Transcript The External Environment for Developing Countries June 2010 The World Bank Development Economics Prospects Group.

The External Environment for Developing
Countries
June 2010
The World Bank
Development Economics
Prospects Group
Overview
CDS spreads have risen by 60 bp or more in 7
European countries
700
600
500
400
300
200
100
0
Increase in CDS spreads
since April 1, basis points
Source: Bloomberg, World Bank.
CDS spreads as of June 23
1000
750
500
250
0
Spreads have risen, but remain close to
earlier levels
600
EMBI spreads, index January 1, 2010=100
500
Brazil
Russia
Turkey
South Africa
400
300
200
100
0
Jan-08
Aug-08
Source: World Bank, JP Morgan.
Mar-09
Oct-09
May-10
Euro Area Crisis
CDS spreads for selected EMs
1000
900
800
700
600
500
400
300
200
100
0
Oct-09
Spreads on credit default swaps
Greece
Portugal
Ireland
Spain
Italy
Average of Brazil, Russia, China, Turkey, and Indonesia
Nov-09
Dec-09
Jan-10
Feb-10 Mar-10
Source: JP Morgan and World Bank data
Apr-10
May-10
Jun-10
Spreads on highly-indebted European
bonds increasing again
1000
10-year government bond spread over comparable German debt (basis points)
900
Greece
800
Ireland
700
Portugal
600
Spain
500
400
300
200
100
0
Jan-10
Feb-10
Mar-10
Apr-10
Sources: Bloomberg and DECPG staff calculation
May-10
Jun-10
Substantial uncertainty characterizes
equity market developments
110
Dow Jones, DAX and CACI [Left], VIX and VSTOXX indices [Right]
VSTOXX (Eur) [R]
VIX (USA) [R]
DJIA
DAX
CACI
105
40
100
95
30
90
20
85
80
1/1/2010
50
2/1/2010
3/1/2010
Source: Thomson/Datastream.
4/1/2010
5/1/2010
6/1/2010
10
OECD developments
Consumer confidence and retail turnover
fall in affected countries**
5
retail sales, ch% (3mma , y/y) [left]; consumer sentiment index, dispersion [right]
GDP weighted RS [left]
-20
GDP-weighted CCI [Right]
0
-30
-5
-40
-10
-15
Jan-08
Jun-08
Nov-08
Apr-09
Sep-09
Source: National Agencies. ** Greece, Portugal and Spain.
Feb-10
-50
Although exports are recovering, EU growth
remains weak
Real GDP and exports, q-o-q, saar % chg
15
10
5
0
-5
-10
-15
-20
-25
-30
2005Q1
Real GDP growth
Real Export growth
2006Q1
2007Q1
2008Q1
2009Q1
2010Q1
German export orders, export volumes
and production reviving in spring 2010
factory orders from abroad, export volumes, industrial production, ch% saar
50
25
0
-25
German export orders
industrial production
exports
-50
-75
Jan-08
Jun-08
Source: Eurostat
Nov-08
Apr-09
Sep-09
Feb-10
U.S. indicators point to favorable
growth outturns for the second quarter
40
30
20
10
0
-10
-20
-30
-40
-50
capital goods orders, retail sales and export volumes, ch% (3m/3m, saar)
Capital goods orders
Retail sales x autos
export volumes
Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10
Source: U.S. Department of Commerce
Japanese industrial production
catching up
Industrial production volume, index August 2008 = 100
110
105
100
95
90
85
Japan USA
80
75
70
65
Jan-05 Oct-05 Jul-06 Apr-07 Jan-08 Oct-08 Jul-09 Apr-10
Source: U.S. Department of Commerce
Developing country first quarter growth
strong, save for ECA region
12
real GDP growth first quarter 2010, ch% (year on year)
9
6
3
0
-3
-6
IDN PHL MYS CHN THA
VEN CHL MEX PRY PER BRA
Source: Haver Analytics and World Bank data.
LVA BGR ROM LTU POL RUS
Country Focus: Hungary
Fiscal and External Balances – 2010
percent of GDP
0
-2
-4
-6
-8
-10
Structural Fiscal Deficit
-12
Source: European Commission, BofA/ML
Current Account Balance
Composition of debt flows – Hungary
(billions of U.S. dollars)
60
Commercial Bank Loans
Officially guaranteed Loans
50
International Bond Issues
IMF Credit
40
30
20
10
0
2005-07
2008
Source: Economist Intelligence Unit
2009
2010
2011
External debt in Hungary
percent of GDP
160
140
120
100
80
60
40
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010F 2011F
Source: Moody’s
Industrial Production
Euro Area output remains robust in April on
demand for intermediate goods
20
percent, 3m/3m saar
10
0
-10
-20
-30
-40
Eurozone
Germany
-50
Jan-08
Jul-08
Jan-09
Source: DECPG
Jul-09
Jan-10
ZEW economic sentiment deteriorated for all markets
in June in the aftermath of the sovereign debt crisis
80 difference in share of positive versus negative responses
Germany
USA
Eurozone
Japan
UK
60
40
20
0
-20
-40
-60
-80
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Source: ZEW Survey.
