The External Environment for Developing Countries
February 2009The World Bank
Development EconomicsProspects Group
-24
-20
-16
-12
-8
-4
0
4
8
1990M1 1992M1 1994M1 1996M1 1998M1 2000M1 2002M1 2004M1 2006M1 2008M1
Sharp contraction in global production
Source: Thomson/Datastream, DECPG.
global industrial production, ch% (3m/3m saar)
Deteriorating credit quality for Emerging Market SovereignsUpgrades minus Downgrades
-20
-10
0
10
20
30
40
2001 2002 2003 2004 2005 2006 2007 2008 2009*
Source: Bloomberg, EMTA and DECPG Finance Team.
* as of Feb-13, 2009
Industrial countries
0.9
2.8
-0.5
-3.8
-6
-4
-2
0
2
4
6
Q1-2008 Q2-2008 Q3-2008 Q4-2008
Source: Department of Commerce and DECPG calculations.
U.S. GDP falls 3.8% in fourth quarteron consumption and investment
growth of real GDP, and contributions to growth in percentage points
StocksGovernmentConsumption
InvestmentNet Exports
4 million persons have joined the jobless queue since start of 2009
initial claims for unemployment insurance, weekly, 4week-ma
300
350
400
450
500
550
600
650
Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09
Source: U.S. Department of Labor.
weekly
4-wk moving-avg
Retail sales and industrial productionoff to tough start in 2009
retail sales and IPmfg, ch% saar
-30
-25
-20
-15
-10
-5
0
5
10
Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09
Source: Department of Commerce, Federal Reserve.
Retail sales
Production
0.6
-3.6-2.3
-12.7
-15
-10
-5
0
5
Q1-2008 Q2-2008 Q3-2008 Q4-2008
Source: Japan Cabinet Office and DECPG calculations.
Japan GDP plummets 12.7% as exports, capital spending drop sharply in Q4-08
growth of real GDP, and contributions to growth in percentage points
GovernmentConsumption
InvestmentStocks
Net Exports
Japan’s trade and production suggest more bad news to come
export volumes and manufacturing output, ch% saar
-40
-30
-20
-10
0
10
Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08-45
-35
-25
-15
-5
5
15
25
35
45
Source: Bank of Japan and Japan Cabinet Office.
IP [Left]
Export volume [R]
Labor market, consumer sentiment point to further slide in spending
unemployment rate, cash wage (ch% y/y) [L]; Consumer confidence [R]
-3
-2
-1
0
1
2
3
4
5
Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09
25
30
35
40
45
50
Source: Japan Cabinet Office.
Unemployment rate [L]
Consumer confidence [R]Cash wage (ch%) [L]
European recession intensifies to worst in twenty years in Q4-08
GDP growth at seasonally adjusted annual rates
-9
-7
-5
-3
-1
1
3
5
7
Germany Italy EUROAREA
U.K. France
Q1-2008 Q2-2008 Q3-2008 Q4-2008
Source: EUROSTAT and DECPG calculations.
European exports drop at year-end 2008 export volumes: Germany and France, ch%
saar
-30
-20
-10
0
10
20
30
40
Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08
Source: EUROSTAT through Thomson/Datastream.
Germany
France
Concerns about European banks and weaker member states mounting
DAX and CACI Index Jan07=100 [left]; IFO overall [R]
50
60
70
80
90
100
110
120
Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09
85
90
95
100
105
110
115
Source: Thomson/Datastream and IFO.
IFO overall [R]
CACI [L]
DAX [L]
Industrial production
-24
-20
-16
-12
-8
-4
0
4
8
12
16
Jan-06 Jan-07 Jan-08 Jan-09
Sharp contraction in global production with further shrinkage envisaged
Source: Thomson/Datastream, DECPG.
Industrial production, ch% (3m/3m saar) Forecast
Global production
Developing countries
-10
-5
0
5
10
15
20
Q1-99 Q1-00 Q1-01 Q1-02 Q1-03 Q1-04 Q1-05 Q1-06 Q1-07 Q1-08
GDP contracted in the fourth quarterin emerging economies as well
Source: DECPG.
GDP in Russia, ch% (3m/3m saar)
A rebound in China’s output growth?
-12
-8
-4
0
4
8
12
16
20
24
28
Jan-06 Jan-07 Jan-08 Jan-09
20
30
40
50
60
70
CLSA/MARKIT PMI:Mnf - Output
NBS PMI Mnf New Exp Orders
Forecast
Industrial production, ch% (3m/3m saar)
Source: Thomson/Datastream, DECPG.
IP
International trade
OECD imports almost “off a cliff” at year-end 2008
import volumes: U.S., Japan and France, ch% saar
-30
-20
-10
0
10
20
30
40
Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08
Source: National Agencies through Thomson/Datastream.
