Transcript triple crises - UNCTAD Paragraph 166 Course

The impacts of the international crises
on the economies of the LDCs
GIOVANNI VALENSISI
UNCTAD - Division for Africa, Least Developed Countries
and Special Programmes
Short courses for delegates, Geneva, 6 July 2012
Presentation structure
• LDCs before the storm: the so-called boom
• The triple crisis: food, fuel and finance
• Channels of transmission and factors of
resilience
• Key policy lessons
Presentation structure
• LDCs before the storm: the so-called boom
• The triple crisis: food, fuel and finance
• Channels of transmission and factors of
resilience
• Key policy lessons
Growth rate of real GDP per capita (const 2005 USD)
8
6
4
2
20
10
20
08
20
06
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
-2
19
82
0
19
80
LDCs witnessed a
significant growth
acceleration during
the early and mid
2000s.
-4
-6
Developed economies
Developing economies excluding LDCs
LDCs
Number of LDCs with negative real GDP growth in each year
16
14
12
10
8
6
4
2
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
0
Though in general oil &
mineral exporters benefited
disproportionately, growth
resumption was relatively
broad-based.
Real GDP per capita in LDCs relative to other country groups
(const. 2005 USD)
2.5%
45%
40%
2.0%
35%
30%
1.5%
25%
20%
1.0%
15%
10%
0.5%
5%
0.0%
0%
70 9 72 9 74 9 76 9 78 9 80 9 82 9 84 9 86 9 88 9 90 9 92 9 94 9 96 9 98 0 00 0 02 0 04 0 06 0 08
9
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2
2
2
2
2
Developed economies
Developing economies excl. LDCs (right scale)
Nonetheless, in spite of rapid and relatively stable growth in the
2000s, still LONG-TERM INCOME DIVERGENCE.
Even during the boom, LDCs continued to play
a marginal role in the world economy.
In 2009
• 12% of world
population;
• 0.9% of world GDP
• 1% of world
merchandise
exports (0.6% excl.
oil)
• 2.5% of world FDI
During the boom period
(2000-2008) 13 LDCs, as
well as the LDCs as a
group achieved the BPOA
target of 7% GDP growth.
Afghanistan
Laos
Angola
Mozambique
Bhutan
Myanmar
Cambodia
Rwanda
Chad
Sierra Leone
Equatorial Guinea
Sudan
Ethiopia
Further,
11
LDCs
achieved the BPOA target
of 25% investment-toGDP ratio.
Bhutan
Lesotho
Chad
Mauritania
Equatorial Guinea Sao Tome & Principe
Guinea
Timor-Leste
Kiribati
Tuvalu
Laos
LDCs' economic boom in the 2000s was largely
underpinned by external factors, above all the expansion
of international trade and high commodities prices.
Volume indices of exports (2000=100)
Terms of trade (2000=100)
200
250
180
160
200
140
120
150
100
80
100
60
40
50
20
0
0
2000
2001
2002
2003
2004
LDCs: Africa and Haiti
2005
2006
LDCs: Asia
2007
2008
2009
LDCs: Islands
2010
2000
2001
2002
2003
2004
LDCs: Africa and Haiti
2005
2006
LDCs: Asia
2007
2008
2009
LDCs: Islands
The pace of export boom has been paralleled and even
surpassed by the rise in imports volumes.
2010
The boom was also underpinned by a significant, though
unevenly distributed, surge in external financing
(including inter alia debt relief).
Capital flows to LDCs (million current USD)
100'000
90'000
80'000
70'000
60'000
50'000
40'000
30'000
20'000
10'000
Remittances inflows
ODA net disbursements (excl. Debt relief)
20
10
20
08
20
06
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
0
FDI inflows
ODA remains the main source of external finance for LDCs.
CAPITAL ACCUMULATION
LDCs excluding oil exporters
All LDCs
25
25
20
20
15
15
10
10
5
5
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Domestic savings as % of GDP
Gross fixed capital formation as % of GDP
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Gross domestic savings as % of GDP
Gross fixed capital formation as % of GDP
• Investment rose slightly to 21% of GDP, but is still
significantly lower than in other developing
countries (26% of GDP);
• Except in oil exporters, capital accumulation was
increasingly dependent on external resources.
Composition of output (% share of GDP, period average)
70
60
50
40
30
20
10
0
2000-2002 2006-2008 2000-2002 2006-2008 2000-2002 2006-2008 2000-2002 2006-2008
Agriculture
LDCs total
•
•
•
Manufacturing
LDCs: Africa and Haiti
Industry, excl.
Manufacturing
LDCs: Asia
Services
LDCs: Islands
Agricultural stagnation (esp. in African LDCs);
De-industrialization in 27 LDCs;
Inability to generate productive employment
outside agriculture.
