Download - First quarter GDP growth surprised to the upside across the OECD...

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


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


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-0835.0

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

ForecastOld 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


20

25

30

35

40


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

-30-25-20-15-10-505

1015

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

4050

60

7080

90

100

110120

130

Jan-04 Jan-05 Jan-06 Jan-07 Jan-082400

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-08200

300

400

500

600

700

800

900

1000

1100c/bushel $/ton

Wheat

Rice


Copper prices remain firm on low stocks and supply problems

3000

4000

5000

6000

7000

8000

9000

Jan-05 Jan-06 Jan-07 Jan-0825

50

75

100

125

150

175

200

225$/ton ‘000 tons

Copper 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


International Finance

Bank lending falls sharply in April

Source: DECPG Finance Team.

Gross capital flows to emerging markets

$ billionQ1 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 5E. Europe 36 179 81 252 38 6 19 13 14 Bonds 17 64 28 64 5 1 3 1 7Asia 25 153 30 213 47 18 8 20 11 Bonds 8 19 8 23 3 3 0 0 0Others 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 marketsEmerging 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


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


Appreciation of Local Currency

The External Environment for Developing Countries

May 2008The World Bank

Development EconomicsProspects Group