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

The External Environment for
Developing Countries
April 2010
The World Bank
Development Economics
Prospects Group
Equity and commodity markets echo the pickup
in global economic activity
Dow-Jones Industrial average [left]; Copper price ($/ton) [right]
14,000
9,000
13,000
Copper price [right]
12,000
8,000
7,000
11,000
6,000
10,000
5,000
9,000
4,000
8,000
Dow Jones [left]
7,000
3,000
6,000
2,000
Jan-08
Jun-08
Nov-08
Source: Thomson-Datastream
Apr-09
Sep-09
Feb-10
Greek CDS spread drops sharply in the wake of
Euro-Group/IMF financial package
450
CDS Spread (basis points)
400
350
300
250
200
150
100
50
1/9/2009
4/9/2009
Source: Bloomberg.
7/9/2009
10/9/2009
1/9/2010
4/9/2010
OECD developments
ISM surveys show step-up in U.S. services
60
55
headline activity indexes, mfgr and services
50 marks growth/contraction threshold
50
45
40
35
Mfgr
Services
30
Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10
Source: Institute for Supply Management (ISM).
U.S. business investment and employment
turn the corner to growth
bus. investment, ch% (q/q) saar [left]; change in employment ‘000 [right]
20
400
10
200
0
0
-10
-200
Investment [left]
-20
Employment [right]
-400
-30
-600
-40
-800
Q1 2000
Q3 2002
Q1 2005
Q3 2007
Source: U.S. Departments of Commerce and Labor.
Q1 2010
U.S. housing hit by a wave of foreclosures
Home sales, ch% 3mma y/y
30
20
Total sales
New home sales
Existing home sales
10
0
-10
-20
-30
-40
-50
1/1/2007
7/1/2007
1/1/2008
7/1/2008
1/1/2009
7/1/2009
1/1/2010
Source: U.S. Department of Commerce and National Association of Realtors.
Japanese prices still falling despite pickup in
economic activity
10
consumer and producer prices, GDP deflator
and Industrial Production ch% (y/y)
20
5
10
0
0
-5
-10
-15
-10
Industrial production
CPI
PPI
GDP deflator
-20
-30
-20
-40
Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10
Source: Japan Cabinet Office, METI.
Greek CDS spread drops sharply in the wake of
Euro-Group/IMF financial package
450
CDS Spread (basis points)
400
350
300
250
200
150
100
50
1/9/2009
4/9/2009
Source: Bloomberg.
7/9/2009
10/9/2009
1/9/2010
4/9/2010
European sentiment steps up…with little
evidence for growth
IFO (overall), Bank du France (business climate) [left]; German export volumes ,ch% saar [right]
110
50
100
30
10
90
-10
80
-30
70
60
Jan-08
-50
IFO
Bank du France
May-08 Sep-08
Jan-09
German exports [right]
May-09 Sep-09
Source: IFO, Bank du France and Bundesbank.
