App Annie & MEF: Emerging Markets and Growth in the Global App Economy
Emerging Markets And World Economy
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Transcript of Emerging Markets And World Economy
1
EM and the World Economy:Something is Different this Time
Visit to the Central Bank of PeruLeonardo Leiderman
October 17, 2002
2
Flight to Quality – Increased Risk Aversion
Dollar Term Returns of Various Assets
-33%
-18%
7%
11%
13%
-40%
-30%
-20%
-10% 0% 10%
20%
World stock index (DJ) (YoY)
S&P500 (YoY)
US Housing (YoY)
United States GovernmentBonds Total Return Index (YTD)
Gold (YoY)
3
Secondary Market Bond Spreads
703
756
731
981
453
871
734
904
55
89 78
81
0
200
400
600
800
1,000
1,200
19992000
2001
2002 YTD
Spr
ead
in B
asis
Poi
nts
EMBI+ High Yield Investment grade
An increase of EM and High Yield Bond Spreads
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Portfolio Flows are Drying Up
EM Net Capital Flows
-100
-50
0
50
100
150
200
1994
1995
1996
1997
1998
1999
2000
2001
2002
(*)
2003
(*)
(*) IMF Forecast
Bil
lio
ns
of
US
$
Private FDI Flows Private Portfolio Investment
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Capital Flows Did Not Recover From the 1997-98 Crisis
Total Private Capital Flows (Net)
-60-40-20
020406080
100120140
1994
1995
1996
1997
1998
1999
2000
2001
2002
(*)
2003
(*)
(*) IMF Forecast
Bil
lio
ns
of
US
$
Developing Asia LATAM
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EM Financing by Type of Issuances
82.4 80.5 89
44.2
23.2 41.8 11.2
8.9
58
94.2
62
23.2
0
50
100
150
200
250
19992000
2001
2002 YTD
Bil
lio
ns
of
US
$
Bonds Equities Loans
Funds Available to Emerging Markets Have Dried Up
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Reasons:
1. Burst of Nasdaq Bubble.2. Geopolitical risks.3. Loss of investor’s
confidence (corporate accounting scandals).
4. A doubtful US recovery.
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US Stock Indexes
0
50
100
150
200
250
300
350
400
1997
.01
1997
.07
1998
.01
1998
.07
1999
.01
1999
.07
2000
.01
2000
.07
2001
.01
2001
.07
2002
.01
2002
.07
Ind
ex
, 19
97.
01=
10
0
S&P500 NASDAQ
A Reflection of Fundamental Problems
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Policy is in Place and Has Been Flexible
Fed Funds Rate in Real Terms (Interest rate less expected inflation based on Univ
of Michigan survey)
-2%
-1%
0%
1%
2%
3%
4%
5%
90.0
191
.01
92.0
193
.01
94.0
195
.01
96.0
197
.01
98.0
199
.01
2000
.01
2001
.01
2002
.01
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The Fiscal Stance has Gone From Surplus to Deficit
US Budget Surplus(+)/Deficit(-)
0.6%
1.5%
-0.2%
-2.6%-3.0%
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
1999 2000 20012002(*)
(*) IMF Forecast
% of GDP
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Growth is Well Below Potential
US Rate of GDP Growth
4.1%3.8%
0.3%
2.2%
2.6%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
1999 2000 20012002(*)
2003(*)
(*) IMF Forecast
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Is There Any Hope From Europe and Japan?
Rates of GDP Growth
2.8%
3.5%
1.6%
1.1%
2.3%
0.8%
2.4%
-0.3%-0.5%
1.1%
-1.0%-0.5%0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%
1999 2000 20012002(*)
2003(*)
(*) IMF ForecastEurope Japan
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EM: Adverse Conditions in 2002…
1.Flight to quality.2.Anemic world growth3.Commodity prices.
…With No Help From Internal EM Factors:
1.Argentina2.Brazil3.Rest of LATAM4.Turkey
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Commodity Price Indexes, US$ Terms
40
60
80
100
120
140
160
180
200
1980
M1
1981
M7
1983
M1
1984
M7
1986
M1
1987
M7
1989
M1
1990
M7
1992
M1
1993
M7
1995
M1
1996
M7
1998
M1
1999
M7
2001
M1
2002
M7
Non-Fuel Commodities indexAverage Petroleum Spot index
The Majority of Non-Oil Commodity Prices Remain Depressed
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EM: Something is Different Now—Exchange Rate Flexibility…
Currency Depreciation(+)/Appreciation(-) Against the US$
-16%
-11%
-7%
-5%
-2%
8%
8%
12%
20%
37%
266%
-50% 0% 50%
100%
150%
200%
250%
300%
Czech Rep.
Hungary
Indonesia
S. Korea
Thailand
Mexico
Russia
Israel
Colombia
Brazil
Argentina
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EM: Something Else is Different This Time-SELECTIVITY
Global Stock Indexes, US$ Terms, YTD
-65%
-58%
-31%
-19%
-6%
1%
13%
13%
21%
30%
32%
-80%
-60%
-40%
-20% 0% 20%
40%
Argentina
Brazil
Israel
Mexico
Colombia
S. Korea
Thailand
Hungary
Indonesia
Czech Rep.
Russia
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Selectivity Applies to the Real Sector (Growth) As Well
Industrial Production, YoY Rate of Change
-17.0%
-9.2%
-1.8%
-1.2%
3.0%
3.4%
5.1%
8.9%
9.6%
11.0%
12.7%
-20.
0%
-15.
0%
-10.
0%
-5.0
%
0.0%
5.0%
10.0
%
15.0
%
Venezuela
Argentina
Israel
Colombia
Brazil
Russia
Hungary
S. Korea
Thailand
Czech Rep.
China
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EM and the World Economy:Something is Different this Time
Visit to the Central Bank of PeruLeonardo Leiderman
October 17, 2002