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The External Environment for Developing Countries
May 2008The World Bank
Development EconomicsProspects Group
First quarter GDP growth surprised to the upside across the OECD...
0
2
4
6
United States Euro Area Japan
Q3-2007 Q4-2007 Q1-2008
real GDP growth, percent saar
...but step-up in inflation may pressure growth globally in coming quarters
U.S. CPI, Euro Area HICP, median developing-country CPI, ch% y/y
0.0
2.0
4.0
6.0
8.0
10.0
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08
Source: National Sources through Thomson/Datastream.
Euro Area
Developing countries
United States
Industrial countries
4.9
0.6 0.9
-4
-2
0
2
4
6
Q3-2007 Q4-2007 Q1-2008
Source: Department of Commerce and DECPG calculations.
U.S. GDP for Q1-2008surprises to the upside at 0.9% (saar)
growth of real GDP, and contributions to growth in percentage points
Net exportsChange in Stocks
GovernmentConsumption
Fixed Investment
Households reticent to spend as wage growth slows... confidence ebbs
Personal income and consumption expenditures, ch% saar
2
4
6
8
10
12
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08
Source: U.S. Department of Commerce.
Personal consumption expenditure
Personal income
U.S. inflation underpinned by food, fuels,
and imports under a sliding dollar Headline CPI, PPI- and Import price indexes,
ch% 3mma y/y
0.0
2.5
5.0
7.5
10.0
12.5
15.0
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08
Source: U.S. Department of Commerce.
PPI
Import price
CPI
1.1
2.63.3
-2
-1
0
1
2
3
4
5
6
Q3-2007 Q4-2007 Q1-2008
Source: Japan Cabinet Office and DECPG calculations.
Japan Q1-GDP surprises to the upside (3.3%) on exports and consumption
growth of real GDP, and contributions to growth in percentage pointsNet exports
Fixed InvestmentConsumptionGovernment
Change in Stocks
Japan’s exports and production take a leg down in April goods export volumes [R], IP manufacturing [L], ch% saar
-5.0
-2.5
0.0
2.5
5.0
7.5
10.0
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08-15
-10
-5
0
5
10
15
20
25
Source: Cabinet Office-- Thomson/Datastream.
Exports [R]
Production [L]
Japan’s manufacturers and households turn more pessimistic
Tankan business conditions [left]; Tokyo consumer confidence [right]
-5
-3
0
3
5
8
10
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08
35.0
37.5
40.0
42.5
45.0
47.5
50.0
Source: Bank of Japan and Cabinet Office.
Tankan(left)
Consumer confidence (right)
2.6
1.2
3.2
-1
0
1
2
3
4
5
Q3-2007 Q4-2007 Q1-2008
Source: Eurostat and DECPG calculations.
Euro Area Q1-GDP: powered by investment and growth in Germany
growth of real GDP, and contributions to growth in percentage points
Net exportsChange in StocksFixed Investment
GovernmentConsumption
European consumer spending continues in the doldrums through April
retail sales volumes, ch% 3mma year over year
-8
-6
-4
-2
0
2
4
6
Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08
Euro Area Germany France Italy
Source: Eurostat through Thomson/Datastream.
HICP near record highs pushed by energy costs
HICP [left]; HICP energy [right], ch% year on year
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08
-2
0
2
4
6
8
10
12
HICP [L]
HICP Energy [R]
Source: Eurostat through Thomson/Datastream.
Industrial production
US industrial production resilient in the first quarter... but growth is softening
industrial production
-2
1
4
7
Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08
Source: World Bank, DECPG.
Y/Y Q/Q, saar
Forecast
Old Forecast
Weaker growth in Euro Area hitscountries that export to the Zone
industrial production, year-on-year percent change
-10
-5
0
5
10
15
20
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Source: Thomson/Datastream.
Hungary
Turkey
Czech RepublicForecast
Downturn in Chinese industrial production as export growth eases real IP (q/q saar) and exports (3m/3m,
oya )
0
5
10
15
20
25
30
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-0815
20
25
30
35
40
Source: Thomson/Datastream.
Production
Exports
International trade
Indo-Sino trade continues on rapid growth course
goods exports: millions U.S. dollars
500
1000
1500
2000
2500
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07
Source: U.N. COMTRADE Database through WITS.
China exports to India
India exports to China
Chinese yuan continues to appreciate against the U.S. dollar in real terms real bilateral exchange rates, ch%
year-on-year
-30
-25
-20
-15
-10
-5
0
5
10
15
2001M1 2002M1 2003M1 2004M1 2005M1 2006M1 2007M1 2008M1
Source: Thomson/Datastream, DECPG calculations.
