Global banking outlook: 2013-14

Banking and the global economy

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As policy-makers struggled, central bankers took the first decisive steps to restore confidence to the markets and broader economy. They have also bought time for politicians to agree on long-term measures to resolve structural issues.

When we released our first global banking outlook in March 2012, there was little doubt that the environment would be a difficult one for banks. Fast forward to the beginning of 2013 – the prospects are better but not great.

In this edition of the outlook, we assess the state of banking in the global economy – and outline these 10 issues, challenges and opportunities for banks to consider during the next two years.

Watch Steven Lewis, Global Banking & Capital Markets Lead Analyst, discuss the global banking outlook for 2013-14.

Headed in the right direction

Global growth is predicted to recover across most major developed and rapid-growth economies in 2013-14 (see table below).

In Europe, the banking situation has improved in part due to the long-term refinancing operations of the European Central Bank (ECB), which helped ensure there was plenty of liquidity in the system. And the proposed banking union, when fully implemented, will give the ECB supervisory power to intervene directly in any of the Eurozone’s more than 6,000 banks.

However, until remaining uncertainties are addressed and peripheral economies improve, we are likely to see continued challenges for banks and borrowers as growth in Europe remains muted.

In the US, the picture is more upbeat but still mixed. Growth in 2012 was positive but below long-term trends, and the housing recovery remains slow and patchy. And although businesses and consumers are starting to borrow again, credit growth remains stop-and-go.

China seems to have engineered a soft landing without resorting to the level of stimulus used in 2008 and 2009. And in an interesting long-term development, banks now have more freedom to deviate from the People’s Bank of China benchmark interest rates for deposits and loans.

In rapid-growth economies other than China, 2013-14 will see further significant investment in infrastructure and the development of higher-end industries to reduce dependence on raw materials and commodities exports. Improved corporate governance and a reduction in the size of the unofficial economy will allow firms to access capital markets for funding and rely less on bank loans.

Real GDP growth for the G20 group of countries 2011–14

Country 2011 Forecast for 2012 Forecast for 2013 Forecast for 2014
At Nov 2012 At Jan 2012 At Nov 2012 At Jan 2012 At Nov 2012
 
Argentina 8.9 1.4 3.8 3 4.3 4.7
Australia 2.1 3.3 3.9 1.9 3.3 3.6
Brazil 2.7 1.4 5 4.5 4.5 5
Canada 2.6 2.3 2.6 3 2.7 4.1
China 9.3 7.5 9.1 8.1 8.8 9
France 1.7 0.1 1.5 0.1 2 1.1
Germany 3.1 1 1.7 0.8 2.1 1.7
India 7.5 5.6 8.7 6.4 9.2 7.7
Indonesia 6.5 5.9 6.7 6.3 6 6
Italy 0.6 -2.4 0 -1.2 0.8 0.6
Japan -0.7 1.9 3.2 1.2 2.2 2.7
Korea 3.6 2.2 5 3.3 5.1 5
Mexico 3.9 3.7 5 3.7 5 4.9
Russia 4.3 3.4 3.8 3.4 4.3 4.2
South Africa 3.1 2.3 4.9 2.9 4.7 4.7
Turkey 8.5 2.7 5 4.2 5.9 5.5
UK 0.9 -0.1 1.9 1.2 2.8 2.3
US 1.8 2.2 2.7 2.5 3.1 3.1
European Union 1.5 -0.2 1.6 0.3 2.4 1.5
Eurozone 1.5 -0.5 1.2 -0.1 1.8 1.1
World 2.9 2.3 3.5 2.6 3.8 3.6

Source: Oxford Economics

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