Transcript high - Development Studies Association

Shockwatch Bulletin:
Monitoring the impact of the euro zone crisis,
China/India slow-down, and energy price shocks
on lower-income countries
Isabella Massa
DSA Conference
London, 3 November 2012
Outline
• Global macro-economic and financial situation and outlook
• Vulnerability assessment
• Actual impacts (case studies)
• Policy analyisis
2
Economic growth trends and forecasts
• Projections of global GDP growth have been revised downwards.
• Global GDP growth is projected to decline from 3.8% in 2011 to 3.3% in
2012, and to recover to 3.6% in 2013 (IMF 2012).
World GDP growth (%)
6
5
4
3
2
1
0
2010
UNDESA
3
2011
World Bank
2012f
IMF
2013f
OECD
Average
Source: Authors’ calculations based on IMF (2012), World Bank (2012),
OECD (2012), and UNDESA (2012).
Economic growth trends and forecasts
• Euro zone is slipping into recession and in 2012 is expected to register a
–0.4% growth (IMF 2012).
• Italy and Spain are registering the most severe contractions (-2.3% and
-1.5% respectively).
Euro area GDP growth (%)
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
2010
UNDESA
4
2011
World Bank
2012f
IMF
2013f
OECD
Average
Source: Authors’ calculations based on IMF (2012), World Bank (2012),
OECD (2012), and UNDESA (2012).
Economic growth trends and forecasts
• Emerging economies are experiencing major growth slow-downs.
• China’s and India’s growth prospects have been revised downwards in
both 2012 and 2013.
China GDP growth (%)
India GDP growth (%)
12
12
10
10
8
8
6
6
4
4
2
2
0
5
0
2010
2011
UNDESA
World Bank
2012f
IMF
2013f
OECD
Average
2010
2011
UNDESA
World Bank
2012f
IMF
2013f
OECD
Average
Source: Authors’ calculations based on IMF (2012), World Bank (2012),
OECD (2012), and UNDESA (2012).
Economic growth trends and forecasts
• Projections of developing countries’ GDP growth have been revised
downwards.
• Developing countries’ GDP growth is projected to decline from 6.2% in
2011 to 5.3% in 2012, and to slightly increase to 5.6% in 2013 (IMF 2012).
GDP growth in developing countries (%)
8
7
6
5
4
3
2
1
0
2010
UNDESA
6
2011
World Bank
2012f
IMF
2013f
Average
Source: Authors’ calculations based on IMF (2012), World Bank (2012),
and UNDESA (2012).
Private capital flows trends and forecasts
• Net private capital flows to developing countries remain volatile.
• They declined over the period 2010-12, but medium-term prospects are
high.
Net private capital flows to developing countries, 2006-14
1,400
1,200
US$ billion
1,000
800
600
400
200
0
2006
2007
2008
2009
2010
2011e
2012f
2013f
2014f
• However, there are differences across types of private capital flows.
7
Source: Adapted from World Bank (2012).
Private capital flows trends and forecasts
• Portfolio equity flows were among the hardest hit.
• They dropped by 80% in 2011, and are expected to decline further in
2012.
• In 2013 and 2014 they are projected to recover but remain below precrisis levels in 2010.
Portfolio equity inflows to developing countries, 2006-14
150
125
100
US$ billion
75
50
25
0
-25
-50
-75
2006
8
2007
2008
2009
2010
2011e
2012f
2013f
2014f
Source: Adapted from World Bank (2012).
Private capital flows trends and forecasts
• Bond flows were more resilient to external shocks.
• They declined by just 2% between 2010-11.
• They are expected to increase in both 2012 and 2013 before a downturn
in 2014 to values close to those of 2010.
Bond flows to developing countries, 2006-14
140
120
US$ billion
100
80
60
40
20
0
2006
9
2007
2008
2009
2010
2011e
2012f
2013f
2014f
Source: Adapted from World Bank (2012).
Private capital flows trends and forecasts
• Cross-border bank lending to developing countries from European banks
and from some emerging markets experienced important declines
between June 2011 and December 2011.