Momentum in China is easing gradually, but
remains robust ,while growth in the U.S. stepped
up in May
40 percent, 3m/3m saar
30
China
US
20
10
0
-10
-20
-30
Jan-08
Jul-08
Jan-09
Source: DECPG
Jul-09
Jan-10
International Trade
Exports from some developing regions
have returned to pre-crisis levels
Level of exports (volume terms) Jan 2008 = 100
125
115
105
95
85
75
65
East Asia & Pacific
Europe & Central Asia
55
Latin America & Caribbean
45
Middle East & N. Africa
35
Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09
Chinese capital goods exports to
developing countries
60%
50%
40%
30%
Percent of total exports, and total in million US$
Total (in millions US$)
EAP
Europe
LAC
MENA
20%
10%
0%
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
180
160
140
120
100
80
60
40
20
0
Number of Trade Measures Implemented
Worldwide and by the G20
Worldwide
Total No. of Measures
that are Discriminatory
G20
Total No. of Measures
that may Discriminate
0
200
Source: Global Trade Alert
400
600
800
Commodity Prices
Crude oil prices rebound
90 $/bbl
WTI
85
80
Brent
75
70
65
Jan-10
Dubai
Feb-10 Mar-10 Apr-10 May-10 Jun-10
Source: Datastream and DECPG.
U.S. oil demand surges (y/y)
1000 kb/d
(3 month moving average)
500
0
-500
-1000
-1500
Other
Gasoline
Distillate
Resid
-2000
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10
Source: U.S. EIA and DECPG.
Non-OPEC oil production rising
55
mb/d
Non-OPEC
45
Non-OPEC x FSU
35
OPEC
25
Jan-00
Jan-02
Source: IEA and DECPG.
Jan-04
Jan-06
Jan-08
Jan-10
300
Raw materials and beverage prices
remain strong in June
(2000=100)
Food
250
Beverages
200
150
Raw Materials
100
Jan-05
Jan-06
Source: DECPG.
Jan-07
Jan-08
Jan-09
Jan-10
Metals prices stabilize
3,500
$/ton
‘000 tons
5,000
Aluminum price
3,000
4,000
2,500
3,000
2,000
2,000
LME stocks
1,500
1,000
1,000
Jan-05
0
Jan-06
Jan-07
Source: Datastream and DECPG.
Jan-08
Jan-09
Jan-10
Global steel production
60000
(000 tons)
Other
50000
40000
China
30000
20000
Other Asia Pacific
10000
0
Jan-00
Source: IISI.
Jan-02
Jan-04
Jan-06
Jan-08
Jan-10
International Finance
Capital flows were sluggish in May
Capital flow s to e m e rging m ark e ts
$ b illion
2008
2009
Q1 Total
Total
2010
Q1 Total
Q1 Mar Apr May
103
390
48
353
104
47
45
15
Bonds
12
65
18
115
48
21
26
3
Banks
71
257
22
129
30
13
8
6
Equity
20
68
8
109
26
12
11
6
19
90
21
137
31
17
15
3
5
20
10
62
19
10
9
0
36
157
6
72
26
10
14
2
2
35
4
33
17
8
11
1
38
98
18
122
38
15
11
10
3
7
5
16
9
0.3
3
2
11
45
3
22
10
5
4
1
Lat. America
Bonds
E. Europe
Bonds
Asia
Bonds
Others
Source: DECPG.
European banks have big exposure to
Europe’s troubled economies
Total claims by euro-zone banks at the end of 2009 ($ billion)
750
600
450
300
150
0
Spain
Ireland
Sources: The Bank for International Settlements
Portugal
Greece
EM assets rebounded from May sell-off
1050
MSCI EM index in USD [L]; EMBIG bond index [R]
495
EM bond index [R]
490
1000
485
950
480
475
900
850
Jan-10
EM equity index [L]
470
465
Feb-10 Mar-10
Apr-10
May-10
Sources: Bloomberg, JPMorgan, and DECPG staff calculation
Jun-10
Currencies and inflation
Dollar gains vs euro and yen continues
but China RMB led to short-rally in other units
USD per Euro (inverse) [Left] and Yen per USD [right]
Jan-10
1.190
Feb-10
Mar-10
Apr-10
May-10
94.50
1.230
1.270
Jun-10
USD/Euro (inverse)
93.00
1.310
91.50
1.350
1.390
1.430
90.00
yen/USD
88.50
Source: Thomson/Datastream.
China RMB rose on an effective basis recently
125
Currency indexes: USD per RMB; Dollar and RMB effective.
120
USD per RMB index
115
110
China effective
105
100
95
U.S. effective
90
85
80
2001M01
2002M07
2004M01
Source: World Bank data.
2005M07
2007M01
2008M07
2010M01
Inflation among developing countries (save SAR)
converging toward 5% pace
headline consumer price index, ch% (yr-on-yr)
20
Developing
EAP
ECA
LAC
MNA
SAR
15
10
5
0
-5
Jan-08
Jun-08
Source: National Agencies.
Nov-08
Apr-09
Sep-09
Feb-10
SSA
The External Environment for Developing
Countries
June 2010
The World Bank
Development Economics
Prospects Group