USA
Japan
France
Imploding East Asia trade export values (USD), ch% saar
-80
-60
-40
-20
0
20
40
60
Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09
Source: National Agencies through Haver Analytics.
Japan China
Korea
Taiwan (PC)
Trade balances shift as terms of trade and crisis effects accrue
balance of goods trade in local currency: U.S. and Japan
-80
-75
-70
-65
-60
-55
-50
Jan-06 Jun-06 Nov-06 Apr-07 Sep-07 Feb-08 Jul-08 Dec-08
-400
-200
0
200
400
600
800
1,000
1,200
Source: National Agencies through Thomson/Datastream.
USA [Left]
Japan [Right]
Oil prices
Crude oil prices stabilize on OPEC production cuts $/bbl
World Bank Average Price
Source: Thomson/Datastream and DECPG Commodities Group.
25
50
75
100
125
150
Jan-08 Apr-08 Jul-08 Oct-08 Jan-09
Crude oil inventories still rising on weak demand
270
280
290
300
310
320
330
340
350
360
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09
M bbl
5-year high-low ranges
Source: U.S. Department of Energy and DECPG Commodities Group.
Crude price differentials diverge on rising U.S. stocks and OPEC cuts
-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
14
Jan-08 Apr-08 Jul-08 Oct-08 Jan-09
$/bbl
WTI
Brent
Dubai
Source: Thomson/Datastream and DECPG Commodities Group.
Non-oil commodity prices
100
150
200
250
300
350
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09
GrainsFats & Oils
Beverages
Other Food
Food prices rebound in January on supply concerns(2000=100)
Source: Datastream and DECPG Commodities Group.
Metals prices stabilize on production cuts
1000
2000
3000
4000
5000
6000
7000
8000
9000
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
55000
Cu $/ton Zn $/ton
Zinc
Copper
Nickel
Source: LME and DECPG Commodities Group.
Gold prices rise on safe-haven buying
400
500
600
700
800
900
1000
1100
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09
1.15
1.20
1.25
1.30
1.35
1.40
1.45
1.50
1.55
1.60$/toz $/euro
Gold price
$/euro
Source: Datastream and DECPG Commodities Group.
International Finance
January capital flows feature a modest revival in bond issuance
Source: DECPG Finance Team.
$ billion 2009
Jan H1 H2 Total Jan H1 H2 Dec Total Jan
Total 35 349 302 652 30 251 119 17 370 19
Bonds 21 107 39 146 7 53 12 3 65 9
Banks 9 156 156 312 17 151 106 14 257 10
Equity 5 86 107 194 6 47 2 0 48 0
Lat. America 10 69 87 156 9 56 24 6 80 9
Bonds 4 31 14 45 4 17 3 2 20 5
E. Europe 13 156 91 247 5 98 56 5 155 6
Bonds 10 50 14 64 1 27 8 0.4 35 2
Asia 9 93 94 188 14 69 23 4 92 4
Bonds 5 18 6 23 3 7 0.4 0 7 2
Others 3 31 30 61 2 27 15 3 43 0
2007 2008
Several BRICs have postedstrong equity gains over 2009 to date
Total return in LCU, 2009 to date (%)
-25 -20 -15 -10 -5 0 5 10 15 20 25 30
PolandVietnamMexico
Nikkei-225Euro Stoxx-50
S&P-500Turkey
DevelopedIndia
IndonesiaEM (MSCI)
ArgentinaRussia
BrazilChile
China
Source: Bloomberg and DECPG Finance Team.
Deteriorating credit quality for Emerging Market SovereignsUpgrades minus Downgrades
-20
-10
0
10
20
30
40
2001 2002 2003 2004 2005 2006 2007 2008 2009*
Source: Bloomberg, EMTA and DECPG Finance Team.
* as of Feb-13, 2009
Currencies
1.230
1.270
1.310
1.350
1.390
1.430
1.470
1.510
1.550
1.590
1.630
Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09
86
90
94
98
102
106
110
Source: Thomson/Datastream.
yen/USD
USD/Euro (inverse)
Dollar continues gains against euromodest upturn vis-à-vis yen
USD per Euro (inverse) [Left] and Yen per USD [right]
1
2
3
4
5
6
Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09
Pro-euro interest differentials narrowas more bullish ECB reponse expected
USD Libor and EURIBOR (6 months),
percent
EURIBOR 6 months
USD LIBOR 6 months
Source: Thomson/Datastream.
Emerging market currencies largely down vs the dollar over 2009 to date
percentage change (USD per LCU) (%)
-25 -20 -15 -10 -5 0 5
Rus RblPol ztyHun frt
Czk krnMex pso
Tur lraNT$
US NEERChn Rmb
Brz rei
Phl psoInd rpe
Zaf RKor won
Source: Thomson/Datastream.
The External Environment for Developing Countries
February 2009The World Bank
Development EconomicsProspects Group