Annual Report - EDP

: strategic framework :2.1. framework2.1.1. macroeconomicframeworkDelay in the resolutionof structural problemsbreaks down the upturnof the world economyThe world economy slowed down again in2012, reflecting the persistence of importantmacroeconomic distortions and the inability of thegreat economic powers to answer, in a decisiveway, to the adverse effects of these constraintsin the global economic activity.After four years since the beginning of the actualcycle of great financial instability, the worldeconomy upturn is still up to come and belowhistorical standards. Largely, the lack of progressfollows the delay in the resolution of structuralimbalances which precipitated the economic andfinancial crisis along with the prevalence of highlevels of debt in the more developed countries andof the maladjustments in the balance of paymentsof major economies, such as the U.S.A. and China.area and the announcement of the creation ofa banking union. Jointly, these decisions aimedat stabilizing the sovereign debt markets ofperipheral countries, as well as inverting theeuro depreciation trend and the decline of theEuropean stock Indexes, allowing for theseindexes to strongly benefit from the performanceof the banking industry stocks. These measures,together with the favourable impact from themonetary policy expansion decisions presentedby the U.S.A Federal Reserve with the intentionto stimulate the upturn of the North Americaneconomy, eventually led to a favourableperformance of the majority of assets classesin the last months of the year.STOCK INDEXES AND EURIBOR 6M(EURO AREA)150100500Jan/09Jan/10Jan/11EURIBOR 6 MONTHSEURO STOXX 50 (DEC 2008=100)Jan/12Jan/1343210Source: BloombergECONOMIC ACTIVITY (REAL GDP)5.95.55.36.2FOREX MARKET1.63.81.33.32011 2012 (e) 2013 (p) 2014 (p)1.43.52.24.12,01,51,00,5043210DEVELOPED ECONOMIESWORLDDec/08Dec/09Dec/10Dec/11Dec/12DEVELOPING ECONOMIESSource: IMF WEO Oct. 12EUR/BRLEUR/USDSource: BloombergEURO AREA PERFORMANCE(REAL GDP AND UNEMPLOYMENT)1.411.511.2 11.21.010.21,3-0.4-0.22011 2012 (e) 2013 (p) 2014 (p)GDPUNEMPLOYMENT RATESource: IMF WEO Oct. 12Strong market volatilityoriginates new stimulusplansIn 2012 the performance of the global financialmarkets was marked by high levels of volatility,as a consequence of a weak dynamism in theglobal economic activity along with the uncertaintycaused by the sovereign debt crisis in the euroarea and the evolution of the U.S.A. budget policy.Backed up by a strong rise in the sovereigndebt bonds risk premium rates from peripheralcountries and by an intense demand for refugeassets - namely sovereign debt bonds from theU.S.A. and Germany -, the risk aversion spiral thatpredominated in the markets during the first half ofthe year impelled the economic policy authoritiesto announce a set of measures which aimed atrestoring confidence in financial markets.Regarding the European authorities, we highlightthe extension of the action field of the EuropeanCentral Bank (ECB), presenting in Septembera plan to buy sovereign debt (Outright MonetaryTransactions), together with the flexibilizationof the financial stability mechanisms in the euroSovereign debt crisis leadsthe euro area to recessionThe recovery trajectory that the euro areadelineated between 2010 and 2011 wasinterrupted in 2012 as a result of the aggravationof the sovereign debt crisis that expanded toItaly and Spain, respectively the third and thefourth biggest economies of the euro area. Inthis context, the negative impact of the financialinstability and of the consolidation measures onpublic spending were extended to the majority ofthe member-states, which along with the externaldemand weak dynamism led to the contraction ofthe Euro area GDP.SOVEREIGN RISK(CDS-5YR IN BP/YEAR)1.2001.0008006004002000Jan/11Mar/11May/11Jul/11Sep/11Nov/11Jan/12GERMANYGR+PT+IT+ES+IR (GEOMETRICA MEAN)Mar/12May/12Jul/12Sep/12Nov/12Jan/13150100500Source: Bloomberg24A World Full Of Energy