Cross-border bank lending to
developing countries from European
banks, March 2005-March 2012
Cross-border bank lending to
developing countries from Indian
banks, March 2005-March 2012
3,000
US$ billion
2,500
2,000
1,500
1,000
500
0
2005 Mar.
Jun.
Sep.
Dec.
2006 Mar.
Jun.
Sep.
Dec.
2007 Mar.
Jun.
Sep.
Dec.
2008 Mar.
Jun.
Sep.
Dec.
2009 Mar.
Jun.
Sep.
Dec.
2010 Mar.
Jun.
Sep.
Dec.
2011 Mar.
Jun.
Sep.
Dec.
2012 Mar.
US$ billions
3,500
10
10
9
8
7
6
5
4
3
2
1
0
2005 Mar.
Jun.
Sep.
Dec.
2006 Mar.
Jun.
Sep.
Dec.
2007 Mar.
Jun.
Sep.
Dec.
2008 Mar.
Jun.
Sep.
Dec.
2009 Mar.
Jun.
Sep.
Dec.
2010 Mar.
Jun.
Sep.
Dec.
2011 Mar.
Jun.
Sep.
Dec.
2012 Mar.
4,000
Source: Authors’ calculations based on BIS Consolidated Banking
Statistics.
Private capital flows trends and forecasts
• FDI inflows to developing countries are projected to decline by 17% in
2012.
• They are expected to recover in 2013 and further increase in 2014 to
values above the peak value of 2008.
FDI inflows to developing countries, 2006-14
800
700
US$ billion
600
500
400
300
200
100
0
2006
11
2007
2008
2009
2010
2011e
2012f
2013f
2014f
Source: Adapted from World Bank (2012).
Trade trends and forecasts
• Growth in developing countries’ exports declined from 6.5% in 2011 to
4% in 2012, and is expected to recover to 5.7% in 2013 (IMF 2012).
• Growth in the value of imports into the euro zone slowed during the first
quarter of 2012.
Euro zone imports: monthly year-on-year change, Jan. 2007-May 2012
100%
75%
50%
25%
0%
-25%
2008 Jan.
Feb.
Mar.
Apr.
May.
Jun.
Jul.
Aug.
Sep.
Oct.
Nov.
Dec.
2009 Jan.
Feb.
Mar.
Apr.
May.
Jun.
Jul.
Aug.
Sep.
Oct.
Nov.
Dec.
2010 Jan.
Feb.
Mar.
Apr.
May.
Jun.
Jul.
Aug.
Sep.
Oct.
Nov.
Dec.
2011 Jan.
Feb.
Mar.
Apr.
May.
Jun.
Jul.
Aug.
Sep.
Oct.
Nov.
Dec.
2012 Jan.
Feb.
Mar.
Apr.
May.
-50%
All Extra-EU27
MIC/LIC
SSA
LDC
• Some commodity imports into China began to slow-down in 2012.
12
Source: Authors’ calculations based on data from Eurostat COMEXT
database.
Remittance and aid trends and forecasts
• Remittances to developing countries could decline by 5% or more in
2012 (World Bank 2012).
• More restrictive employment conditions are affecting migrant workers.
• Some EU member states have reduced their aid budgets (e.g. Spain,
Greece).
• Growth in country programmable aid is expected to decline to an
average of 2% between 2011-13, compared to the 5% average growth
during 2001-10 (World Bank 2012).
13
Vulnerability to macro-financial shocks
• We assessed the vulnerability of 57 developing countries (20 LICs and 37
LMICs) to: (i) euro zone crisis; (ii) China/India slow-down
• Vulnerability = Exposure – Resilience
• Exposure indicators:
o dependence on trade with Euro zone
o
o
o
o
o
o
o
dependence on trade with China
dependence on trade with India
FDI dependence
dependence on cross-border bank lending from European banks
aid dependence
dependence on remittances
pegged to euro (yes/no)
• Resilience indicators:
o fiscal balance
o current account balance
o foreign currency reserves
o external debt burden
14
0
3
2
1
15
4
5
LICs
7
6
Gambia
Guyana
Moldova
Mozambique
São Tomé & Principe
Tajikistan
Togo
Cape Verde
Senegal
Albania
Armenia
Cameroon
Ethiopia
Guinea-Bissau
Kyrgyz Rep.
