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![Page 1: The External Environment for Developing Countries May 2008 The World Bank Development Economics Prospects Group.](https://reader034.fdocuments.us/reader034/viewer/2022042616/56649c755503460f94929514/html5/thumbnails/1.jpg)
The External Environment for Developing Countries
May 2008The World Bank
Development EconomicsProspects Group
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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
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...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
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Industrial countries
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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
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Households reticent to spend as wage growth slows... confidence ebbs
Personal income and consumption expenditures, ch% saar
2
4
6
8
10
12
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08
Source: U.S. Department of Commerce.
Personal consumption expenditure
Personal income
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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
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08
Source: U.S. Department of Commerce.
PPI
Import price
CPI
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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
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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]
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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-08
35.0
37.5
40.0
42.5
45.0
47.5
50.0
Source: Bank of Japan and Cabinet Office.
Tankan(left)
Consumer confidence (right)
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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
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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.
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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.
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Industrial production
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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
Forecast
Old Forecast
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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
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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
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-0815
20
25
30
35
40
Source: Thomson/Datastream.
Production
Exports
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International trade
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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
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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
-5
0
5
10
15
2001M1 2002M1 2003M1 2004M1 2005M1 2006M1 2007M1 2008M1
Source: Thomson/Datastream, DECPG calculations.
Real yuan / Euro XR
Real yuan / USD XR
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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]
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Oil prices
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Oil prices soar on expectations of tight markets
30
40
50
60
70
80
90
100
110
120
130
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08
2400
2500
2600
2700
2800
$/bbl million bbl
WB Oil price [L scale]
OECD stocks [R]
Source: IEA and DECPG Commodities Group.
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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.
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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
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Non-oil commodity prices
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Rice prices surge on policy decisions resulting from fear of shortages
400
600
800
1000
1200
1400
Jan-06 Jan-07 Jan-08
200
300
400
500
600
700
800
900
1000
1100
c/bushel $/ton
Wheat
Rice
Source: Datastream and DECPG Commodities Group.
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Copper prices remain firm on low stocks and supply problems
3000
4000
5000
6000
7000
8000
9000
Jan-05 Jan-06 Jan-07 Jan-08
25
50
75
100
125
150
175
200
225
$/ton ‘000 tonsCopper price
LME stocks
Source: LME and DECPG Commodities Group.
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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
Source: Datastream and DECPG Commodities Group.
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International Finance
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Bank lending falls sharply in April
Source: DECPG Finance Team.
Gross capital flows to emerging markets
$ billion
Q1 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 5
E. Europe 36 179 81 252 38 6 19 13 14
Bonds 17 64 28 64 5 1 3 1 7
Asia 25 153 30 213 47 18 8 20 11
Bonds 8 19 8 23 3 3 0 0 0
Others 12 45 16 60 11 2 4 5 3
2006 2007 2008
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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
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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 markets
Emerging markets
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Currencies
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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 higher on expectations Fed rate cuts finished for near term USD per Euro (inverse) [Left] and Yen per
USD [right]
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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
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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
Source: Thomson/Datastream.
Appreciation of Local Currency
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The External Environment for Developing Countries
May 2008The World Bank
Development EconomicsProspects Group