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The External Environment for Developing Countries February 2008 The World Bank Development Economics Prospects Group.

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Presentation on theme: "The External Environment for Developing Countries February 2008 The World Bank Development Economics Prospects Group."— Presentation transcript:

1 The External Environment for Developing Countries February 2008 The World Bank Development Economics Prospects Group

2 Equities tumbled in January S&P/Citi-Group BMI Global Index, ch% Source: Standard & Poor’s. January months: from October year: from January 2007

3 Source: JPMorgan-Chase and Thomson/Datastream Spreads widen, but yields stable EMBIG spread and U.S. 10-year T-note, basis points EMBIG spreads U.S. 10-year Treasury note EMBIG yields

4 Industrial countries

5 Source: Department of Commerce and DECPG calculations. U.S. GDP growth falls to 0.6% in fourth quarter as housing takes a toll growth of real GDP, and contributions to growth in percentage points Net exports Government Consumption Fixed Investment Change in stocks Growth %

6 Source: National Assn of Realtors and Department of Commerce. Existing home sales U.S. new home sales drop 33% over 2007– worst in 45 years existing and new home sales, ch% 3mma y/y New home sales

7 Source: Departments of Labor and Commerce. Employment [R] Retail sales [L] Employment decline in January points to weaker retail spending ahead retail sales, ch% 3mma y/y [L], change in employment 3mma [R]

8 Source: Cabinet Office and DECPG calculations. Japanese GDP jumps to 3.7% growth in fourth quarter on exports growth of real GDP, and contributions to growth in percentage points Net exports Stocks Fixed Investment Government Consumption Growth %

9 Japan’s public-sector and residential investment show sharp declines public- and residential investment, share of real GDP, percent Source: Cabinet Office through Thomson/Datastream. Public investment Residential investment

10 Japan’s orders momentum up in December supporting exports and production export volume and IP, ch% saar [L] machinery orders ch% saar [R] Exports [L] Industrial production [L] New machinery orders [R] Source: Cabinet Office through Thomson/Datastream.

11 Euro Area growth eases in fourth quarter on consumer and exports percent change Source: EuroStat.

12 German exports and production dampened by euro strength export volumes and IP ch% 3mma, y/y Source: Eurostat through Thomson/Datastream. Production Exports

13 ECB hints at cut in policy rates as Euro Area growth slows HICP inflation (ch% y/y) [L]; Germany IP ch% saar [R] Source: Eurostat and Bundesbank. Germany IP [R] HICP inflation (y/y) [L]

14 Industrial production

15 Possible contraction of industrial production in the Euro-zone in 2008-Q1 Euro Area industrial production, 3mma ch%, saar Source: DECPG Forecast

16 Has the slowdown in U.S.- and Mexican IP bottomed out? Industrial production, 3mma, ch% saar United States Mexico dataforecast Source: DECPG

17 IP growth appears to be moving “sideways” in East Asia Other EAP countries China forecastdata Source: DECPG Industrial production, 3mma, ch% saar

18 High-tech Markets

19 The tech-cycle has been truncated by global growth uncertainties and delayed investment spending global semi-chip sales and high-tech exports, ch% saar Source: SIA, Thomson/Datastream, Haver. Exports Semiconductor sales

20 Production trends still at lofty rates but signs of downturn emerging unit value index in USD terms, ch% year-on- year Global East Asia x Japan Source: National Agencies and DECPG calculations.

21 G-3 high-tech orders back in negative territory G-3 orders for high-tech manufactures, US dollar terms, ch% saar G-3 High-tech orders

22 International trade

23 Developing countries are now key drivers of global imports and trade contribution to global import growth, ch% year-on-year Source: National Agencies through Thomson/Datastream. Developing country imports U.S. imports

24 Gap between developing export- and high-income import- growth widens growth (USD, y/y percent) developing country exports and high-income imports Source: National Agencies through Thomson/Datastream. Developing country export volumes High-income import volumes

25 Large emerging economies’ import growth and contributions strengthen contribution to global import growth, ch% year-on-year Source: National Agencies through Thomson/Datastream. China Russia India Brazil

26 Oil prices

27 Crude oil prices remain elevated $/bbl WTI Brent Dubai Source: DECPG Commodities Group.

28 OPEC maintaining production levels OPEC-10 Quota OPEC-10 Including Iraq mb/d Source: OPEC and DECPG Commodities Group.

29 Thermal coal prices surge on weather supply problems in Australia, China and South Africa Australia Thermal Coal $/ton (fob) WB Oil Price $/bbl Source: DECPG Commodities Group.

30 Non-oil commodity prices

31 Grains prices surge on strong competition for feed, food and fuel $/bushel Soybeans Corn Wheat $/bushel Source: DECPG Commodities Group.

32 Aluminum prices rise on electric power disruptions $/ton ‘000 tons Aluminum price LME stocks Source: LME and DECPG Commodities Group.

33 Global steel production growth slowing mil tons Source: LME and DECPG Commodities Group.

34 International Finance

35 Sharp decline in bank lending and equity placement in January Source: DECPG Finance Team.

36 Equities tumbled in January S&P/Citi-Group BMI Global Index, ch% Source: Standard & Poor’s. January months: from October year: from January 2007

37 All sectors lost ground in January Total return by sector (based on MSCI world stock indices) Source: Bloomberg and DECPG calculations.

38 Source: JPMorgan-Chase and Thomson/Datastream Spreads widen, but yields stable EMBIG spread and U.S. 10-year T-note, basis points EMBIG spreads U.S. 10-year Treasury note EMBIG yields

39 Large credit write-downs reported by major banks Total write-downs, billions U.S. dollars Source: Bloomberg.

40 Source: JPMorgan-Chase. Corporate default risk at record highs Credit default swaps, basis points CDSs on benchmark European exchange CDSs on the North American index

41 Currencies

42 Source: Thomson/Datastream. Dollar in holding pattern against the majors since mid-January index, LCU per USD, January 1, 2007 = 100 euro yen

43 U.S. capital inflows up since August 2007– demand for Treasuries falling billions U.S. dollars Source: TICS data system: U.S. Treasury. o/w Treasuries/Agencies Net foreign purchases of U.S. securities o/w Private securities

44 Source: Thomson/Datastream. Commodity currencies trading slightly stronger against the dollar index, LCU per USD, July 1, 2007 = 100 A$ ruble Brazil Rl C$

45 The External Environment for Developing Countries February 2008 The World Bank Development Economics Prospects Group

46 NOT USED

47 Fed funds target rate [L] LIBOR 6-months [L] Source: Thomson/Datastream. Another 50bp cut in Fed Funds on Jan-30 carries the rate to 3 percent DJIA [R] Fed funds rate, LIBOR 6-month [left] DJIA [right]

48 Services activity tumbles in January joining factory output in doldrums IP manufacturing ch% saar [Left], ISM Services Index [Right] Source: Federal Reserve, Institute for Supply Management. IP manufacturing [L] ISM Services [R]

49 Source: JPMorgan-Chase and Thomson/Datastream Spreads continue to widen in 2008 EMBIG spread, basis points [left] and U.S. 10-year T-note, percent [right] EMBIG Spread [left] U.S. 10-year Treasury note [right]


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