Nicaragua
Niger
Samoa
Tanzania
Ukraine
Vietnam
Belize
Benin
Burundi
Côte d'Ivoire
Egypt
El Salvador
Georgia
Ghana
Honduras
Kenya
Morocco
Nepal
Philippines
Sudan
Tonga
Yemen
Zambia
Fiji
Indonesia
Nigeria
Pakistan
Papua N.G.
Paraguay
Sierra Leone
Bangladesh
Burkina Faso
Cambodia
Guatemala
Mali
Mongolia
Rwanda
Sri Lanka
Swaziland
Syria
Uganda
Bolivia
Vulnerability to macro-financial shocks
Selected LICs/LMICs: 0 to 3 = low; 4 = intermediate; 5 to 7 = high
LMICs
Source: Authors’ elaboration from various sources.
Vulnerability to macro-financial shocks:
high
Country
Exposure indicators
Dependence on trade with:
Euro
zone
China
India
China
and
India
FDI
depend
-ence
Resilience indicators
DependAid
Depend- Pegged
ence on
depend- ence on to euro
crossence
remit(yes /
border bank
tances
no)
lending
from
European
banks
Fiscal
balance
(surplus /
deficit)
Current
account
balance
(surplus /
deficit)
Foreign
currency
reserves
External
debt
burden
Overall
degree of
vulnerability
Cape Verde
high
low
low
low
medium high
high
medium
yes
deficit
deficit
healthy
heavy
Senegal
high
low
high
high
low
medium
high
yes
deficit
deficit
healthy
manageable high
Gambia
high
high
high
high
medium medium
medium
high
no
deficit
deficit
healthy
manageable high
Mozambique
high
medium low
medium high
high
high
low
no
deficit
deficit
healthy
manageable high
Tajikistan
high
low
low
low
medium
high
no
deficit
deficit
unhealthy
heavy
high
Togo
medium low
medium medium low
high
medium
high
yes
deficit
deficit
healthy
heavy
high
Guyana
high
low
low
low
medium low
high
high
no
deficit*
deficit
healthy
heavy
high
Moldova
high
low
low
low
medium high
medium
high
no
deficit*
deficit
healthy
heavy
high
São Tomé/Principe
high
low
low
low
medium high
high
low
no
deficit
deficit
healthy
heavy
high
Ethiopia
high
high
low
high
low
low
medium
low
no
deficit*
deficit
unhealthy
manageable high
Guinea-Bissau
low
low
high
high
low
low
medium
medium
yes
deficit*
deficit
healthy
heavy
high
Kyrgyz Republic
low
low
low
medium high
medium
medium
high
no
deficit
deficit
healthy
heavy
high
Niger
high
low
low
low
low
medium
low
yes
deficit*
deficit
healthy
manageable high
Tanzania
high
high
medium high
medium high
medium
low
no
deficit
deficit
healthy
manageable high
Albania
high
medium low
medium medium high
medium
high
no
deficit
deficit
healthy
manageable high
Armenia
high
low
low
medium medium
medium
high
no
deficit
deficit
healthy
heavy
Cameroon
high
medium medium high
Low
high
low
low
yes
deficit*
deficit
healthy
manageable high
Nicaragua
medium low
low
low
high
medium
medium
high
no
deficit*
deficit
healthy
heavy
high
Samoa
low
low
low
low
low
high
medium
high
no
deficit
deficit
healthy
heavy
high
Ukraine
high
medium medium medium medium high
low
medium
no
deficit
deficit
healthy
heavy
high
Vietnam
high
high
low
medium
no
deficit
deficit
unhealthy
manageable high
16
low
low
low
high
low
high
high
medium medium
high
high
Source: Authors’ elaboration from various sources.
