THE WORLD ECONOMYFEBRUARY 2014

These slides reflect the opinions of the author and not the official position of the ONS

Cyp

rus

Gre

ece

Bulg

ari

a

Slo

vaki

a

Port

ugal

Lith

uania

Sw

eden

Sw

itze

rland

Cze

ch R

epublic

Irela

nd

Spain

Cro

atia

Latv

ia

Italy

Pola

nd

Denm

ark

France

Hungary

Neth

erl

ands

Malta

Slo

venia

Belg

ium

Germ

any

Rom

ania

Aust

ria

Icela

nd

Luxe

mbourg

Est

onia

Finla

nd

United K

ingdom

Norw

ay

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

Annual Change in CPI for January 2014

UK

% change

Source: Eurostat

Price Level Changes in Europe

$19 billion

Facebook bought what’s app for:

Facebook went shopping . . .

$19 billion

Facebook bought what’s app for:

Facebook went shopping . . .

GDP of $18.9 billion

What could they have bought instead?

Mozambique

0

2

4

6

8

10

12

14Interest rate (%)

Turkey

Brazil

India

SouthAfrica

USA

Hot money refers to when funds are moved to one country to another in order to earn a short-term profit on interest differences and exchange rate shifts. They potentially lead to instability in a country because the transfers can happen very quickly – hence the term ‘hot’.

With the Fed’s interest rates set at a low 0.25% investors turned to riskier emerging economies for greater returns.

Now the US economy appears to be stabilising, investors are pulling their money out of the riskier assets and back to America.

To remain attractive to investors, central banks in emerging economies have increased their bank rates. You can see Turkey, India, Brazil and South Africa all saw rate rises in January, and Brazil increased theirs further in February, while the rest held steady.

Source: OECD

‘Hot’ Money

0

100

200

300

400

500

600

700

800

900

Annual GDP, Index 2000=100 Forecasts

ChinaRussia

Nigeria

Indonesia

IndiaBrazilTurkeySouthAfricaMexico

The MINTs – Mexico, Indonesia, Nigeria and Turkey have been identified as the new emerging economies to watch in the next few years. They all have young, largely literate, growing populations and low government debt levels, although they also have problems with poverty, lack of infrastructure and corruption.

Although Russia and China out of the BRICS countries are still seeing high forecasted growth, the remaining countries have seen growth tail off in the last couple of years. Nigeria in particular out of the MINT economies has high growth forecasted for 2013 and 2014.

Source: OECD

MINTs and BRICS

Current price productivity estimates are indexed to UK=100 and show each country’s productivity relative to that of the UK in that particular year

Productivity: UK vs. The World

2008Q1

2008Q2

2008Q3

2008Q4

2009Q1

2009Q2

2009Q3

2009Q4

2010Q1

2010Q2

2010Q3

2010Q4

2011Q1

2011Q2

2011Q3

2011Q4

2012Q1

2012Q2

2012Q3

2012Q4

2013Q1

2013Q2

2013Q3

2013Q4

90

92

94

96

98

100

102

104

GDP Growth, Index2008 Q1 = 100

Germany

Italy

UK

EU28

Eurozone

Spain

France

Source: Eurostat

Quarterly GDP Growth in Europe

6.7% 1.8%59.1

%8.1%

1. Eurozone + Norway &Switzerland (59.1%)2. China (8.1%)3. USA (6.7%)4. Japan (1.8%) Source: ONS

UK Imports in December 2013

13.5% 2.0

%

53.4%

4.1%

1. Eurozone + Norway &Switzerland (53.4%)2. USA (13.5%)3. China (4.1%)4. United Arab Emirates (2.0%) Source: ONS

UK Exports in December 2013

2007 Q1

2007 Q2

2007 Q3

2007 Q4

2008 Q1

2008 Q2

2008 Q3

2008 Q4

2009 Q1

2009 Q2

2009 Q3

2009 Q4

2010 Q1

2010 Q2

2010 Q3

2010 Q4

2011 Q1

2011 Q2

2011 Q3

2011 Q4

2012 Q1

2012 Q2

2012 Q3

2012 Q4

2013 Q1

2013 Q2

2013 Q3

2013 Q4

0

200

400

600

800

1000

1200

1400

1600

1800

£ millions

Value of UK Exportsto UAE

Value of UK Importsfrom UAE

The UAE is an interesting

trading partner because it is

resource rich and has a high GDP

per capita, but it also suffers from inequality and in some ways can still be classified as a developing

economy.

This is reflected by the key sectors for exports from

the UK which focus on

infrastructure projects such as

construction, financial and professional services, and education.

Source: ONS

UK Trade with the United Arab Emirates (UAE)

Trade Case Study