Transcript Source: World Bank staff estimates.… - UN

The Impact of the Global Financial
Crisis on the Development
Finance Prospects for LDCs
Doug Hostland
Development Economics Prospects Group
THE WORLD BANK
November 18, 2008
Main messages
 Expect moderate decline in private capital flows in 2009
 Very tight credit conditions expected to persist
– private debt flows will fall dramatically from high levels
 Mounting evidence of major global slowdown
– curtail workers’ remittances
– FDI flows expected to be more resilient
 Impending fiscal pressures in high-income countries
– from global slowdown & contingent liabilities
– more difficult for donors to meet aid commitments
Private capital flows expected to decline in 2009…
Net private debt and equity flows
1990-2007, projected 2008-09
$ billions
Percent
8
1000
800
6
Percent of GDP
(right axis)
600
4
400
2
200
0
0
1991
1994
1997
2000
2003
2006
Source: World Bank Debtor Reporting System (DRS) and staff estimates.
2009P
Private capital flows expected to decline in 2009…
Net private debt and equity flows
1990-2007, projected 2008-09
$ billions
Percent
1000
8
Projection revision
800
6
Percent of GDP
(right axis)
600
4
400
2
200
0
0
1990
1993
1996
1999
2002
2005
2008P
Source: World Bank Debtor Reporting System (DRS) and staff estimates.
…amid large external imbalances
Current account / GDP in LDCs, 2008 (estimated)
Angola
Equatorial Guinea
Nepal
Bangladesh
Yemen, Rep.
Chad
Mauritania
Guinea
Zambia
Sudan
Central African Republic
Comoros
Sierra Leone
Benin
Mali
Uganda
Guinea-Bissau
Haiti
Ethiopia
Cape Verde
Burkina Faso
Senegal
Niger
Tanzania
Lao PDR
Cambodia
Mozambique
Vanuatu
Malawi
Madagascar
Togo
Gambia, The
Lesotho
Eritrea
Burundi
-40
-30
-20
-10
Percent
Source: World Bank staff estimates.
0
10
20
Emerging market sovereign bond spreads
have widened dramatically…
Percent
Emerging market (EMBI Global) sovereign bond yields
Jan 2004 – Nov 13, 2008
Sept 15, 2008
Investment Grade
1500
BB Index
1000
B Index
500
0
Jun-07
Oct-07
Source: JPMorgan.
Feb-08
Jun-08
Oct-08
…raising financing costs significantly
Percent
Emerging market (EMBI Global) sovereign bond yields
Jan 2004 – Nov 13, 2008
10
Implied yield on EM sovereign bonds
8
6
Yield on 10-year US Treasury bills
4
June 2007
2
0
2003M1
2004M1
2005M1
2006M1
Source: JPMorgan and U.S. Board of Governors.
2007M1
2008M1
Gradual downturn in credit cycle has been
underway since mid-2007…
Bank lending to / bond and equity issuance by developing countries
Jan. 2004 – Oct. 2008
$ billions
(12-month moving average)
June 2007
35
Bank lending
30
25
20
Equity issuance
15
10
5
0
2004M1
Bond issuance
2005M1
Source: Dealogic Analytics.
2006M1
2007M1
2008M1
…private debt flows expected to decline sharply…
$ billions
Net private debt inflows to developing countries
1990-2007, projected 2008-09
Percent
400
300
4
Percent of GDP
(right axis)
3
200
2
100
1
0
0
-100
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009P
Source: World Bank Debtor Reporting System (DRS) and staff estimates.
-1
…while FDI inflows exhibits resilience
FDI inflows to developing countries
1991-2007, projected 2008-10
$ billions
Percent
4
500
Percent of GDP
(right scale)
400
3
300
2
200
1
100
0
0
1991
1993
1995
1997
Source: World Bank staff estimates.
1999
2001
2003
2005
2007 2009P
Bank lending to LDCs has continued to expand…
$ billions
10
Cross-border bank loan commitments to LDCs
1990-2007, estimated 2008
8
Percent
5
4
Share of total
(right scale)
6
3
4
2
2
1
0
0
1990
1992
1994
1996
1998
2000
2002
Source: Dealogic Analytics and World Bank staff estimates.
2004
2006 2008e
…but is concentrated in just a few countries
Cross-border bank loan commitments to LDCs,
Annual average: 2003-08
Guinea-Bissau
Congo, Dem.
Chad
Malawi
Sierra Leone
Rwanda
Cambodia
Maldives
Lesotho
Cape Verde
Ethiopia
Benin
Burkina Faso
Haiti
Guinea
Yemen
Tanzania
Senegal
Sudan
Djibouti
Madagascar
Uganda
Mali
Bangladesh
Zambia
Mozambique
Laos
Liberia
Angola
0
Source: Dealogic Analytics.
0.5
1
$ billions
1.5
2
Remittances as well have expanded…
$ billions
20
Cross-border bank loans
FDI inflows
Workers' remittances
15
10
5
0
2000 2001 2002 2003 2004 2005 2006 2007 2008e
Source: World Bank staff estimates and Dealogic Analytics.
…but again is concentrated in a few countries
Workers’ remittances / GDP in 2007
Burundi
Lao PDR
Malaw i
Mauritania
Tanzania
Madagascar
Zam bia
Burkina Faso
Vanuatu
Mozam bique
Rw anda
Niger
Ethiopia
Com oros
Guinea
Mali
Sudan
Benin
Cam bodia
Yem en, Rep.
Gam bia, The
Uganda
Guinea-Bissau
Togo
Senegal
Cape Verde
Sierra Leone
Bangladesh
Nepal
Haiti
Lesotho
5% of GDP
0
10
20
Percent
Source: World Bank staff estimates.
30
LCDs are more dependent on foreign aid…
$ billions
25
20
Cross-border bank loans
FDI inflows
Workers' remittances
Net ODA disbursements
15
10
5
0
2000
2001
2002
2003
2004
2005
Source: World Bank staff estimates and Dealogic Analytics.
2006
2007
2008P
…which increased modestly in 2000-06…
Net ODA disbursements net of debt relief
billions of constant $2005
30
Percent
45
LDC share of total
(right axis)
35
20
25
15
10
5
0
-5
1990
1992
Source: OECD DAC.
1994
1996
1998
2000
2002
2004
2006
…but outlook bleak as donors face growing fiscal
pressures
Net disbursements of ODA, 1990-2007, commitments 2008-10
Constant 2006 $ billions
Percent
Percent of GNI in donor
countries (right axis)
120
Debt relief
0.3
100
80
0.2
60
40
0.1
ODA less debt relief
20
0
0.0
1990
1993
Source: OECD DAC.
1996
1999
2002
2005
2008P