Download March 2008 - World Bank

The External Environment for
Developing Countries
March 2008
The World Bank
Development Economics
Prospects Group
Large-scale losses across global
bourses in the last weeks
index January 1, 2008 = 100
100
Dow Jones
95
90
TOPIX
MSCI
85
DAX
80
75
Jan-08
Jan-08
Jan-08
Feb-08
Feb-08
Source: Thomson/Datastream.
Mar-08
Dollar plummets to all-time lows
against the majors
USD per Euro (inverse) [Left] and Yen per USD [right]
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
1.290
124
1.330
120
yen/USD
1.370
116
1.410
112
1.450
108
1.490
104
 USD/Euro (inverse)
1.530
100
1.570
96
Source: Thomson/Datastream.
Industrial countries
A dramatic 75bp cut in Fed Funds on
Mar-18 carries the rate to 2.25%
Fed funds rate [left] DJIA [right]
6.0
14,250
14,000
5.5
13,750
5.0
13,500
DJIA [R]
4.5
13,250
4.0
13,000
3.5
12,750
Fed funds target rate [L]
12,500
3.0
12,250
2.5
12,000
2.0
11,750
4-Jun07
5-Jul07
5-Aug07
5-Sep07
6-Oct07
6-Nov07
7-Dec07
7-Jan08
Source: Thomson/Datastream.
7-Feb08
9-Mar08
Employment declines feed into
softening retail sales in February
sales volume, ch% 3mmay/y [left]; delta employment, 3mma [right]
4.0
275
250
225
200
175
150
125
100
75
50
25
0
-25
Retail sales volume [L]
3.0
2.0
1.0
0.0
Change in Employment [R]
-1.0
-2.0
01/15/06
05/15/06
09/15/06
01/15/07
05/15/07
09/15/07
01/15/08
Source: Departments of Commerce and Labor.
U.S. inflation picks up on higher energy
and food- a possible restraint on the Fed
headline
CPI
ad
PPI,
ch%
3mma
y/y
8
7
Headline PPI
6
5
4
3
2
Headline CPI
1
0
Jan-06
May-06
Sep-06
Jan-07
May-07
Sep-07
Source: U.S. Department of Labor.
Jan-08
Revised Japan GDP bumps Q4-growth
to 3.5% from 3.7% on investment
growth of real GDP, and contributions to growth in percentage points
5.0
3.7
3.5
2.5
1.3
0.0
Growth 2007 2.0%
-2.5
Q3-2007 F
Q4-2007 P
Net exports
Stocks
Fixed Investment
Government
Consumption
Q4-2007 F
Source: Cabinet Office and DECPG calculations.
Yen strength and plummeting equities
hit consumer confidence hard
Yen per dollar [right] and TOPIX index January 1, 2007 = 100
110
125
120
100
Yen [R]
90
115
110
TOPIX [L]
105
80
100
70
95
Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar07
07
07
07
07
07
07
07
07
07
07
07
08
08
08
Source: Thomson/Datastream.
Japan’s GDP boost from net exports may
fade over 2008
25
20
15
10
5
0
-5
-10
-15
goods export and import volumes, ch% saar
Export volumes
Import volumes
-20
-25
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08
Source: Cabinet Office-- Thomson/Datastream.
Euro-Zone GDP slows to 1.5% growth
in fourth quarter on sluggish demand
growth of real GDP, and contributions to growth in percentage points
5.0
Growth 2007 2.6%
3.0
2.5
Net exports
Fixed investment
Consumption
Government
Change in stocks
1.5
1.0
0.0
-2.5
Q2-2007
Q3-2007
Q4-2007
Source: Eurostat and DECPG calculations.
German factory orders drop in January
foreign orders halve in momentum
30
factory orders, total, domestic, overseas, ch% saar
Foreign orders
25
20
15
10
5
0
-5
Total orders
Domestic orders
-10
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08
Source: Bundesbank-- Thomson/Datastream.
ECB: policy rates will not be
cut as growth slows and HICP rises
3.5
HICP inflation (ch% y/y) [L]; EA IP ch% saar [R]
10.0
Euro Area IP (mfg) [R]
3.0
7.5
2.5
5.0
2.0
2.5
1.5
HICP inflation (y/y) [L]
1.0
Jan-06
0.0
May-06
Sep-06
Jan-07
May-07
Sep-07
Source: Eurostat and Bundesbank.