225'000
200'000
175'000
150'000
125'000
100'000
75'000
50'000
25'000
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Food and agricultural raw material (SITC 0 + 1 + 2 + 4, less 27 and 28)
Ores, metals and precious stones (SITC 27 + 28 + 667 + 68 + 971)
Fuels (SITC 3)
Manufactured goods (SITC 5 to 8 less 667 and 68)
Other goods not elsewhere specified
Services
 Double-digit growth rates for all products, though fuels eroded the
weight of all other categories and stand now at ≈ 50% of the total.
 Fuels & minerals pulled the exports boom in many fast-growing LDCs.
 Manufactures played subdued role except in Bangladesh, Cambodia, and
some small ec. (Bhutan, Gambia, Lesotho).
•
•
Increasing concentration of exports and
primary commodity dependence;
Widening import bill for sensitive products (→
food and fuel crisis in 2008).
Economic growth has been accompanied by some
improvements in LDCs macroeconomic fundamentals
(esp. lower inflation, better business environment).
In most cases, however, growth contributed only weakly
to the development of LDCs’ productive capacities.
LDCs’ economic performance during the 2000s is
“best understood in terms of boom-bust cycle which
have been typical of their development experience
over the long term”.
(LDCR 2010)
Presentation structure
• LDCs before the storm: the so-called boom
• The triple crisis: food, fuel and finance
• Channels of transmission and factors of
resilience
• Key policy lessons
Agriculture value added per worker (constant 2000 US$)
900
30'000
800
25'000
700
600
20'000
500
15'000
400
300
10'000
200
5'000
100
0
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
0
LDCs (left scale)
Middle-income countries (left scale)
High-income countries (right scale)
Growth did not reverse AGRICULTURAL STAGNATION!
Yet, the agricultural sector employs 60% of L force in the
LDCs, and is crucial for poverty
1990
 LDC population doubled since
1980 and is forecasted to double
once more by 2050.
 Young population structure and
the youth bulge is expected to
persist over the medium-term (by
2015 in 27 LDCs >40% of pop.
will be below 15).
 Youth are also increasingly
educated (primary enrolment ↑ to
80%, and secondary enrolment to
31% in 2009).
 Growing pressure on the L market,
and natural resources.
2000
+60
+60
50-59
50-59
40-49
40-49
30-39
30-39
20-29
20-29
10-19
10-19
0-9
0-9
40 30 20 10
0
Women
10 20 30 40
40
30
Men
+60
50-59
50-59
40-49
40-49
30-39
30-39
20-29
20-29
10-19
10-19
0-9
0-9
20
10
0
Women
0
10
20
30
40
30
40
Men
2015 (forecast)
+60
30
10
Women
2008
40
20
10
Men
20
30
40
40
30
20
10
0
Women
10
20
Men
The pattern of growth
and structural change
had only weak effects
for poverty reduction.
In 2007 53% of the
population was living on
less than 1.25 $ a day
(59% in 2000).
The number of extreme
poor increased even
during the boom.
In spite of the “new bottom billion” narrative, given
current trends over time LDCs will become the major
locus of extreme poverty in the world.
Monthly price indexes for various commodities (2000=100)
500
450
400
350
300
250
200
150
100
50
Ja
n2
00
0
Ju
l2
00
0
Ja
n2
00
1
Ju
l2
00
1
Ja
n2
00
2
Ju
l2
00
2
Ja
n2
00
3
Ju
l2
00
3
Ja
n2
00
4
Ju
l2
00
4
Ja
n2
00
5
Ju
l2
00
5
Ja
n2
00
6
Ju
l2
00
6
Ja
n2
00
7
Ju
l2
00
7
Ja
n2
00
8
Ju
l2
00
8
Ja
n2
00
9
Ju
l2
00
9
Ja
n2
01
0
0
Food and tropical beverages
Vegetable oilseeds and oil
Minerals, ores and metals
Crude petroleum
Agricultural raw materials
No evidence of declining volatility
On the long term, greater correlation across commodities
Some evidence of asymmetric pass-through
LDC import bill for food and fuels
60'000
USD million
50'000
40'000
30'000
20'000
10'000
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
0
All food items
Fuels
Absent a meaningful supply response, the rise in prices has
led to a mounting import bill (four-fold increase)
New elements: commodity financializatioin, bio-fuels.
THE GREAT RECESSION OF 2009
LDCs severely affected by the 2008 food & fuel crisis,
but far from the epicenter of the financial crisis (→
shallow financial integration)
In general, LDCs suffered sharp growth slowdown due to
the fallout of the global recession (in 2009 GDP growth ≈
3% lower than in 2000-2007)
Heterogeneous impact according to structural conditions
(in over 1/3 of the 49 LDCs the slowdown was > 6%,
while there was no slowdown in other 15 of them);
Oil exporters and most Island LDCs were the worst hit.
