Post on 26-Jan-2016
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The External Environment for Developing Countries
June 2008The World Bank
Development EconomicsProspects Group
High-income CPI in 3% range– fastest since early 1990s
Median (aggregate), HICP (EA) Headline CPI (US) ch% year on year
1
2
3
4
5
1992M1 1995M1 1998M1 2001M1 2004M1 2007M1
Euro Area
United States
Source: Thomson/Datastream DECPG calculations
EM spreads down 75 basis points since recent peaks at mid-March
100
125
150
175
200
225
250
275
300
325
350
375
Jan-07 Feb-07 Apr-07 Jun-07 Aug-07 Oct-07 Dec-07 Jan-08 Mar-08 May-08
Source: JPMorgan-Chase.
Stripped spreads, basis points
EAP
MSCILAC
ECA
Industrial countries
U.S. households spend rebates in May Retail sales, ch% saar and 3mma y/y
-2
0
2
4
6
8
May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08
Source: U.S. Department of Commerce.
Retail sales, saar
Retail sales, year-on-year
Slackening labor markets could dim consumer outlays in coming months
change in employment 3mma [L], unemployment claims 4wma [R]
-100
-50
0
50
100
150
200
250
300
Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08280
300
320
340
360
380
Source: U.S. Department of Labor.
unemployment claims [right]
employment [left]
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
4-Jun-07
4-Jul-07
3-Aug-07
2-Sep-07
2-Oct-07
1-Nov-07
1-Dec-07
31-Dec-07
30-Jan-08
29-Feb-08
30-Mar-08
29-Apr-08
29-May-08
Fed funds target rate
Source: Thomson/Datastream.
Fed likely to halt rate reductions at 2% as CPI pressures mount
2.93.3
4.0
-1
0
1
2
3
4
5
Q4-2007 Q1-2008 P Q1-2008 R
Source: Cabinet Office and DECPG calculations.
Japan first-quarter GDP revised up on stronger investment
growth of real GDP, and contributions to growth in percentage points
Net X
Invest
PCE
Gvt
dStok
Japan’s orders, exports and production falter in April
orders and export volumes [R], IP mfgr [L] ch% 3mma y/y
0
1
2
3
4
5
6
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08-5
0
5
10
15
20
Source: Cabinet Office-- Thomson/Datastream.
Exports [R]
Production [L]
Orders [R]
Japan’s inflation increasing on fuel prices and weaker yen
Tokyo CPI, PPI- and Import price indexes, ch% 3mma y/y
-0.5
0.0
0.5
1.0
1.5
2.0
Jan-07 May-07 Sep-07 Jan-08 May-080
3
6
9
12
15
18
Source: Japan Cabinet Office.
import price [right]
CPI [left]
PPI [left]
European surveys broadly lowerIFO ‘expect’, Banc d’France [left], EEC
consumer sentiment [right]
95
98
100
103
105
108
110
Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08
-15
-12
-9
-6
-3
0
Source: IFO, BdF and EEC through Thomson/Datastream.
EEC consumer [right]
IFO expectations [left]
Banc d’France [left]
German April factory orders plummet-- export orders down 14% (saar)
factory orders, domestic, overseas, ch% saar
-15
-10
-5
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-08
Source: Bundesbank-- Thomson/Datastream.
Export orders
Domestic orders
HICP breaches 16-year 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 May-08
-2
0
2
4
6
8
10
12
14
HICP [L]HICP Energy [R]
Source: Eurostat through Thomson/Datastream.
Industrial production
Developing countries continue to outperform IP in high-income countries
industrial production, ch% (3m/3m saar)
-2
0
2
4
6
8
10
12
14
16
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08
Source: Thomson/Datastream, DECPG.
High Income
Developing countries
Production in ECA holding up, Latin America shows signs of weakness industrial production, ch% (q/q saar)
0
3
6
9
12
15
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08
Source: Thomson/Datastream, DECPG.
Europe and Central Asia
Latin America and the Carribean
IP in China showing moderation, other East Asia in sharp decline
industrial production ch% (q/q saar)
-10
-5
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-08
Source: Thomson/Datastream, DECPG.
Other East Asia
China
International trade
Oil imports as a share of GDP up sharply
oil imports as a share of GP (%)
0
1
2
3
4
5
1995 2000 2001 2002 2003 2004 2005 2006 2007 2008
European Union
Source: UN Comtrade, National Sources.