Jan-08
Industrial production
Sharp downtrend expected for
Euro Area industrial output growth
6mn/6mn ar
data
5
forecast
3
0
-3
-5
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Source: DECPG
Jan-07
Jan-08
Robust external demand cushioned
U.S. IP from weak domestic demand
6mn/6mn ar
15
data
Export volumes
forecast
10
5
0
Industrial production
-5
-10
-15
-20
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Source: DECPG
Jan-07
Jan-08
IP trend growth in Japan is also
projected to deteriorate
6mn/6mn ar
data
15
forecast
10
5
0
-5
-10
-15
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Source: DECPG
Jan-07
Jan-08
High-tech Markets
High-tech orders slumping
in the U.S. and Europe
45
40
35
30
25
20
15
10
5
0
-5
-10
-15
G-3 orders for high-tech manufactures, US dollar terms, ch% saar
70
60
United States [R]
50
G-3 High-tech orders [L]
40
30
20
10
0
-10
Europe [R]
Jan-06
Apr-06
Jul-06
Oct-06
-20
Jan-07
Apr-07
Jul-07
Oct-07
Source: National Agencies and DECPG calculations.
Semiconductor sales and tech output wane
over late 2007 and early 2008
semi-chip sales ch% y/y [L]; output of high-tech goods ch% saar [R]
12
30
Production [R]
10
25
8
6
20
4
15
2
10
0
Semiconductor sales
-2
Jan-06
5
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Source: SIA, Thomson/Datastream, Haver.
Jan-08
Exports mixed across the globe
global exports of high-tech goods in USD terms, ch% 3mma y/y
18
East Asia x Japan
15
13
10
8
5
3
0
-3
-5
-8
World
USA
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Source: National Agencies and DECPG calculations.
International trade
U.S. export growth easing into
the first months of 2008
goods exports: values and volumes, percent change 3mma/y/y and saar
30
Value saar
25
20
Value year/year
15
10
5
Volume year/year
0
Volume saar
-5
-10
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Source: Department of Commerce-- Thomson/Datastream.
World and high-income exports to slow
but revive somewhat at mid-2008
goods export volumes, ch% saar
20
World exports
15
10
5
High-income exports
0
2003M1
2003M10
2004M7
2005M4
2006M1
2006M10
2007M7
2008M4
Source: National Agencies through Thomson/Datastream.
Exports from China and other
developing economies up in January
goods export volumes, ch% saar
50
China exports
40
30
20
10
0
Developing ex China
-10
2003M1
2003M10
2004M7
2005M4
2006M1
2006M10
2007M7
Source: National Agencies through Thomson/Datastream.
Oil prices
Gold and Oil at all-time highs
Gold $/toz
Oil $/bbl
110
1000
Oil
100
900
90
80
800
Gold
700
70
60
600
07
Jan-
50
7
Jul- 0
08
Jan-
Source: LME and DECPG Commodities Group.
Crude oil inventories rise seasonally
M bbl
exacerbated by weak demand
360
5-year high-low ranges
350
340
330
320
310
300
290
280
270
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Source: U.S. Department of Energy and DECPG Commodities Group.
WTI Futures Prices - NYMEX
Monthly contract prices to Dec 2013*
on select dates in 2007-08
$/bbl
110
Mar 13 2008
100
90
Feb 6 2008
80
70
Aug 15 2007
60
Jan 16 2007
50
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
* No monthly futures prices for 2013 for contracts trading before Nov 07
Dec-13
Non-oil commodity prices
Food and beverage prices surge
(1990=100)
300
Fats & Oils
275
250
225
Grains
200
175
150
Beverages
125
100
Other Food
75
Jan-06
Jul-06
Jan-07
Jul-07
Source: DECPG Commodities Group.
Jan-08
Copper prices rebound on falling
stocks and tight supplies
‘000 tons
$/ton
9000
225
Copper price
8500
200
8000
7500
175
7000
150
6500
6000
125
5500
100
LME stocks
5000
4500
n-0
a
J
75
6
n-0
a
J
7
n-0
a
J
8
Source: LME and DECPG Commodities Group.
