Outlook 1999
international forecast
6 What'sNewS Issue 1January 1999
Last year was one of unaccustomed turbulence in financial markets, of
potentially far-reaching shifts on the political and public policy front, and of
great challenges in the technological area as well. Looking ahead, these same
factors are likely to decisively influence further global economie development:
sagging markets, political instability in several important developing nations
and the millennium bug all rank among the key challenges to come.
Global predictions
In-depth analysis
Adapting strategies
Streamlining operations
Regional commitment
In December, management unveiled its
vision for growth in the coming year,
focusing on the Netherlands, as is
customary, hut also unveiling a new and
more broadly-focused study addressing
the prospects for international financial
markets as a whole. lts conclusions -
broadly in line with those of the IMF
and the OECD - are that 1999
will most probably bring a
continued slowing of world
economie activity.
Holland will likely see a marked
slowdown in the rate of GDP
growth to some 2.5 percent in
1999 versus 3.8 percent in 1998,
although it seems safe from
falling into outright recession. In
the United States, an engine of
the world economy, the rate of
growth is likely to almost halve
from some 3.5 percent in 1998
to 1.8 percent this year. The
contraction in Japan is expected to
persist, albeit less severely, with a decline
of half a percentage point versus a
negative 2.5 percent in 1998. Euroland
as a whole, experiencing its inaugural
year of economie and monetary union,
will see its growth slow to 2.1 percent
from the 2.5 percent expansion rate
achieved last year.
'Forecast 1999,' the report containing
these conclusions, was prepared by
professionals in our global research team
working in conjunction with the
Rabobank group's economie research
department. It also includes an in-depth
analysis of fixed income, credit, foreign
exchange and equities markets world-
wide. 'The 1997-98 crisis currently
engulfing the world is going to be
prolonged and quite intractable because
each of its dimensions (economie,
financial and institutional) reflects a
fundamental imbalance that does not lend
itself to quick and easy fixes,' it states.
The key issue on the economie front is the
continuing problem of over-capacity in
areas ranging from basic commodities to
petrochemicals, pulp and paper, steel,
shipbuilding, automobiles, electronics
Chairman Wijffels unveiling our'forecast 1999'
and, significantly, financial services. The
financial sphere has been weakened by
asset deflation, while the financial and
economie collapse in emerging markets,
coupled with their institutional instability,
has made recovery a painful, diffieult and
protracted prospect.
The implications for Rabobank
International (RI) are numerous. As Rik
van Slingelandt recently pointed out,
proposed budget increases of as much as
one-third have been submitted by global
product and general managers around
the R1 network. But 'in a period when
markets are strained, and when we have
already more than doubled our cost base
in the past two years, we are not going
to expend 30 percent more next year.
Country limits are going to go down
because we're losing too much; solvency
will have to go down because we are
not earning enough; and infrastructure
will have to adapt to new realities such
as Euroland.'
In short, this 'will be very much a year of
consolidation.' What's more, it will take
some considerable amount of time and
effort to return to previous levels of
growth and stability. The regionalization
of our customer base and our activities
into Europe, the Americas, Asia and
Australia/New Zealand will gather pace.
To the extent that Euroland comes to
resemble a United States of Europe, we f
are likely to see a streamlining of our
operations along the lines of what we
already have in North America. And
already, the contraction of
the Asia Pacific region has
led to a profound slowing of
revenues in that part of the
world: this, too, calls for
further cost cutbacks.
Our presence in Greater
China/Northeast Asia has
rapidly grown over the past
three to four years. We now
have offices in Beijing and
Taipei and a full subsidiary
in Shanghai in addition to
our branch in Hong Kong. m
The capacity and respon-
sibilities of the Hong Kong office, which
previously covered the whole of Greater
China prior to the establishment of the
aforementioned new offices, needed to be
changed. In its adjusted role, Hong Kong
is the primary location for serving
customers in the specific geographic area
of Hong Kong, Southern China and
Macau. It will also serve as the
Northeast Asian regional centre of
support for specialized products and
services. Upon completion of the capacity
adjustment and the changes in
responsibilities in Hong Kong, as
described above, we will have over 200
people stationed in Greater China and
Northeast Asia (plus an additional 50
staff in private banking). The substantial
number is a clear indication of our
continuing commitment to the region
and shows how the organization evolves
in response to changing economie
conditions and market requirements.