Real GDP growth ( const. 2005 USD)
10
LDCs faced a
growth slowdown
of 3%, less than
ODC, but also
had a weaker
recovery.
8
6
4
2
0
2006
2007
2008
2009
2010
-2
-4
-6
Developed economies
Developing economies excluding LDCs
LDCs
25
31 LDCs suffered
growth slowdown, of
which 4 had open
recession.
Real GDP growth rate 2009-2010
20
15
Ethiopia
10
Myanmar
Timor Leste
Malawi
5
Rwanda
Gambia
Liberia
Guinea Bissau
TogoBurundi
Burkina Faso Sierra Leone
Angola
Uganda
Mauritania
Eritrea
Cambodia
Central African Republic
Tuvalu
Chad
0
Guinea Samoa
-5
0
-Haiti
5
Madagascar
10
Afghanistan
Equatorial Guinea
15
-Kiribati
-5
Real GDP growth rate 2000-2008
20
25
However GDP p.c. fell
in 16 LDCs in 2009, &
in 10 LDCs in 2010.
Presentation structure
• LDCs before the storm: the so-called boom
• The triple crisis: food, fuel and finance
• Channels of transmission & factors of
resilience
• Key policy lessons
CHANNELS OF TRANSMISSION TO LDCs
Direct financial contagion has been sometimes acute (esp.
where foreign actors played a big role), but relatively
circumscribed due to LDCs shallow financial mkt.
Main channel of transmission to LDCs has been the fallout
of the global recession:
A. TRADE SHOCK (world AD ↓, terms of trade?)
B. FDI inflows ↓ & profit repatriation ↑, except in
countries where developing partners invested heavily
C. REMITTANCES mostly ↓
D. PUBLIC REVENUES ↓
2008-2009 export shock, volume and price effects
-80%
TRADE SHOCK (1)
LDCs’ export revenues
plummeted by 26% in
2009.
Price movements hit hard
commodities exporters,
esp. oil & minerals
AD conditions penalized
the majority of LDCs, but
export composition and
trade partners mattered
-60%
-40%
-20%
0%
20%
Af ghanistan
Angola
Bangladesh
Benin
Bhutan
Burkina Faso
Burundi
Cambodia
Central Af rican Rep.
Chad
Comoros
Dem. Rep. of Congo
Djibouti
Equatorial Guinea
Eritrea
Ethiopia
Gambia
Guinea
Guinea-Bissau
Haiti
Kiribati
Lao People's Dem. Rep.
Lesotho
Liberia
Madagascar
Malawi
Maldives
Mali
Mauritania
Mozambique
Myanmar
Nepal
Niger
Rwanda
Samoa
Sao Tome and Principe
Senegal
Sierra Leone
Solomon Islands
Somalia
Sudan
Togo
Uganda
United Rep. of Tanzania
Vanuatu
Yemen
Zambia
LDC median
LDC weighted average
% change in export volumes
% change in unit value of export
40%
South-South trade and the 2009 shock to LDCs exports
TRADE SHOCK (2)
Volume indices of exports (% change 20082009)
40%
S-S trade proved
more resilient
30%
20%
10%
0%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
-20%
-30%
y = 0.2699x - 0.1739
R2 = 0.1612
-40%
-50%
-60%
-70%
Share of South-South m erchandise exports in 2008
Mineral commodity dependence and the 2009 shock to LDCs exports
Unit value of exports (% change 2008-2009)
30%
20%
10%
0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
-10%
-20%
-30%
y = -0.2941x + 0.0021
R2 = 0.6153
-40%
Share of fuels and minerals in total merchandise exports in 2008
90%
100%
Heightened
commodity
dependence proved
to be a risk factor
100%
Terms of trade and import compression 2008-2009
-40%
TRADE SHOCK (3)
Terms of trade movements
penalized commodities
exporters, but “benefitted”
net importers
Reduction in import
volumes were avoided in
most LDCs, with oil
exporters and Island LDCs
being the exception
-20%
0%
20%
40%
Af ghanistan
Angola
Bangladesh
Benin
Bhutan
Burkina Faso
Burundi
Cambodia
Central Af rican Rep.
Chad
Comoros
Dem. Rep. of Congo
Djibouti
Equatorial Guinea
Eritrea
Ethiopia
Gambia
Guinea
Guinea-Bissau
Haiti
Kiribati
Lao People's Dem. Rep.
Lesotho
Liberia
Madagascar
Malawi
Maldives
Mali
Mauritania
Mozambique
Myanmar
Nepal
Niger
Rwanda
Samoa
Sao Tome and Principe
Senegal
Sierra Leone
Solomon Islands
Somalia
Sudan
Togo
Uganda
United Rep. of Tanzania
Vanuatu
Yemen
Zambia
LDC median
LDC weighted average
% change in import volumes
% change in terms of trade
60%
DECLINE IN FDI
FDI inflows fell from 32 bln.
in 2008 to $28 bln. in 2009, &
have not yet recovered.