Jan-10
-70
Country Focus:
China
China’s growth remains robust in 2010
Real growth (percent)
25
Jan-Feb average
20
15
10
5
GDP (yoy)
Industrial value added (yoy)
0
2001
Source: World Bank
2004
2007
2010
Net external trade subtracted heavily from
growth in 2009
Contribution to growth (real, percent y-o-y)
20
15
10
5
0
GDP
-5
-10
Domestic demand
contribution of net exports
2006
Source: World Bank
2007
2008
2009
China’s exports have recovered impressively
Index, constant prices (October 2008 = 100)
120
100
80
60
40
China's exports of goods (sa)
World imports, excluding China (sa)
2005
2006
Source: World Bank
2007
2008
2009
The composition of growth is likely to change
substantially this year
Contribution to growth (real, percent y-o-y)
15
10
5
GDP
Domestic demand
Net exports
0
-5
2003
2004
Source: World Bank
2005
2006
2007
2008
2009
2010
2011
The external surplus is likely past its peak
Share of GDP (percent)
12
10
8
6
4
Current account
Trade balance
2
0
2001
Source: World Bank
2003
2005
2007
2009
2011
China’s cyclical condition differs sharply from
that in the United States
Percent
4
3
2
1
0
-1
-2
-3
-4
-5
-6
US output gap
China's output gap
1993
Source: World Bank
1997
2001
2005
2009
Industrial production
Global industrial production
continues to expand at a rate near 10%
global industrial production, ch% (3m/3m, saar)
15
10
5
0
-5
-10
-15
-20
-25
-30
Jan-04 Oct-04 Jul-05 Apr-06 Jan-07 Oct-07 Jul-08 Apr-09 Jan-10
Source: World Bank calculations based on Thomson Datastream data
Pace of recovey in production mixed
across developing regions
industrial production, ch% (3m/3m saar)
40
30
20
10
0
-10
Latin America
-20
Europe and Central Asia
-30
East Asia and Pacific
-40
South Asia
Jan-07
Jul-07
Source: World Bank data
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Growth in retail sales picking up
but volumes yet to breach pre-crisis levels
global retail sales proxy, (excl United States), ch% (y/y)
6
5
4
3
2
1
0
-1
-2
-3
Jan-04 Oct-04 Jul-05 Apr-06 Jan-07 Oct-07 Jul-08 Apr-09 Jan-10
Source: DEC Prospects Group calculations
International trade
Developing country trade increased
above pre-crisis peaks as of early 2010
export and import volumes, billions USD
800
High income countries
700
600
500
400
Developing countries
300
200
2007M01
2007M06
2007M11
2008M04
Developing imports
High income imports
2008M09
2009M02
2009M07
2009M12
Developing exports
High income exports
Source: World Bank, DEC Prospects Group
China’s share in U.S. trade deficit in part a
reflection of East Asia’s production chain
share of selected countries in U.S. trade deficit
0.70
0.60
Japan
0.50
0.40
0.30
China
Other Asia
0.20
0.10
0.00
-0.10
Mexico
1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009
Source: U.S. ITC data and World Bank calculations
LPI 2010 – performance varies around the world
Logistics unfriendly
Partial performers
Consistent performers
Logistics friendly
No data
Source: Connecting to Compete, World Bank, 2010
Oil prices
Oil prices and OPEC production
140 $/bbl
OPEC production [R scale]
120
million b/d
32
31
100
80
30
60
40
Oil price [L scale]
29
20
28
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10
Source: IEA, Bloomberg and DECPG.
U.S. petroleum inventories
remain relatively high
million barrels
1,150
1,100
5-year range
1,050
1,000
950
U.S. petroleum inventories
900
850
Jan-03
Source: U.S. EIA.
Jan-05
Jan-07
Jan-09
Jan-11
U.S. natural gas prices remain low on
unconventional production gains
$/mmbtu
25
Oil price
20
15
10
5
0
Jan-00
U.S. gas price
Jan-02
Jan-04
Source: IEA, Bloomberg and DECPG.
Jan-06
Jan-08
Jan-10
Non-oil commodity prices
Food-beverage prices fall but cotton & rubber
prices up on supply constraints
300
(2000=100)
Food
250
Beverages
200
150
100
Jan-05
Source: DECPG.
Raw Materials
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Metals prices rise on demand expectations
9,000
$/ton
$/ton
8,000
7,000
50,000
Copper [L scale]
6,000
40,000
5,000
30,000
4,000
3,000
20,000
2,000
1,000
Aluminum [L scale]
Nickel [R scale]
0
Jan-03
60,000
10,000
0
Jan-05
Jan-07
Source: IEA, Bloomberg and DECPG.
Jan-09
Global steel production
(000 tons)
60000
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 to EM surged in March
$ billion
Total
Bonds
Banks
Equity
Lat. America
Bonds
E. Europe
Bonds
Asia
Bonds
Others
Source: DECPG.
