Transcript Developing - World Bank

Global
Development
Finance 2004
Harnessing Cyclical Gains
for Development
Washington DC
April 2004
Outlook for the global economy
 The global recovery has found firm footing,
and is largely driven by rebound in investment
 Developing countries continue to grow faster
than high-income countries; improved macro
policies key to this success
 Global growth likely peaks this year and the
prospects are for somewhat slower growth in
2005
Capital stock adjustment drives the cycle
Percent
4.0
World GDP growth
Contribution of
investment
3.7
3.0
3.1
3.0
2005
2006
2.6
2.1
1.8
1.4
Other contributions
1998
1999
2000
2001
2002
Source: World Bank
2003
2004
Momentum of global economy at peak
World industrial production and merchandise export volumes, excludes China, 3m/3m saar
20
Forecast
18
15
Exports
13
10
8
5
3
Industrial
production
0
-3
-5
-8
-10
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Source: World Bank, DECPG
Jul-03
Jan-04
Jul-04
Commodity prices are soaring
Petroleum and non-energy weighted price indices, current US dollars, 1990=100.
150
140
Petroleum
130
120
110
100
90
Non-energy
80
70
60
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Source: World Bank, DECPG
Jul-03
Jan-04
Jul-04
…yet inflation remains subdued
Consumer price inflation, median for Developing- and GDP weighted mean for High-income.
25
20
15
Developing
10
5
High-income
0
Jan91
Jan92
Jan93
Jan94
Jan95
Jan96
Jan97
Jan98
Jan99
Jan00
Source: World Bank, DECPG
Jan01
Jan02
Jan03
Jan04
Interest rates continue to be low
Central bank policy rates
7
Percent
6
5
4
Euro Zone
3
2
United States
1
Japan
0
Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04
Source: National Agencies
Trade: Developing countries outperform OECD
Exports and imports (GNFS), 2003, percentage change
23.6
East Asia & Pacific
21.1
13.2
South Asia
16.4
Europe & Central
Asia
14.1
13.5
Latin America &
Caribbean
1.1
5.4
Middle East &
North Africa
6.4
7.3
4.3
Sub-Saharan Africa
1.7
Imports
Exports
2.2
1.3
High-income OECD
0
5
10
Percent
15
Source: World Bank
20
25
Developing economies are key to growth
Industrial production excl. construction indices, seasonally adjusted, Jan 2000=100.
120
115
Developing
excl. China
110
105
High-income
100
95
90
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
* Kinks stem from shifting Lunar New Year not accounted for by seasonal adjustment.
Source: World Bank, DECPG
Developing economies are key to growth
Industrial production excl. construction indices, seasonally adjusted, Jan 2000=100.
170
160
China*
150
140
130
120
Other Developing
110
High-income
100
90
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
* Kinks stem from shifting Lunar New Year not accounted for by the seasonal adjustment.
Source: World Bank, DECPG
Policies have fostered environment for
growth
Uptrend in Developing country growth
6
All Developing 1990s
2003
GDP
3.4
4.8
Cont. of Inv.
0.6
2.6
5
4
3
CAB
-1.4
1.1
2
MFN Tariffs
25.4
13.5
Fiscal Balance
-7.1
-3.6
Inflation
8.4
3.9
1
0
1990
1992
1994
1996
1998
2000
2002
2004
2006
Prospects for slower growth in 2005
6.0
2002 2003 2004 2005 2006
GDP growth
OECD countries
1.4
2.0
3.1 2.6 2.5
Developing
3.4
4.8
5.4 5.2 5.0
East Asia
6.7
7.7
7.4 6.7 6.3
ECA
4.6
5.5
4.9 4.8 4.7
-0.6
1.3
3.8 3.7 3.5
Mid-East &
North Africa
3.3
5.1
3.7 3.9 4.0
South Asia
4.3
6.5
7.2 6.7 6.5
Sub-Saharan
Africa
3.3
2.4
3.4 4.2 3.9
5.0
Developing countries
4.0
3.0
Latin America
2.0
1.0
OECD
0.0
2002
2003
2004
2005
2006
Source: World Bank
Policy challenges
 High-income countries: pursue fiscal adjustment,
orderly realignment of current account imbalances and
deliberate transition to higher interest rates.