Significant decline, albeit
lower than in other regions.
Some mostly small countries
saw rising FDI even in 2009
(China effect?).
FDI mostly natural-resourceseeking, except in Island
LDCs.
Change in FDI inflows (2008-2009)
Nepal
Equatorial Guinea
Guinea-Bissau
Solomon Islands
Eritrea
Togo
Chad
Liberia
Mozambique
Niger
Haiti
Burkina Faso
Bhutan
Comoros
Sudan
Rwanda
Myanmar
Kiribati
São Tomé and Principe
Zambia
Uganda
Tanzania
Lesotho
Ethiopia
Vanuatu
Maldives
Angola
Senegal
LDC tot
Burundi
Laos
Gambia
Bangladesh
Cambodia
Sierra Leone
Afghanistan
Mali
Congo, Dem. Rep. of
Benin
Timor-Leste
Madagascar
Djibouti
Guinea
Central African Rep.
Malawi
Samoa
Yemen
Mauritania
-24%
-150% -100% -50%
0%
50%
100% 150%
Remittances proved somewhat more resilient, but still
fell in the large majority of LDCs.
Inflows to big Asian recipients grew even in 2009, though
at a lower rate (destination matters).
Remittances as share of GDP in
2008
30%
-25%
Lesotho
Samoa
25%
Nepal
Haiti
20%
15%
Bangladesh
Togo Senegal
Gambia10%
Sierra Leone
Liberia
5%
Uganda
Ethiopia
0%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
Expected percentage change in remittances 2008-2009
25%
FISCAL IMPACT AND POLICY RESPONSES
Gov. revenues fell (as % of GDP) in about half of African
LDCs, esp. due to ↓ mineral-related revenues and duties.
Expenditure rose on average by ≈2% of GDP, but fiscal
policy contained procyclical elements in more than 1/3 of
the countries considered.
Several LDCs incurred additional debt to cope with the
crisis; meanwhile debt vulnerabilities remain a serious
concern (10 LDCs in debt distress & other 10 at high risk).
INTERNATIONAL POLICY RESPONSES
In both 2008 and 2009, the World Bank, IMF and
regional development banks increased their lending
significantly to the LDCs.
Although the bulk of its intervention in the aftermath of
the crisis benefited MIC, IMF financing to LDCs also
increased from SDR 1,089 million in 2005–2007 to SDR
2,691 million in the period 2008–2010.
Surveys of lending agreements concluded with the IMF
during the global recession show that there has been very
little fundamental change with respect to the use of
procyclical conditionalities.
Macroeconomic factors attenuating the downturn
 Price movements favoring net importers of food & fuel
(i.e. most LDCs) at the trough of the crisis;
 Timely involvement of multilateral lenders (ex. Zambia,
Dem. Rep. Congo);
 Pickup of commodity prices since Q2 of 2009
Mothly price indices for primary commodities (2000=100)
500
450
400
350
300
250
200
Current deficits
actually shrunk in
most LDCs except
oil exporters in 2009
150
100
50
0
Food and tropical beverages
Agricultural raw materials
Crude petroleum
Vegetable oilseeds and oil
Minerals, ores and metals
Considerable downside risks remain
 LDCs’ rebound ultimately depends on world recovery,
which is still uneven and fragile (European periphery).
 Debt vulnerabilities remain a serious concern for LDCs (10
LDCs in debt distress and other 10 at high risk), and
several LDCs incurred additional debt to cope with the
crisis.
 Prospects for future ODA flows are uncertain/pessimistic
as traditional donor strive to restore government balances.
 The recent spikes in food prices put pressure on LDCs
balance of payments, & threaten to trigger another food
crisis.
Presentation structure
• LDCs before the storm: the so-called boom
• The triple crisis: food, fuel and finance
• Channels of transmission and factors of
resilience
• Key policy lessons
KEY LESSONS FROM THE DOWNTURN
 Sound fundamentals are necessary, but without
development of productive capacities you
remain prone to shocks.
 Regional integration and export diversification
were useful in containing the impact of the
downturn on export sectors (ex. East Africa).
 Timely policy responses were critical, but LDCs
often lack resources to adopt countercyclical
policies → domestic resource mobilization.
KEY LESSONS FROM THE DOWNTURN
 Agricultural modernization is essential to improve
the food security outlook in LDCs, and alleviate the
pressure on the BoP.
 Proactive policies are crucial for LDCs to achieve
economic diversification.
 The social impact of the crises can be long-lasting,
as many “survival strategies” poor households put in
place affect their long-term well-being.
Thank you for your attention!
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