The External Environment for Developing Countries
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The External Environment for Developing Countries June 2010 The World Bank Development Economics Prospects Group. Overview. CDS spreads have risen by 60 bp or more in 7 European countries. Source: Bloomberg, World Bank. Spreads have risen, but remain close to earlier levels.

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The External Environment for Developing CountriesJune 2010The World BankDevelopment EconomicsProspects Group


Overview


CDS spreads have risen by 60 bp or more in 7 European countries

Source: Bloomberg, World Bank.


Spreads have risen, but remain close to earlier levels

EMBI spreads, index January 1, 2010=100

Source: World Bank, JP Morgan.


Euro Area Crisis


CDS spreads for selected EMsSpreads on credit default swaps

Source: JP Morgan and World Bank data


Spreads on highly-indebted European bonds increasing again

10-year government bond spread over comparable German debt (basis points)

Sources: Bloomberg and DECPG staff calculation


Substantial uncertainty characterizes equity market developments

Dow Jones, DAX and CACI [Left], VIX and VSTOXX indices [Right]

Source: Thomson/Datastream.


OECD developments


Consumer confidence and retail turnoverfall in affected countries**retail sales, ch% (3mma , y/y) [left]; consumer sentiment index, dispersion [right]

Source: National Agencies. ** Greece, Portugal and Spain.


Although exports are recovering, EU growth remains weak


German export orders, export volumesand production reviving in spring 2010 factory orders from abroad, export volumes, industrial production, ch% saar

Source: Eurostat


U.S. indicators point to favorablegrowth outturns for the second quartercapital goods orders, retail sales and export volumes, ch% (3m/3m, saar)

Source: U.S. Department of Commerce


Japanese industrial production catching up

Source: U.S. Department of Commerce


Developing country first quarter growth strong, save for ECA region

Source: Haver Analytics and World Bank data.


Country Focus: Hungary


Fiscal and External Balances – 2010percent of GDP

Source: European Commission, BofA/ML


Composition of debt flows – Hungary(billions of U.S. dollars)

Source: Economist Intelligence Unit


External debt in Hungarypercent of GDP

Source: Moody’s


Industrial Production


Euro Area output remains robust in April on demand for intermediate goods

Source: DECPG


ZEW economic sentiment deteriorated for all markets in June in the aftermath of the sovereign debt crisis

Source: ZEW Survey.


Momentum in China is easing gradually, but remains robust ,while growth in the U.S. stepped up in May

Source: DECPG


International Trade


Exports from some developing regions have returned to pre-crisis levels


Chinese capital goods exports to developing countries


Number of Trade Measures Implemented Worldwide and by the G20

Source: Global Trade Alert


Commodity Prices


Crude oil prices rebound

$/bbl

WTI

Brent

Dubai

Source: Datastream and DECPG.


U.S. oil demand surges (y/y)(3 month moving average)

kb/d

Source: U.S. EIA and DECPG.


Non-OPEC oil production rising

mb/d

Non-OPEC

Non-OPEC x FSU

OPEC

Source: IEA and DECPG.


Raw materials and beverage prices

remain strong in June

(2000=100)

Source: DECPG.


Metals prices stabilize

$/ton

‘000 tons

Aluminum price

LME stocks

Source: Datastreamand DECPG.


Global steel production

(000 tons)

Source: IISI.


International Finance


Capital flows were sluggish in May

Source: DECPG.


European banks have big exposure to Europe’s troubled economies

Total claims by euro-zone banks at the end of 2009 ($ billion)

Sources: The Bank for International Settlements


EM assets rebounded from May sell-off

MSCI EM index in USD [L]; EMBIG bond index [R]

EM bond index [R]

EM equity index [L]

Sources: Bloomberg, JPMorgan, and DECPG staff calculation


Currencies and inflation


Dollar gains vs euro and yen continuesbut China RMB led to short-rally in other units USD per Euro (inverse) [Left] and Yen per USD [right]

USD/Euro (inverse)

yen/USD

Source: Thomson/Datastream.


China RMB rose on an effective basis recently

Currency indexes: USD per RMB; Dollar and RMB effective.

USD per RMB index

China effective

U.S. effective

Source: World Bank data.


Inflation among developing countries (save SAR)converging toward 5% paceheadline consumer price index, ch% (yr-on-yr)

Source: National Agencies.


The External Environment for Developing CountriesJune 2010The World BankDevelopment EconomicsProspects Group


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