USA
Japan
Forecast,assuming price of oil averages $110/bbl in 2008
U.S. and German capital goods exports regaining momentum
exports of capital goods in nominal LCU, ch% (3mma y/y)
-5
0
5
10
15
20
2006M1 2006M4 2006M7 2006M10 2007M1 2007M4 2007M7 2007M10 2008M1 2008M4
Source: Thomson/Datastream, DECPG calculations.
Japan
USA
Germany
U.S. current account deficit widens on oil during first quarter
non-oil and oil balances ($bn) [L] and current account as %GDP [R]
-240
-200
-160
-120
-80
-40
0
Q1 2005 Q3 2005 Q1 2006 Q3 2006 Q1 2007 Q3 2007 Q1 2008
-7
-6
-5
-4
-3
-2
-1
0
Source: U.S. Department of Commerce.
non-oil balance
oil balance
CAB/GDP [R]
Oil prices
Oil prices higher on supply fears
25
35
45
55
65
75
85
95
105
115
125
135
Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08
25
26
27
28
29
30
31
$/bbl mb/d
Oil price [L scale]
OPEC-11 Production (x Angola) [R]
Source: IEA and DECPG Commodities Group.
Crude oil inventories in the U.S. fall on higher refinery runs
270
280
290
300
310
320
330
340
350
360
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09
M bbl
5-year high-low ranges
Source: U.S. DOE and DECPG Commodities Group.
Non-OPEC supply growth slumps
-3
-2
-1
0
1
2
3
4
1Q00 1Q01 1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08
kb/d
Source: IEA and DECPG Commodities Group.
Other
OPEC
FSU
Non-oil commodity prices
Corn and soybean prices rise on threats of flooding
400
600
800
1000
1200
1400
1600
Jan-06Jan-07
Jan-08
100
200
300
400
500
600
700
c/bushel c/bushel
Soybeans
Corn
Source: Datastream and DECPG Commodities Group.
Zinc prices plunge on rebound in mine supply
1000
1500
2000
2500
3000
3500
4000
4500
5000
050100150200250300350400450500550600650
$/ton ‘000 tons
Zinc price
LME stocks
Source: LME and DECPG Commodities Group.
Freight rates ease
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 again in May
Source: DECPG Finance Team.
Gross capital flows to emerging markets
$ billion
Q1 Total Q1 Jan-May Total Q1 Apr May YTD
Total 96 494 166 294 683 114 42 30 186
Bonds 42 137 58 88 146 14 13 12 39
Banks 39 246 81 140 343 80 17 10 107
Equity 15 111 26 66 194 20 13 8 41
Lat. America 23 116 38 60 157 18 14 10 41
Bonds 14 41 20 28 45 5 5 6 16
E. Europe 36 179 81 135 252 39 14 11 65
Bonds 17 64 28 43 64 5 7 5 18
Asia 25 153 30 74 213 47 11 5 63
Bonds 8 19 8 13 23 3 0 1 3
Others 12 45 16 25 60 10 3 4 17
2006 2007 2008
EM equities suffer in 2008 returns over 2008 to date (%)
-60
-50
-40
-30
-20
-10
0
10
Source: Bloomberg and DECPG Finance Team.
EM bond spreads have remained stable of late
0
150
300
450
600
750
900
Jan-07 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08
Source: Datastream and DECPG calculations.
high-yield OECD bond spead and EMBIG EM spread, basis points
EM spread
HY-OECD
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 up on the yen... in trading range on euro $1.54 to $1.58
USD per Euro (inverse) [Left] and Yen per
USD [right]
A look at yen cross rates:are carry trades unwinding?
Yen/LCU: change 2008 ytd. vs full year 2007 percent
-20 -15 -10 -5 0 5 10 15 20
Kor won
India Rpe
Thai bhat
Indo Rph
Aus$
Ch RMB
S$
Source: Thomson/Datastream.
Appreciation of Local Currency
2007 2008
Libor differentials stabilize: U.S. likely on hold, ECB to raise 25 bp
-2.5
-1.5
-0.5
0.5
1.5
2.5
3.5
4.5
5.5
Jan-08 Jan-08 Feb-08 Feb-08 Mar-08 Apr-08 Apr-08 May-08 Jun-08
Source: Datastream and DECPG calculations.
LIBOR-6 months and EURIBOR 6-months, percent
USD LIBOR
EURIBOR
differential: US less euro rates
The External Environment for Developing Countries
June 2008The World Bank
Development EconomicsProspects Group