Vulnerability to macro-financial shocks:
intermediate
Country
Exposure indicators
Dependence on trade with:
Euro
zone
China
India
China
and
India
Resilience indicators
FDI
depend
-ence
DependAid
Depend- Pegged
ence on
depend- ence on to euro
crossence
remit(yes /
border bank
tances
no)
lending
from
European
banks
Fiscal
balance
(surplus /
deficit)
Current
account
balance
(surplus /
deficit)
Foreign
currency
reserves
External
debt
burden
Overall
degree of
vulnerability
Benin
medium high
medium high
low
low
medium
medium
yes
deficit*
deficit
healthy
manageable intermediate
Burundi
high
low
low
low
low
low
high
low
no
deficit
deficit
healthy
manageable intermediate
Kenya
high
low
low
low
low
high
medium
medium
no
deficit
deficit
healthy
manageable intermediate
Nepal
medium low
high
high
low
low
medium
high
no
deficit*
deficit
healthy
manageable intermediate
Belize
medium low
low
low
medium high
low
medium
no
deficit*
deficit**
healthy
heavy
Côte d'Ivoire
high
low
low
low
Low
high
low
low
yes
deficit
surplus
healthy
manageable intermediate
Egypt
high
low
medium high
Low
high
low
medium
no
deficit
deficit**
healthy
manageable intermediate
El Salvador
medium low
low
low
Low
medium
low
high
no
deficit
deficit
healthy
heavy
intermediate
Georgia
high
low
low
medium medium medium
medium
medium
no
deficit*
deficit
healthy
heavy
intermediate
Ghana
high
low
medium medium medium high
medium
low
no
deficit
deficit
healthy
manageable intermediate
Honduras
high
low
low
low
high
no
deficit
deficit
healthy
manageable intermediate
Morocco
high
low
medium medium low
high
low
medium
no
deficit
deficit
healthy
manageable intermediate
Philippines
high
high
low
high
low
medium
low
high
no
deficit
surplus
healthy
manageable intermediate
Sudan
low
high
low
high
low
low
low
medium
no
deficit
deficit
unhealthy
manageable intermediate
Tonga
low
low
low
low
low
low
high
high
no
deficit
deficit
healthy
manageable intermediate
Yemen
medium high
high
high
low
medium
low
medium
no
deficit
deficit
healthy
manageable intermediate
Zambia
low
low
high
high
high
medium
low
no
deficit
surplus
healthy
manageable intermediate
17
high
low
medium medium
intermediate
Source: Authors’ elaboration from various sources.
Vulnerability to macro-financial shocks:
low
Country
Exposure indicators
Dependence on trade with:
Euro
zone
China
China
and
India
Resilience indicators
DependAid
Depend- Pegged
ence on
depend- ence on to euro
crossence
remit(yes /
border bank
tances
no)
lending
from
European
banks
Fiscal
balance
(surplus /
deficit)
Current
account
balance
(surplus /
deficit)
Foreign
currency
reserves
External
debt
burden
Overall
degree of
vulnerability
Bangladesh
high
medium medium low
medium
low
high
no
deficit
surplus
healthy
manageable low
Burkina Faso
medium low
low
low
low
medium
medium
low
yes
deficit
deficit**
healthy
manageable low
Cambodia
high
low
low
low
medium low
medium
medium
no
deficit*
deficit
healthy
manageable low
Mali
medium low
low
low
low
Medium
medium
medium
yes
deficit*
deficit
healthy
manageable low
Rwanda
high
medium low
medium low
medium
medium
low
no
deficit*
deficit
healthy
manageable low
Uganda
high
low
low
medium medium medium
medium
medium
no
deficit
deficit
healthy
manageable low
Guatemala
medium low
low
low
Low
low
low
high
no
deficit
deficit**
healthy
manageable low
Mongolia
medium high
low
high
high
medium
medium
medium
no
surplus
deficit
healthy
manageable low
Sri Lanka
high
low
medium medium low
medium
low
medium
no
deficit
deficit**
healthy
manageable low
Swaziland
high
low
low
low
low
low
low
medium
no
deficit
deficit
healthy
manageable low
Syria
high
low
low
low
low
low
low
medium
no
deficit
deficit
healthy
manageable low
Sierra Leone
low
low
low
low
low
medium
medium
medium
no
deficit
deficit
healthy
manageable low
Fiji
low
low
low
low
medium low
low
medium
no
deficit
deficit
healthy
manageable low
Indonesia
medium high
medium high
low
low
low
no
deficit*
surplus
healthy
manageable low
Nigeria
high
low
high
medium low
low
medium
no
surplus
surplus
healthy
manageable low
Pakistan
high
medium low
medium low
medium
low
medium
no
deficit
surplus
healthy
manageable low
Papua New Guinea
medium medium low
medium low
medium
medium
low
no
surplus
deficit
healthy
heavy
Paraguay
medium low
low
high
low
medium
no
surplus
deficit
healthy
manageable low
Bolivia
medium medium low
medium
medium
no
surplus
surplus
healthy
manageable low
18
low
India
FDI
depend
-ence
low
high
low
medium
medium medium low
low
Source: Authors’ elaboration from various sources.
