88805 DECPG Weekly Global Economic Brief Number 47 For more information, see www.worldbank.org/gem 29 April 2010 In contrast with continued erosion of credit quality in advanced economies on concerns of debt- sustainability—evidenced by S&P’s downgrades of southern Euro-Zone sovereign debt earlier this week, and the unfolding financial crisis in Greece―credit quality for developing-country sovereigns improved thus far in 2010 on strong growth fundamentals. The five-day shutdown of EU airspace in mid-April resulted in severe disruption of perishable goods trade from Africa. And trade for industries practicing just- in-time production was also disrupted. Reflecting recovery in world economic activity, global steel output has grown by one-third since its trough in December 2008, led by a return to trend output in China. Credit quality for developing-country sovereigns improved Credit quality for emerging-market over 2010 to date, with 15 upgrades and only 2 downgrades, sovereigns improved in early-2010 as faster growth buoyed market perceptions of credit quality. Net credit rating actions (upgrades less downgrades) by Moody’s, S&P and Fitch, * = as of end-April, 2010 Emerging Europe, the Middle East and Latin America accounted 40 for the majority of positive ratings actions, with recent upgrades 30 for Ukraine, Lebanon, Panama, and the Dominican Republic. In 20 contrast, credit quality has eroded for advanced economies, as 10 the sovereign-debt crisis in southern Europe has resulted in a 0 series of markdowns on concerns of debt-sustainability. -10 Prospects for additional upgrades for emerging markets are -20 good, with a large number (14) on positive outlook by the -30 agencies. Still, the crisis in the Southern Euro Area could lead to 2003 2004 2005 2006 2007 2008 2009 2010* heightened risk-aversion, with potential contagion and Sources: Bloomberg and World Bank DEC Prospects downgrades of more vulnerable emerging market sovereigns. The shutdown of EU airspace halted shipments of fresh Sub-Saharan Africa and Middle East and North African perishable exports to EU-25 produce for five days, creating severe trade disruptions. While Percentage share of total exports (2008) exports of perishable goods represented only 1.5% of global 25 trade in 2008, they can be significant at the country level, 20 notably where the goods are not produced for local consumption, but export. In Sub-Saharan Africa, Kenya is among 15 the hardest hit, where horticultural exports (flowers and 10 vegetables) are the leading source of foreign exchange earnings. And companies engaged in just-in-time production (e.g., autos, 5 electronics and clothing) have been adversely affected as well. The garment industry in MENA (Tunisia, Morocco, Jordan and 0 Egypt) and in South Asia was faced with substantial disruption. In Kenya Uganda Senegal Gambia Tanzania Morocco Source: World Bank PREM Trade Group Bangladesh, summer season orders for European fashion-houses reportedly piled-up at the airport in Dhaka. Global steel production posts recovery, led Global steel production is up by one-third since the end of its by return to trend output in China 1,000 tonnes slump in December 2008. The recovery in output has been 60000 shared near-equally between China and the rest of the world. 