was expected There are good reasons to get bullish on the Emerging economies formerly in recession are Eurozone: Sentiment indicators are above long- back to (low) growth; yet Emerging Markets are term average. not accele
Slide 10: China: Financial tightening is starting to bear fruit
China: Financial tightening is starting to bear fruit Financial imbalances start to reduce with more The downside is that credit intensive activity sustainable credit growth and lower risky credit expenditures are slowing. flows. Shadow banking and domestic credit Industrial Production and Investmen
Slide 11: This time around political risks are mainly in or from the US (and the UK) for a change
This time around political risks are mainly in or from the US (and the UK) for a change In the US: Critical deadlines for fiscal issues to Rising threat of a military conflict in the Korean return in December. peninsula is a source of uncertainty. US federal fiscal policy timeline Japan and Korea st
Slide 12: Agenda
Agenda 1 Let’s grow 2 Turkey: Full of surprises? 12
Slide 13: GDP growth in Turkey surprised in H1; now forecast to pick up to +5.2% in 2017
GDP growth in Turkey surprised in H1 (+5.1% y/y); now forecast to pick up to +5.2% in full-year 2017 Strong public spending and public investment, as well as rebounding exports spur the economy. Slowdown in 2018 expected, in part due to base effects (waning impact of one-off fiscal stimulus measures
Slide 14: The question is who is financing the lifeline of Turkish growth?
The question is who is financing the lifeline of Turkish growth? The sharp downtrend of the government fiscal balance since the start of 2016 underscores that fiscal stimulus (public spending and public investment) has largely financed the lifeline of Turkish GDP growth over the past 18 months Secto
Slide 15: Unorthodox monetary policy tightening to counter inflationary and currency pressures…
Unorthodox monetary policy tightening to counter inflationary and currency pressures… While keeping the official policy (1-week repo) rate unchanged at 8%, the Central Bank has funded the market mostly through its late liquidity window lending rate of 12.25% this year, putting upward pressure on loa
Slide 16: …and expansionary fiscal policy
…and expansionary fiscal policy Despite higher market interest rates, credit growth to NFC has accelerated over the last year, helped by the revivification of the Credit Guarantee Fund in late 2016. The treasury is the main supporter of the now permanent mechanism to increase access to loans and exp
Slide 17: Is it sustainable? Public finances are still solid, but new debt gets more expensive
Is it sustainable? Public finances are still solid, but new debt gets more expensive Stimulus expected to push fiscal deficit to Turkey is not benefiting form the strong risk -3.2% of GDP in 2017, though public debt is appetite from global investors in emerging hovering around just 30% of GDP (good)
Slide 18: Advance indicators point to continued robust outlook in the near term
Advance indicators point to continued robust outlook in the near term but no further acceleration Industrial production continues to surge but Retail sales growth has peaked, for now, Manufacturing PMI has passed its peak while consumer confidence remains below the long-term average Industrial produ
Slide 19: Unemployment remains a problem, despite improving capacity utilization
Unemployment remains a problem, despite improving capacity utilization Despite the increase in the labor force, the unemployment rate remains high at above 10%. Strong GDP growth in 2017 (and before) has not created enough employment opportunities Unemployment and labor force participation (%) Capac
Slide 20: Banking sector still in fairly good shape overall
Banking sector still in fairly good shape overall Capital adequacy and profitability are good and NPLs remain low, while the loan-to-deposit ratio has increased to a new high in 2017 Banking sector soundness indicators Loan-deposit ratio 24% 130 Tier-1 Capital Adequacy Ratio 22% Return on Equity NPL
Slide 21: Full-blown currency crisis averted, for now
Full-blown currency crisis averted, for now Sharp TRY depreciation since 2015 (-40% loss of value against the USD to date) has adversely affected corporates indebted in FX. We expect continued volatility and a -10% depreciation in 2018, due to growth slowdown, large current account deficit and ongoi
Slide 22: Current account deficit, and its financing, remain Turkey's Achilles' heel
Current account deficit, and its financing, remain Turkey’s Achilles’ heel High current account deficits largely financed Strong rebound in external trade activity in through new short-term external debt has 2017. Weaker TRY benefits exports but, along been a looming risk for a long time with rising
Slide 23: Tourism is recovering but FDI inflows remain weak
Tourism is recovering but FDI inflows remain weak Sharp drop in tourist arrivals has bottomed out, FDI inflows, never really strong in relation to mainly thanks to Russians coming back, but GDP (1.6% in 2010-2016) remain below the return to the record high will take a long time levels in 2011-2014 F
Slide 24: Short-term external debt rises again in 2017, after some deleveraging in 2015-2016
Short-term external debt rises again in 2017, after some deleveraging in 2015-2016 Capital outflows led to a reduction of ST …FX reserves dropped by USD30bn from external debt of banks by USD30bn in 2015 end-2014 to April 2017, now covering only and 7bn in 2016. As a result… 50% of short-term debt (
Slide 25: Steadily deteriorated payment behavior since 2007 – DSO now among the longest worldwide
Steadily deteriorated payment behavior since 2007 – DSO now among the longest worldwide In 2016 companies paid on average 15 Construction, high-tech, paper, pharma days later than in 2007 and 16 days later and machinery wait ≥3 months to be paid than the global average (64 days in 2016) Average Days
Slide 26: Insolvencies forecast to decline in 2018, but the devil is in the detail
Insolvencies forecast to decline in 2018, but the devil is in the detail (sector risk) Insolvencies to rise by +4% in 2017, as 8 sector downgrades in the last 8 quarters, TRY depreciation take its toll on firms with and only 1 upgrade FX-denominated debt. U-turn in 2018 Corporate insolvencies in Tur
Slide 27: Export recovery to continue in 2018: +USD16bn
Export recovery to continue in 2018: +USD16bn (the same as in 2017) Turkey’s exports benefit from recoveries in MENA and Europe, though the UK will be the main drag. MENA has caught up with Europe as a key region with regard to export gains Potential 2018 export gains for 18 key trading Potential 20
Slide 28: Exporting companies face overall moderate country and insolvency risk
Exporting companies face overall moderate country and insolvency risk – yet several hot spots Low to moderate country risk in most key Our Export Insolvency Index (IDEX) for export destinations. But beware of higher risk Turkey is expected to slow down to -1% but in MENA region remains favorable – c
Slide 29: Total FDI outflows have weakened since 2015 but those to the U.S. have increased
Total FDI outflows have weakened since 2015 but those to the U.S. have increased Netherlands and Azerbaijan are top partners Turkish companies invested less in Europe for FDI in both directions. and MENA & Caucasus in recent years. China is a minor FDI partner so far – One SSA and also Asia not targ
Slide 30: Thank you for your attention!
Thank you for your attention! Economic Research Department Euler Hermes Group 1 place des Saisons 92048 Paris La Défense Cedex France Phone +33 01 84 11 50 50 research@eulerhermes.com http://www.eulerhermes.com/economic-research This material is published by Euler Hermes SA, a Company of Allianz, fo