 Low- and middle-income countries: use current
favorable environment to consolidate fiscal balances,
and avoid excessive accumulation of short-term debt.
Per capita income growth and population in developing
countries (1998 – 2003).
1,800
Average Population (Mn.), 1998-2003
1,638
1,600
1,428
1,400
1,200
1,000
800
605
600
446
400
381
325
200
0
Number of
countries
Falling
(16)
0 and 1%
(8)
1% and 2%
(16)
2% and 3%
(16)
Per capita income growth rate (%), 1998-2003
3% and 4%
(14)
Above 4%
(14)
Developing countries remain net capital
exporters to the developed world
Developing countries’ current account balance
$ billion
80
Percent
1.5
60
1.0
40
0.5
20
0
-20
-40
-60
0.0
1997
1998
1999
2000
2001
2002
2003
-0.5
CA as a share of GDP (right axis)
-1.0
-80
-100
-120
-1.5
-2.0
Foreign exchange reserves have risen sharply,
especially in East Asia
$ billion
EAP
Developing countries
1200
1000
800
600
400
200
0
1996
1997
1998
1999
2000
2001
2002
2003
Developing countries’ external liability
position has improved
Selected debt indicators
1999
Percent
160
2003
145.8
140
120
98.2
100
80
60
40
44.0
36.8
21.8
20
15.0
0
Debt/GDP
Debt/Exports
Debt
service/Exports
Private capital flows recovered in 2003
…but remain well below 1997 peak
$ billion
350
$286 in 1997
300
250
Net private flows
$200 in 2003
200
150
100
50
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003*
Bond issuance and ST bank lending
lead the recovery
$ billion
250
Net private equity flows
200
150
Net private debt flows
100
50
0
-50
1995
1996
1997
1998
1999
2000
2001
2002
2003
The risk premium on developing country
debt has declined steadily
938 points (Sep., 2002)
Basis points
1000
900
EMBIG spreads
800
700
424 points (Mar., 2004)
600
500
400
300
Jan-02
May-02
Sep-02
Jan-03
May-03
Sep-03
Jan-04 Mar-04
After 1990s surge, recent FDI flows are down
Net FDI inflows
$ billion
200
All developing countries
180
160
140
120
100
Latin America
80
60
40
20
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003*
Despite FDI concentration, Poor
Countries receive sizeable share
FDI-GDP Ratio
2002
3.0
2003
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
Developing
Countries
Least Developed
Countries
Sub-Saharan Africa
Aid has started to increase
…but much more effort is needed
OECD DAC nominal ODA flows
As % of OECD GNI
0.36
0.34
0.32
Monterrey target, 2006
0.3
0.28
0.26
0.24
0.22
0.2
1990
1992
1994
1996
1998
2000
2002
2004
2006
Trade finance is a key source of finance
for less creditworthy countries
Trade finance by commercial banks, by investment rating, 1980-2003
Percent of total bank lending
Non-investment grade and non-rated
80
60
Investment
grade
40
20
0
198082
198385
198688
198991
199294
199597
199800
200103
Remittances are a growing and stable source
of finance, especially in poor countries
Remittances as % of GDP
2.9
1.3
1.0
Low-income
Lower middleincome
Upper-middle
income
International investment in developing country
infrastructure has declined since 1997
$ billion
120
Total international investment in
developing country infrastructure
100
80
60
40
Latin America
20
East Asia
0
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Concluding messages
1. Developing countries must maintain improvement in
fundamentals, and avoid excessive debt accumulation
2. More effort is needed to expand aid flows
3. Sustainability of private capital flow recovery depends on
careful management of developed country macro
imbalances