The External Environment for Developing Countries
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The External Environment for Developing Countries January 2009 The World Bank Development Economics Prospects Group. Global industrial production plummets into 4 th quarter of 2008... manufacturing production, ch% (saar). Developing. World. OECD. Source: DEC Prospects Group.

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The External Environment for Developing CountriesJanuary 2009The World BankDevelopment EconomicsProspects Group

Global industrial production plummets into 4th quarter of 2008...manufacturing production, ch% (saar)




Source: DEC Prospects Group.

...while worries about recession and banks push markets lower in January equity market indices (LCU)* Sep-15-2008 = 100.


DAX (Germany)

MSCI (Emerging Markets)

TOPIX (Japan)

Source: Thomson/Datastream, Morgan Stanley (*USD index).

Industrial countries

U.S. employment losses in 2008 sum to 2.6 million...worst since 1945change in non-farm employment, ‘000

3mma change

monthly change

Source: U.S. Department of Labor.

Falling exports, orders and production pressure U.S. GDPexport volumes, durable goods orders and IPmfg, ch% saar

Export volumes [R]

Production [L]

Durable goods orders [R]

Source: Department of Commerce, Federal Reserve.

Interbank market rates- and yield on ten-year note easing Fed Funds target- and effective rates; Libor and T-note 10 yr

LIBOR 6 months

T-note 10-year

Fed Funds Target

Fed Funds Effective

Source: Thomson/Datastream.

Japan’s exports and production point to severe 4th quarter downturnexport volumes and manufacturing output, ch% saar

Export volumes [R]

Industrial production [L]

Source: Bank of Japan and Japan Cabinet Office.

Household spending turns to the doldrums in the last months of 2008household expend, retail sales [L]; Tokyo consumer confidence [R]

HH spending [L]

Retail sales [L]

Consumer confidence [R]

Source: Japan Cabinet Office.

Yen strength on unwinding “carry trades” supports BOJ ease Yen/USD rate (inverse) [right]; TIBOR and JGB 10-year [left]

JGB- ten year [L]

Yen/dollar (inverse) [R]

TIBOR 6 months [L]

Source: Thomson/Datastream.

European confidence plummets while ECB asesses economic damageEuro Area consumer confidence [L]; IFO overall [R]

IFO overall [R]

EC Consumer confidence [L]

Source: Eurostat-- Thomson/Datastream.

Production now in sharp decline across the Euro Areamanufacturing production, ch% (saar)


Euro Area



Source: Eurostat.

Euro interbank rates fall quickly adding pressure on the currency Euribor and Bund- 10 yr [L]; USD per Euro [R]

EURIBOR 6 months [L]

Bund, ten-year [L]

USD per Euro [R]

Source: Thomson/Datastream.

Industrial production

Developing countries’ IP plunges, mirroring high-income countriesreal IP (3m/3m saar)

Developing countries


Source: Thomson/Datastream, DECPG.

East Asia and Central and Eastern Europe hit hardestreal IP (3m/3m saar)


East Asia, excl China

Source: Thomson/Datastream, DECPG.

Dramatic IP contraction in export intensive economiesreal IP (6m/6m saar)

Czech Republic





Source: Thomson/Datastream, DECPG.

International trade

Major OECD imports contract in step with domestic demandimport volumes: U.S, Japan, Germany and U.K. ch% 3mma y/y




United States

Source: National Agencies through Thomson/Datastream.

Developing exports in decline export volumes: China, India, Mexico and Jordan ch% 3mma y/y





Source: National Agencies through Thomson/Datastream.

U.S. trade balance improves sharply in November on plummeting oil price

goods balance, and oil- and non-oil balances ($bn)

Oil balance

Non-oil balance

Goods balance

Source: Department of Commerce.

Oil prices

Oil prices appear to stabilize amid OPEC production cuts



OPEC-11 Production (x Angola) [R]

Oil price [L scale]

Source: IEA and DECPG Commodities Group.

Growth in U.S. Oil Demand (yr/yr)


Source: IEA and DECPG Commodities Group.

WTI Futures Prices - NYMEX

Monthly contract prices to Dec 2013 on select dates in 2008-09


Aug 29

Sep 30

Oct 31

Jan 15 09

Dec 24

Source: NYMEX and DECPG Commodities Group.

Non-oil commodity prices

Agriculture price declines begin to moderate


Source: Datastream and DECPG Commodities Group.

Metal prices rebound slightly on index rebalancing


‘000 tons

Copper price

LME stocks

Source: LME and DECPG Commodities Group.

Global steel production plunging

mn tons

Source: Datastream and DECPG Commodities Group.

International Finance

A difficult year for emerging market capital flows

Source: DECPG Finance Team.

Equities post modest gains in Decemberpercentage change (in local currency)





Source: Bloomberg and DECPG Finance Team.

Sharp widening in EM bond spreads at year-end 2008 Yen/USD rate (inverse) [right]; TIBOR and JGB 10-year [left]

EMBIG annual retruns [Left]

EMBIG spread [Right]

Source: JPMorgan-Chase and DECPG Finance Team.


Dollar falls on Fed rate cutuntil ECB reduction seen as sure USD per Euro (inverse) [Left] and Yen per USD [right]

USD/Euro (inverse)


Source: Thomson/Datastream.

Interest differentials well in favorof stronger euro since November USD Libor and EURIBOR (6 months), percent

EURIBOR 6 months

USD LIBOR 6 months

Source: Thomson/Datastream.

Dollar mixed against EM currencies LCU per USD indexes, Sept-15 2008=100 [*increase = weaker LCU]

Turkish lira

Brazilian real

Korean won

Russian rouble

Source: Thomson/Datastream.

The External Environment for Developing CountriesJanuary 2009The World BankDevelopment EconomicsProspects Group

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