World Refined Metal Consumption*
‘000 tons
25000
China
20000
Europe
N America
Other Asia
15000
OECD Pac
Latin A
10000
FSU/EE
ME
Africa
5000
0
1994
1996
1998
2000
2002
2004
2006
* Aluminum, Copper, Lead, Nickel, Tin, Zinc
International Finance
Continued stagnation in flows to
emerging markets in February
Gross capital flows to emerging markets
$ billion
2006
2007
Q1 Total
Total
2008
Jan
Feb
Q1
Total
Jan
Feb
96
494
36
55
166
683
29
22
Bonds
42
137
20
19
58
146
7
4
Banks
39
246
10
20
81
343
16
16
Equity
15
111
5
16
26
194
6
3
23
116
10
10
38
157
8
3
14
41
4
4
20
45
4
0
36
179
13
25
81
252
4
11
17
64
10
11
28
64
1
3
25
153
10
11
30
213
16
4
8
19
5
3
8
23
3
0
12
45
3
8
16
60
1
4
Lat. America
Bonds
E. Europe
Bonds
Asia
Bonds
Others
Source: DECPG Finance Team.
Continued turmoil
in world stock markets
150
Equity price indexes, January 1, 2007 = 100
140
MSCI
130
120
S&P-500
110
100
90
Eurofirst-300
80
Nikkei-225
70
Jun-07
Aug-07
Oct-07
Dec-07
Source: Thomson/Datastream.
Feb-08
Credit risk soars to record levels
Credit default swap spreads (CDSs), basis points
700
600
CDSs on the Europe index
500
400
300
200
100
CDSs on the North American index
CDSs on Emerging Market Index
0
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Source: JPMorgan-Chase.
Mar-08
Currencies
Dollar plummets to all-time lows
against the majors
USD per Euro (inverse) [Left] and Yen per USD [right]
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
1.290
124
1.330
120
yen/USD
1.370
116
1.410
112
1.450
108
1.490
104
 USD/Euro (inverse)
1.530
100
1.570
96
Source: Thomson/Datastream.
Interest differentials now at
230 bp favoring euro-based assets
US-LIBOR, EURIBOR in percent
6.00
5.50
5.00
4.50
EURIBOR
4.00
3.50
USLIBOR
3.00
2.50
2.00
4-Jun07
5-Jul07
5-Aug07
5-Sep07
6-Oct07
6-Nov07
7-Dec07
7-Jan08
Source: Thomson/Datastream.
7-Feb08
9-Mar08
Dollar falling equally sharply against
emerging market units
index, LCU per USD, January 1, 2007 = 100
105
100
Russian ruble
95
90
euro
85
80
Turkish lira
Brazilian rei
75
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Source: Thomson/Datastream.
Jan-08
Mar-08
Focus
March 2008
Food prices and domestic inflation
International food prices increased 25%
in real terms since Jan-2006
Index, 2006=100
160
Nominal US$
150
Nominal LCU
140
130
Real
120
110
100
90
80
2006M1
2006M7
2007M1
2007M7
Source: DECPG
2008M1
Similar increases in domestic food
prices across countries
percentage change since Jan-2006
imported food price
Domestic food price
EA Ch
in
P
ex a
CH
N
Ru
ss
ia
Tu
rk
ey
CE
E
LA
C
Eg
yp
Jo t
rd
an
In
Pa dia
ki
st
an
N
So ig
ut eria
h
DE Af
ric
V
a
av
er
ag
O
EC e
D
HI
C
100
90
80
70
60
50
40
30
20
10
0
Source: DECPG
Food prices exert upward
pressures on inflation
percentage points
Venezuela
Latvia
South Africa
Egypt
Colombia
Bulgaria
Czech
OECD HIC
Croatia
Brazil
Turkey
Ecuador
Slovak
Nigeria
Indonesia
Food
Non-Food
-8
-6
-4
-2
0
Source: DECPG
2
4
6
The External Environment for
Developing Countries
March 2008
The World Bank
Development Economics
Prospects Group