20131230-NATIXIS-Major_risks_for_2014_20页_345kb

FLASH ECONOMICS - Major Risks for 2014 Summary

Core Content

This document outlines five major economic risks that were identified for the year 2014 by Patrick Artus, an economist at Natixis. These risks are based on current economic indicators and projections, and the report emphasizes that while these risks are not guaranteed to occur, they are significant and warrant attention.

Main Risks Identified

1. Growth far below expectations in France and Italy
2. Resurgence of the sovereign debt crisis in the euro zone
3. Contagion of the euro zone crisis to emerging countries
4. Another downturn in the Japanese economy
5. Steepening of yield curves due to U.S. monetary policy tightening

Detailed Analysis of Each Risk

Risk 1: Growth in France and Italy

• Growth Forecasts:

  • IMF: 1.0% for France, 0.7% for Italy
  • OECD: 1.0% for France, 0.6% for Italy
  • Consensus Forecast: 0.8% for France, 0.5% for Italy
  • European Commission: 0.9% for France, 0.7% for Italy
  • Government: 0.9% for France, 1.1% for Italy

• Key Indicators:

  • Negative leading indicators (Chart 1A)
  • No prospect of investment pickup (Chart 1B)
  • Weak competitiveness and export performance (Chart 2)
  • Squeezed manufacturing margins (Charts 3A and B)
  • Increasing tax burden (Chart 4)

• Conclusion: The potential for growth to fall short of expectations is high due to structural issues and weak economic indicators.

Risk 2: Resurgence of the Sovereign Debt Crisis in the Euro Zone

• Factors Contributing to Risk:

  • Diverging public debt ratio dynamics among countries
  • Sharp increase in public debt ratios (Chart 7)
  • High real interest rates relative to growth (Charts 6A, B, C, D)
  • Risk of rising interest rates (Chart 8)

• Impact: A potential resurgence of the sovereign debt crisis could threaten financial stability in the euro zone.

Risk 3: Contagion of the Crisis to Emerging Countries

• Weakening Factors:

  • Slowdown in growth (Charts 9A and B)
  • Decline in industrial activity (Charts 10A and B)
  • Large external deficits (Charts 11A and B)
  • Rapid domestic demand growth fueled by credit (Charts 12A and B)

• Consequences:

  • Depreciation and high volatility in exchange rates (Charts 13A and B)
  • Vulnerability to contagion from the euro zone (Charts 14A, B and C)

Risk 4: Another Downturn in the Japanese Economy

• Current Recovery Drivers:

  • Quantitative easing policy (Chart 15A)
  • Depreciation of the yen (Chart 15D)
  • Negative real long-term interest rates (Chart 15E)
  • Wealth effects and increased consumption (Chart 15B)

• Threats to Recovery:

  • 3% VAT hike on 1 April 2014 not targeting savings (Chart 16A)
  • Lack of wage growth despite corporate profits (Chart 16B and C)

• Conclusion: The Japanese economy faces a risk of another downturn if these challenges are not mitigated.

Risk 5: Steepening of Yield Curves in the U.S.

• Federal Reserve Actions:

  • Tapering of asset purchases starting in January 2014 (Chart 17A)
  • Forward guidance to prevent long-term interest rate increases (Chart 17C)

• Potential Impact:

  • A significant rise in long-term interest rates could negatively affect the U.S. housing market (Chart 18)
  • Impact on weak economies, especially the euro zone

Key Information

• The five risks are based on economic forecasts and indicators, not guaranteed to materialize.
• The report highlights the interconnectedness of global economies and the potential for risks in one region to affect others.
• The document serves as an informational report and is not a personalized investment recommendation.
• It is issued by Natixis, which is a regulated financial institution in several jurisdictions.
• The information provided is based on public data and should not be considered as an offer or solicitation for investment.

Disclaimer

• The document is prepared by Natixis economists and is not an independent investment research report.
• It is confidential and intended solely for the use of the addressee(s).
• No liability is accepted for any financial loss or decisions based on the information contained in this document.
• The views and forecasts expressed are those of the author and do not reflect the views of Natixis or any other entity.
• The document is not subject to any legal requirement promoting independence in investment research.