Transcript The External Environment for Developing Countries March 2009 The World Bank Development Economics Prospects Group.

The External Environment for
Developing Countries
March 2009
The World Bank
Development Economics
Prospects Group
Federal Reserve’s “quantitative easing”
spurs quick fall in long rates
U.S. ten-year T-note, 30-year fixed- and ARM mortgage rates, percent
3.3
6.5
Variable ARM rate [right]
3.0
6.0
2.8
Ten-year note [left]
5.5
2.5
30-year fixed mortgage [right]
5.0
2.3
2.0
Jan-09
4.5
Jan-09
Jan-09
Feb-09
Mar-09
Source: Thomson/Datastream.
Mar-09
... sustaining longest
equity rally since end-2008
Indexes: 100 on September 15, 2008 [Lehman Brothers]
105
100
95
90
85
MSCI-Emerging
Markets
DJIA USA
80
75
70
65
60
55
Sep-08
Topix Japan
CAC- France
Oct-08
Nov-08
Dec-08
Jan-09
Source: Thomson/Datastream.
Feb-09
Mar-09
Industrial countries
U.S. GDP revised to substantial 6.2%
decline in fourth quarter 2008
growth of real GDP, and contributions to growth in percentage points
6
4
Stocks
Government
Consumption
Investment
Net Exports
2.8
2
-0.5
0
-2
-3.8
-4
-6.2
-6
-8
Q2-2008
Q3-2008
Q4-2008 F
Q4-2008 R
Source: Department of Commerce and DECPG calculations.
Continued employment losses affecting
incomes and retail spending
15
retail sales growth (saar) [L]; change in employment (3mma) [R] 400
10
200
Retail sales [L]
5
0
0
-5
Change in
employment [R]
-10
-200
-15
-400
-20
-600
-25
-30
Jan-06
-800
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Source: U.S. Departments of Commerce and Labor.
Virtual collapse in manufacturing and
exports pressures growth further
durable goods orders, export volumes and mfgr output, ch% saar
10
40
Exports [right]
30
5
Production [left]
20
0
10
-5
0
-10
-10
-20
-15
-30
-20
-40
Orders [right]
-25
-50
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
Source: Federal Reserve, Department of Commerce.
Japan’s trade and production falling
from a veritable “cliff” through February
10
export volumes and manufacturing output, ch% saar
0
60
40
-10
20
IP [Left]
-20
0
-30
-20
-40
-40
Export volume [R]
-50
-60
-60
-80
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
Source: Bank of Japan and Japan Cabinet Office.
United States and Asia account for the
bulk of the decline in Japan’s exports
contributions to growth in percentage points
15
12
9
6
3
0
-3
-6
-9
-12
-15
USA
MENA
Q1-2008
EU
Other
Q2-2008
Asia
Total
Q3-2008
Q4-2008
Source: National Sources through Thomson/Datastream.
Japan’s liquidity inches higher
growth of M-0, M1 and ‘L’, ch%, y/y
7
‘L’ (Broad money)
6
5
4
M-1
3
2
1
M-0
0
-1
-2
01/31/2007
07/31/2007
01/31/2008
Source: Bank of Japan.
07/31/2008
01/30/2009
GDP in Euro Area falls sharply on
investment and exports
growth of real GDP, and contributions to growth in percentage points
4
2.8
2
-1.0
0
-1.0
-2
-4
Stocks
Consumption
Government
Investment
Net Exports
-6
-5.7
-8
Q1-2008
Q2-2008
Q3-2008
Q4-2008
Source: EUROSTAT and DECPG calculations.
Trade is sapping the German economy
of any forward momentum
export orders and factory output, ch% saar
30
20
10
0
-10
-20
-30
-40
-50
IP Manufacturing
-60
-70
Export orders
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Source: EUROSTAT through Thomson/Datastream.
Jan-09
European labor markets begin to
weaken, sentiment falls quickly
growth in the number of EA unemployed [left] EC consumer sentiment [right]
15
0
10
-5
-10
5
-15
0
growth in the number
of unemployed (y/y), % [left]
-20
-5
-25
-10
-30
Euro Area consumer sentiment [right]
-15
Jan-07
Jun-07
Nov-07
Apr-08
Sep-08
-35
Feb-09
Source: EUROSTAT and European Commission.
Industrial production
Manufacturing output collapses across
high-income OECD countries
manufactures output, ch% (3m/3m saar)
15
10
5
0
-5
Eurozone
-10
-15
Japan
-20
-25
Jan-07
USA
-56.5%
May-07
Sep-07
Jan-08
May-08
Sep-08
Source: Thomson/Datastream, DECPG.
Jan-09
10
Industrial output decline
intensifies in Europe
industrial production ch% (3m/3m saar)
0
Germany
-10
Italy
France
-20
-30
Spain
-40
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Source: Thomson/Datastream, DECPG.
Jan-09
Industrial output collapses in ECA as
trade partners fall deeper into recession
industrial production, ch% (3m/3m saar)
25.0
12.5
0.0
Europe and Central Asia
-12.5
-25.0
Turkey
Czech Republic
-37.5
-50.0
Jan-07
Hungary
May-07
Sep-07
Jan-08
May-08
Sep-08
Source: Thomson/Datastream, DECPG.