Real yuan / Euro XR
Real yuan / USD XR
Euro Area exports make some headway despite strength of the euro dollar per euro [L]; Euro Zone export
volume [R], ch% saar
1.10
1.20
1.30
1.40
1.50
1.60
2005M1 2005M7 2006M1 2006M7 2007M1 2007M7 2008M1-7
0
7
14
21
28
Source: Eurostat and Thomson/Datastream.
Dollar per Euro [L]
Euro Area Exports [R]
Oil prices
Oil prices soar on expectations of tight markets
30
40
50
60
70
80
90
100
110
120
130
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08
2400
2500
2600
2700
2800
$/bbl million bbl
WB Oil price [L scale]
OECD stocks [R]
Source: IEA and DECPG Commodities Group.
Distillate prices rise on ultra-low sulfur diesel constraints
-10
0
10
20
30
40
Jan-06 Jan-07 Dec-07
$/bbl
Crude (WTI)
Gasoline
Distillate
Price differentials relative to crude
Source: Datastream and DECPG Commodities Group.
WTI Futures Prices - NYMEX
50
60
70
80
90
100
110
120
130
140
Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13
May 21 2008
$/bblMonthly contract prices to Dec 2013*
on select dates in 2007-08
* No monthly futures prices for 2013 for contracts trading before Nov 07
Jan 16 2007
Aug 15 2007
Dec 31 2007
Mar 31 2008
Apr 30 2008
Non-oil commodity prices
Rice prices surge on policy decisions resulting from fear of shortages
400
600
800
1000
1200
1400
Jan-06 Jan-07 Jan-08
200
300
400
500
600
700
800
900
1000
1100
c/bushel $/ton
Wheat
Rice
Source: Datastream and DECPG Commodities Group.
Copper prices remain firm on low stocks and supply problems
3000
4000
5000
6000
7000
8000
9000
Jan-05 Jan-06 Jan-07 Jan-08
25
50
75
100
125
150
175
200
225
$/ton ‘000 tonsCopper price
LME stocks
Source: LME and DECPG Commodities Group.
Freight rates rise on strong demand for bulk materials and port congestion
0
2000
4000
6000
8000
10000
12000
Jan-05 Jan-06 Jan-07 Jan-08
Baltic dry freight index
Source: Datastream and DECPG Commodities Group.
International Finance
Bank lending falls sharply in April
Source: DECPG Finance Team.
Gross capital flows to emerging markets
$ billion
Q1 Total Q1 Total Q1 Jan Feb Mar Apr
Total 96 494 166 683 113 35 35 44 41
Bonds 42 137 58 146 14 7 4 3 13
Banks 39 246 81 343 80 21 28 30 16
Equity 15 111 26 194 20 6 3 11 13
Lat. America 23 116 38 157 18 9 4 5 13
Bonds 14 41 20 45 5 4 0 1 5
E. Europe 36 179 81 252 38 6 19 13 14
Bonds 17 64 28 64 5 1 3 1 7
Asia 25 153 30 213 47 18 8 20 11
Bonds 8 19 8 23 3 3 0 0 0
Others 12 45 16 60 11 2 4 5 3
2006 2007 2008
Trading in EM debt continues decline in 2008
Emerging Market debt trading volume in billions U.S. dollars
0
200
400
600
800
1000
1200
Q1 01 Q4 01 Q3 02 Q2 03 Q1 04 Q4 04 Q3 05 Q2 06 Q1 07 Q4 07
Local market instruments
Source: EMTA and and DECPG calculations.
Eurobonds
Emerging market equities: strong in May EM and high-income equity markets,
returns by period (%)
-8
-6
-4
-2
0
2
4
6
8
April May year to Date
Source: Bloomberg.
High-income markets
Emerging markets
Currencies
1.410
1.430
1.450
1.470
1.490
1.510
1.530
1.550
1.570
1.590
1.610
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08
96
98
100
102
104
106
108
110
112
Source: Thomson/Datastream.
yen/USD USD/Euro (inverse)
Dollar moves higher on expectations Fed rate cuts finished for near term USD per Euro (inverse) [Left] and Yen per
USD [right]
A move up in USD LIBOR lends some support to the greenback
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Jan-08 Feb-08 Mar-08 May-08
Source: Datastream and DECPG calculations.
LIBOR-6 months and EURIBOR 6-months, percent
USD LIBOR
EURIBOR
Mixed developments for USD versus range of currencies over 2008 to date change early-June 2008 vs. December
2007, percent
-15 -10 -5 0 5 10 15
Pol zltyCzk Krna
Brz realA$
Ch RMBEURO
YENMex peso
Rus RblIndo rpha
C$NEER
Tur LireSterling
Thai bahtK won
ZA Rand
Source: Thomson/Datastream.
Appreciation of Local Currency
The External Environment for Developing Countries
May 2008The World Bank
Development EconomicsProspects Group