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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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slide1
The External Environment for Developing CountriesJanuary 2009The World BankDevelopment EconomicsProspects Group
global industrial production plummets into 4 th quarter of 2008 manufacturing production ch saar
Global industrial production plummets into 4th quarter of 2008...manufacturing production, ch% (saar)

Developing

World

OECD

Source: DEC Prospects Group.

slide3
...while worries about recession and banks push markets lower in January equity market indices (LCU)* Sep-15-2008 = 100.

DJIA (USA)

DAX (Germany)

MSCI (Emerging Markets)

TOPIX (Japan)

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

u s employment losses in 2008 sum to 2 6 million worst since 1945 change in non farm employment 000
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.

slide6
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.

slide7
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.

slide8
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.

slide9
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.

slide10
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.

slide11
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 area manufacturing production ch saar
Production now in sharp decline across the Euro Areamanufacturing production, ch% (saar)

Germany

Euro Area

Italy

France

Source: Eurostat.

slide13
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.

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

Developing countries

High-income

Source: Thomson/Datastream, DECPG.

east asia and central and eastern europe hit hardest real ip 3m 3m saar
East Asia and Central and Eastern Europe hit hardestreal IP (3m/3m saar)

ECA

East Asia, excl China

Source: Thomson/Datastream, DECPG.

dramatic ip contraction in export intensive economies real ip 6m 6m saar
Dramatic IP contraction in export intensive economiesreal IP (6m/6m saar)

Czech Republic

Taiwan

Hungary

Turkey

Korea

Source: Thomson/Datastream, DECPG.

slide19
Major OECD imports contract in step with domestic demandimport volumes: U.S, Japan, Germany and U.K. ch% 3mma y/y

Germany

U.K.

Japan

United States

Source: National Agencies through Thomson/Datastream.

developing exports in decline export volumes china india mexico and jordan ch 3mma y y
Developing exports in decline export volumes: China, India, Mexico and Jordan ch% 3mma y/y

China

India

Mexico

Jordan

Source: National Agencies through Thomson/Datastream.

u s trade balance improves sharply in november on plummeting oil price
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 appear to stabilize amid opec production cuts
Oil prices appear to stabilize amid OPEC production cuts

$/bbl

mb/d

OPEC-11 Production (x Angola) [R]

Oil price [L scale]

Source: IEA and DECPG Commodities Group.

growth in u s oil demand yr yr
Growth in U.S. Oil Demand (yr/yr)

kb/d

Source: IEA and DECPG Commodities Group.

wti futures prices nymex
WTI Futures Prices - NYMEX

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

$/bbl

Aug 29

Sep 30

Oct 31

Jan 15 09

Dec 24

Source: NYMEX and DECPG Commodities Group.

slide27

Agriculture price declines begin to moderate

2000=100

Source: Datastream and DECPG Commodities Group.

metal prices rebound slightly on index rebalancing
Metal prices rebound slightly on index rebalancing

$/ton

‘000 tons

Copper price

LME stocks

Source: LME and DECPG Commodities Group.

global steel production plunging
Global steel production plunging

mn tons

Source: Datastream and DECPG Commodities Group.

equities post modest gains in december percentage change in local currency
Equities post modest gains in Decemberpercentage change (in local currency)

Nov

Dec

Oct

2008

Source: Bloomberg and DECPG Finance Team.

slide33
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.

slide35
Dollar falls on Fed rate cutuntil ECB reduction seen as sure USD per Euro (inverse) [Left] and Yen per USD [right]

USD/Euro (inverse)

yen/USD

Source: Thomson/Datastream.

slide36
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
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.

slide38
The External Environment for Developing CountriesJanuary 2009The World BankDevelopment EconomicsProspects Group
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