Download February 2009

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