2008
Q1 Total
2009
Q1 Total
2010
Jan Feb Mar Q1
103
12
71
20
390
65
257
68
48
18
22
8
353
115
129
109
33
21
4
7
17
5
5
7
44
21
10
13
94
48
19
27
19
5
36
2
38
3
11
90
20
157
35
98
7
45
21 137
10 62
6 72
4 33
18 122
5 16
3 22
9
8
12
7
12
7
0
4
2
2
1
7
2
3
16
10
9
8
14
0
5
29
19
24
17
33
9
8
Volatility of risky assets
continues to ease in 2010
VIX index [left], daily change in weighted EMBIG spreads (30-day movavg)[right]
90
20
80
16
Equity volatility,
VIX index [L]
70
12
60
8
50
EM bond volatility,
EMBIG [R]
40
4
0
30
20
-4
10
Feb-08
-8
Jul-08
Dec-08
May-09
Source: JPMorgan, Bloomberg, World Bank.
Oct-09
Mar-10
U.S. Treasury yields increasing…European and
EM bonds remain subdued
10-year government bonds yields (%)
6.0
5.0
U.S.
Euro zone
BRIC [right]
8.5
8.0
4.0
7.5
3.0
7.0
2.0
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10
6.5
Source: Bloomberg and World Bank.
Currencies and inflation
Euro regains some ground vs dollar on partial
relaxation of Greek debt tensions
USD per Euro (inverse) [Left] and Yen per USD [right]
Oct-09 Nov-09 Dec-09
1.325
Jan-10
Feb-10 Mar-10
1.365
Apr-10
95.00
92.50
1.405
90.00
1.445
1.485
1.525
Source: Thomson/Datastream.
yen/USD
USD/Euro (inverse)
87.50
85.00
Volatility in USD-Libor increases sharply
with UST yields moving well above Bund
USD-Libor, EURIBOR, US Treasuty 10-year yield and 10-yr Bund yield, percent
6.0
5.0
UST-10-yr
4.0
3.0
Bund10-yr
2.0
EURIBOR
1.0
USD-LIBOR
0.0
Feb-08
Jul-08
Dec-08
Source: Thomson-Datastream
May-09
Oct-09
Mar-10
Inflation picking up as the period of high
commodity prices passes from calculation
14
12
10
8
6
4
2
0
-2
-4
1/1/2007
headline CPI indexes, ch% yr/yr
USA
Euro Area
7/1/2007
1/1/2008
Japan
China
7/1/2008
Source: World Bank, DEC Prospects Group
Developing (median)
1/1/2009
7/1/2009
1/1/2010
Focus
Financing gaps in 2010
External financing needs decline in 2010-11
2.0
1.5
percent
$ trillion
% of GDP of those countries
with financing needs [right]
Maturing foreign debt [left]
Current account deficit [left]
12
10
8
6
1.0
4
0.5
2
0.0
2009 e
2010 p
2011 p
Source: DataStream and World Bank, DEC Prospects Group
0
Modest recovery in private capital
expected in 2010 and 2011
Net private capital flows to developing countries, $ billion
1,200
Portfolio equity
1,000
FDI
5
Private debt
4
Share of GDP [right axis]
800
600
3
400
2
200
0
-200
1
2008
2009 e
2010 p
2011 p
Source: DataStream and World Bank, DEC Prospects Group
0
External financing gaps are projected to fall
9
8
7
6
5
4
3
2
1
0
2009 2010 2011
Total gap ($bn): 352 210 180
2009e
Low
2010p
Lower-Middle
2011p
Upper-Middle
Source: World Bank DEC Prospects Group staff estimates
Financing gaps were closed through current account
adjustment and higher-than expected capital flows
billions dollars
200
150
100
50
0
-50
-100
-150
-200
-250
Current Account Balance
Predicted
Source: World Bank, DEC Prospects Group
Net Capital flows
Actual
Difference
Net official flows increased sharply in
response to the crisis
billions dollars
World Bank
IMF
Other official
Total
2005
2.7
-40.2
-34.0
-71.5
2006
-0.5
-26.7
-45.1
-72.3
2007
4.8
-5.1
-0.6
-0.9
Source: World Bank Debtor Reporting System, IMF
2008
7.1
10.8
10.2
28.1
2009
21.1
27.5
20.9
69.5
Sovereign debt issuance by high-income
countries, 2006-2010
trillions dollars
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2006
2007
Source: IMF and World Bank
2008
2009e
2010f
The External Environment for
Developing Countries
April 2010
The World Bank
Development Economics
Prospects Group