Jan-09
International trade
Growth of world trade in dollars
Q4-2008 / Q-4 2007 (%)
export values: ch% yr/yr
0
-2
-4
-6
-8
-10
-12
-14
-16
World
USA
Japan
Euro Area
Developing
countries
Source: National Agencies through Thomson/Datastream.
U.S. current balance improves
in fourth quarter on falloff in goods
imports (notably oil)
100
50
Income
Services
0
Non-oil
BOT
-50
-100
Oil balance
-150
Transfers
-200
-250
Q4-2007
Current account
Q1-2008
Q2-2008
Q3-2008
Q4-2008
Source: Department of Commerce.
World trade has averaged 10% growth
per annum over the last 2 decades
export values (USD), ch%
25
20
15
10
5
0
-5
1991
1993
1995
1997
1999
2001
2003
2005
Source: National Agencies through Haver Analytics.
2007
Oil prices
OECD oil stocks remain high
million bbl
$/bbl
140
2,800
OECD stocks [R]
120
2,700
100
80
2,600
60
2,500
Oil price
40
[L]
2,400
20
0
Jan-00
2,300
Jan-02
Jan-04
Jan-06
Jan-08
Source: IEA and DECPG Commodities Group.
OPEC oil production drops sharply
mb/d
32
Including Iraq
30
28
OPEC-11
26
24
22
Jan-00
Jan-02
Jan-04
Jan-06
Jan-08
Source: IEA and DECPG Commodities Group.
WTI Futures Prices - NYMEX
Monthly contract prices to Dec 2014* on
select dates in 2009
$/bbl
80
70
Mar 16
Jan 15
60
50
Feb 18
40
30
Jan-09
Jan-10
Jan-11
Jan-12
Source: NYMEX.
Jan-13
Jan-14
Non-oil commodity prices
Food prices slip in February on
weak demand
(2000=100)
350
Grains
300
Fats & Oils
250
Beverages
200
150
Other Food
100
Jan-06
Jan-07
Jan-08
Source: DECPG Commodities Group.
Jan-09
Copper prices rise on Chinese
restocking
$/ton
‘000 tons
9,000
550
500
8,000
450
7,000
400
350
6,000
Copper price
5,000
300
250
LME stocks
200
4,000
150
3,000
100
2,000
Jan-06
50
Jan-07
Jan-08
Jan-09
Source: LME and DECPG Commodities Group.
Freight rates revive on stronger
trans-PAC
bulk
shipments
$/ton
12,000
10,000
8,000
Baltic dry freight index
6,000
4,000
2,000
0
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Source: Datastream and DECPG Commodities Group.
International Finance
Lending falters in early 2009 as
banks deleverage and build capital
Gross capital flows to emerging markets
$ billion
2007
2008
Q1 Total
Total
Jan
Feb
2009
Q1
Total
Jan
Feb
164
652
30
33
103
370
18
15
Bonds
58
146
7
2
12
65
9
6
Banks
79
312
17
28
71
257
10
9
Equity
26
194
6
3
20
48
0
0
38
156
9
4
19
80
9
10
20
45
4
0
5
20
5
3
82
247
5
16
36
155
6
1
28
64
1
2
4
35
2
0
27
188
14
9
38
92
3
3
8
23
3
0
3
7
2
3
16
61
2
3
11
43
0
0
Lat. America
Bonds
E. Europe
Bonds
Asia
Bonds
Others
Source: DECPG Finance Team.
EM equities outperform
mature markets over 2009 to date
12
9
6
3
0
-3
-6
-9
-12
-15
-18
return by period
Emerging markets
Mature markets
* through March 13
January
February
March *
Year to date *
Source: Morgan-Stanley through Thomson/Datastream
Sovereign credit risk has increased
sharply across emerging markets
Sovereign CDS spreads in basis points
Mexico
Malaysia
Thailand
Brazil
Colombia
South Africa
Bulgaria
Russia
Philippines
Turkey
Indonesia
Kazakstan
Argentina
// 3,680
Ukraine
// 4,600
0
250
500
750
1,000
1,250
Source: Bloomberg and DECPG Finance Team.
1,500
Currencies
Dollar continues gains against euro
and yen until FOMC of March 18
Jan-08
1.230
USD per Euro (inverse) [Left] and Yen per USD [right]
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
110
1.270
1.310
106
1.350
102
1.390
1.430
1.470
1.510
98
USD/Euro (inverse)
94
1.550
1.590
1.630
yen/USD
Source: Thomson/Datastream.
90
86
Net foreign purchases of U.S. assets
turn to outflow as of the fourth quarter
net foreign purchases USD billions
280
240
200
160
120
80
40
0
-40
-80
-120
Q1-2008
Q2-2008
Treasuries
Q3-2008
Corp Bonds
GSEs
Q4-2008
Equity
Jan-09 (qr)
Total
Source: U.S. Treasury ‘TICS’ database.
Emerging market currencies down vs
the dollar over 2009 to date
percentage change (USD per LCU) (%)
US NEER
Indo rph
Mys rgt
Ind rpe
Brz rei
Tur lra
Cze crn
Mex pso
Hun frt
Pol zty
Rus Rbl
-30
-25
-20
-15
-10
-5
Source: Thomson/Datastream.
0
5
The External Environment for
Developing Countries
March 2009
The World Bank
Development Economics
Prospects Group