Vulnerability to macro-financial shocks
• Poorest countries are more vulnerable to macro-financial shocks: 45% of LICs
are highly vulnerable versus 32% of LMICs.
• Most important transmission channels of shocks appear to be (i) trade and
financial linkages with European economies; (ii) dependence on remittances;
(iii) trade linkages with China and (mainly in the case of LMICs) India.
• Almost all countries have high fiscal and current account deficits.
• The most highly vulnerable countries are Senegal and Cape Verde.
• Several countries with an intermediate degree of vulnerability have weak trade
linkages with emerging powers.
• Some countries with a low degree of vulnerability are particularly resilient.
19
Case studies: actual impacts
• Actual impacts of the euro zone crisis and China/India slow-down are
becoming increasingly apparent, with more expected.
• in Kenya:
o horticultural and tea exports declined by about 10% and 3% respectively
in the first six months of 2012
• in Zambia:
o copper exports increased at a slower pace in 2011 and 2012 (in
estimates) than in 2009
o exports to European partners declined in 2011
o exports to China increased at a lower rate in 2011 (42%) than in 2010
(137%)
o Lusaka Stock Exchange All Share Index dropped in May 2012
• in Cambodia:
o ODA declined by more than 50% between 2010-12
20
Policy analysis
• Developing countries (LICs) should be concerned since:
 they have become more open
 global shocks have become more frequent with significant effects
on growth and development outcomes
 links with emerging powers have increased
 buffers have deteriorated after 2008-09 crisis
• However, we need to qualify these concerns:
 LICs are still growing, and faster than developed economies
 so far effects of the combined global shocks are smaller than those
of the 2008-09 crisis
 better policies have created more fiscal space and slightly more
diversified economies in this decade than previously
 not all countries are vulnerable to all shocks
 many shocks are interdependent with some cancelling each other
out
21
Policy analysis
• What should developing countries do?
 need to monitor external shocks and their possible effects more
than was the case in the past
 introduce appropriate policy responses, especially targeted
measures to raise productivity
• How can donors help?
 safeguarding the future of shock facilities
 enhancing coordination and coherence amongst shock facilities
 encouraging the monitoring of effects of external shocks on
developing countries
22
Thank you!
[email protected]
23
1
Bolivia
7
6
5
4
3
Fiji
Indonesia
Nigeria
Pakistan
Papua N.G.
Paraguay
Sierra Leone
Bangladesh
Burkina Faso
Cambodia
Guatemala
Mali
Mongolia
Rwanda
Sri Lanka
Swaziland
Syria
Uganda
Belize
Benin
Burundi
Côte d'Ivoire
Egypt
El Salvador
Georgia
Ghana
Honduras
Kenya
Morocco
Nepal
Philippines
Sudan
Tonga
Yemen
Zambia
Albania
Armenia
Cameroon
Ethiopia
Guinea-Bissau
Kyrgyz Rep.
Nicaragua
Niger
Samoa
Tanzania
Ukraine
Vietnam
Gambia
Guyana
Moldova
Mozambique
São Tomé & Principe
Tajikistan
Togo
Cape Verde
Senegal
Vulnerability to macro-financial shocks
Selected LICs/LMICs: 0 = low, 7 = high
2
0
LICs
24
LMICs
Source: Authors’ elaboration from various sources.