50000 Other China’s production is up one-third over the period and output 40000 has returned to trend growth, consistent with the rebound in overall industrial output and trade. China’s share of world 30000 China production registered 47% in February. Elsewhere steel 20000 production remains well below pre-crisis peaks and below trend Other Asia Pacific 10000 production, particularly outside of Asia, which recorded by far the largest falloff during 2008-H2. But all main regions have 0 posted notable gains, with the most rapid increases coming in Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Sources: International Iron and Steel Institute, World Bank DEC Prospects North America and Europe, up 51% and 41%, respectively. The material presented here and on the GEM website is a product of the staff of the World Bank. The findings, interpretations, and conclusions expressed herein do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent. Content is not for quotation unless specifically authorized in writing by the World Bank. For permission, please contact pubrights@worldbank.org. Economic Developments indicators expressed as %ch y/y, except Industrial Production quarterly figures are %ch q/q, annualized 27-Apr-10 2009 2009 2010 2006 2007 2008 Q1 Q2 Q3 Q4 Oct Nov Dec Jan Feb Industrial Production, S.A. World 4.9 4.7 0.7 -22.2 6.2 12.2 9.4 -3.7 0.4 4.6 8.5 9.7 High Income Countries 3.3 2.6 -1.8 -31.1 1.6 11.7 7.0 -8.7 -4.4 0.3 5.6 7.6 Developing Countries 8.8 9.8 6.0 -2.2 14.9 13.3 13.5 6.2 9.8 13.0 13.9 13.4 East Asia and Pacific 12.9 15.2 11.1 10.1 25.0 14.8 16.4 14.2 17.0 18.2 19.8 19.3 East Asia x. China 1.2 4.4 3.9 -7.4 14.7 5.3 21.4 3.8 5.3 15.2 14.6 11.7 Europe and Central Asia 7.8 7.2 1.2 -15.6 4.7 10.5 14.7 -3.3 3.1 9.6 7.6 5.7 Middle East and N. Africa -0.6 -0.4 1.6 -6.5 6.5 4.5 2.2 1.3 1.2 2.1 4.4 - Latin America and Caribbean 4.6 4.2 0.7 -17.5 2.9 10.9 9.0 -3.7 0.7 5.4 6.5 6.9 South Asia 10.6 9.1 4.1 2.5 15.9 20.4 12.6 10.1 11.3 16.6 16.2 14.5 Sub-Saharan Africa 4.1 6.3 3.5 -15.1 -4.2 9.8 9.2 -3.7 -1.3 3.4 4.6 - 1 Inflation, S.A. High Income Countries 2.5 2.4 4.3 1.9 0.7 0.1 0.9 0.3 1.0 1.3 1.3 1.4 Developing Countries 6.2 6.2 10.4 7.8 4.8 2.5 2.9 2.1 2.6 3.6 4.5 4.8 East Asia and Pacific 6.2 5.5 9.5 4.5 1.4 0.3 1.7 -0.3 1.3 2.4 4.2 - Europe and Central Asia 6.6 8.4 10.7 7.6 4.5 2.9 3.0 3.2 2.8 3.7 3.3 4.3 Middle East and N. Africa 6.2 3.9 14.9 4.5 3.3 4.2 - 5.0 - - - - Latin America and Caribbean 4.3 6.4 8.8 6.2 4.0 1.9 2.4 2.6 2.4 3.0 4.2 4.5 South Asia 7.5 7.6 10.9 9.6 8.9 9.7 8.8 7.8 8.9 9.6 11.4 13.2 1 Inflation is calculated as medians for all groups. Trade and Finance indicators expressed as %ch y/y, except International Reserves %ch p/p and trade quarterly figures are %ch q/q, annualized 2009 2009 2010 2006 2007 2008 Q1 Q2 Q3 Q4 Oct Nov Dec Jan Feb Exports, Nominal, US$, S.A. World 15.9 15.2 15.0 -50.0 5.7 34.4 46.7 -11.9 4.3 13.2 21.1 25.4 High Income Countries 13.3 13.4 12.5 -48.2 5.8 36.6 38.7 -11.3 5.2 11.1 19.1 21.5 Developing Countries 22.9 19.7 20.8 -53.6 5.4 29.6 65.6 -13.3 2.5 17.7 25.5 34.1 East Asia and Pacific 23.4 22.0 16.7 -48.6 0.5 26.7 75.9 -9.5 1.9 20.8 26.7 38.6 Europe and Central Asia 22.9 21.8 29.1 -61.1 6.4 45.3 74.5 -14.5 3.8 19.0 32.0 36.4 Middle East and N. Africa 31.4 16.1 37.1 -73.9 15.1 27.4 - -29.9 -13.1 -3.5 - - Latin America and Caribbean 19.7 13.3 11.8 -44.7 12.8 7.5 65.4 -13.5 4.7 19.7 24.4 27.2 South Asia 19.1 18.5 24.8 -41.7 -3.4 56.4 39.8 -6.1 13.0 10.9 14.3 34.0 Sub-Saharan Africa 23.6 20.1 27.4 -64.3 20.7 56.0 - -21.2 7.0 14.4 - - Imports, Nominal, US$, S.A. World 14.8 15.1 15.7 -51.6 -1.4 36.0 46.1 -14.5 2.0 10.9 19.5 23.9 High Income Countries 13.3 12.7 12.1 -49.7 -7.1 36.5 39.6 -14.4 1.2 6.6 14.0 20.1 Developing Countries 19.3 21.9 25.4 -55.7 13.0 34.7 61.7 -14.8 3.9 21.2 33.2 32.8 East Asia and Pacific 16.9 18.7 21.1 -55.0 59.9 42.4 85.3 -6.8 19.2 47.2 70.0 45.8 Europe and Central Asia 25.6 30.3 26.4 -62.2 -9.5 31.5 46.8 -23.2 -4.8 1.5 14.1 17.8 Middle East and N. Africa 9.7 22.9 44.7 -39.3 15.1 11.3 - -8.6 -3.9 10.6 - - Latin America and Caribbean 19.5 19.0 22.1 -57.1 -16.9 25.0 41.1 -26.1 -7.9 3.6 9.3 23.8 South Asia 20.5 21.4 38.5 -60.7 -12.2 48.6 112.7 -13.9 -2.7 27.6 33.8 57.5 Sub-Saharan Africa 22.6 21.7 24.1 -42.1 -9.9 38.9 - -9.6 0.7 0.8 - - International Reserves, US$ High Income Countries 11.1 12.7 6.0 -1.9 5.1 9.4 2.6 1.7 1.8 -0.8 0.6 0.3 Developing Countries 33.0 42.0 12.5 -2.7 6.3 7.0 4.2 2.3 2.0 -0.2 0.4 0.1 East Asia and Pacific 29.1 41.5 23.5 0.5 8.3 7.1 5.2 2.3 2.4 0.3 0.9 0.3 Europe and Central Asia 50.9 45.7 -8.6 -9.4 6.7 4.8 3.7 4.1 2.2 -2.6 0.1 -0.4 Middle East and N. Africa 37.1 31.7 23.9 -3.4 1.9 5.7 1.7 0.5 1.8 -0.6 -0.4 - Latin America and Caribbean 21.6 44.6 11.3 -5.9 1.8 8.9 6.0 2.2 1.9 1.8 -0.4 0.1 South Asia 28.1 53.2 -9.0 -2.2 6.6 8.1 -1.5 1.1 -1.2 -1.5 -0.7 -0.6 Sub-Saharan Africa 40.1 27.3 8.0 -8.8 0.1 10.7 - 0.3 - - - - Weekly Global Economic Brief – 29 April 2010 2 Financial Markets 2007 2008 2009 2010 MRV 1 Chg since Q1 Q2 Q3 Q4 Jan Feb Mar Sep-12 '08 3 Interest rates and LIBOR (%) U.S. Fed Funds Effective 5.02 1.93 0.19 0.18 0.15 0.12 0.11 0.13 0.16 0.20 -1.91 ECB repo 3.98 3.78 1.12 0.79 0.44 0.43 0.37 0.36 0.35 0.37 -4.01 US$ LIBOR 3-months 5.30 2.91 1.24 0.85 0.41 0.27 0.25 0.25 0.27 0.33 -2.52 EURIBOR 3-months 4.28 4.63 2.02 1.31 0.87 0.72 0.68 0.66 0.64 0.64 -4.32 US 10-yr Treasury yield 4.63 3.65 2.71 3.30 3.50 3.45 3.72 3.68 3.72 3.80 0.13 German Bund, 10 yr 4.22 3.99 3.10 3.35 3.31 3.22 3.28 3.19 3.12 3.05 -1.06 Spreads (basis points) US Corporate (High Yield Bonds) 304 915 1516 1107 803 618 513 553 499 464 -269 JP Morgan Emerging Markets 197 406 683 503 384 318 300 320 276 252 -102 Asia 161 355 558 396 299 244 234 251 207 178 -110 Europe 158 370 692 467 369 269 232 258 214 202 -124 Latin America & Caribbean 208 426 712 548 416 364 355 376 331 304 -75 Middle East 476 585 808 618 470 399 321 326 307 295 -202 Africa 288 452 673 489 307 253 224 244 204 173 -164 Stock Indices 2 Global (MSCI) 393 327 204 234 268 294 302 286 303 314 -1.9 High-Income ($ Index) 1571 1297 820 924 1054 1150 1178 1121 1183 1228 -4.3 United States (S&P-500) 1476 1221 810 892 996 1089 1124 1088 1152 1202 -4.0 Euro Area (S&P-350$) 1909 1544 899 1025 1208 1344 1347 1240 1299 1329 -9.7 Japan (Nikkei-225) 16983 12156 7961 9275 10140 9967 10663 10165 10678 11212 -8.2 Developing Markets (MSCI) … 743 431 566 670 760 784 736 783 821 17.8 Asia … 688 430 571 678 750 778 726 769 813 28.1 Europe & C. Asia … 766 341 424 538 621 639 585 633 661 -12.0 Latin America & Caribbean 3670 3771 2103 2760 3296 4002 4079 3813 4089 4192 18.6 Middle East and N. Africa 693 733 358 433 473 491 479 486 510 537 -22.9 Africa … 772 496 621 728 787 807 775 838 874 13.8 Exchange Rates (LCU / USD) High Income Countries Euro 0.73 0.68 0.77 0.73 0.70 0.68 0.70 0.73 0.74 0.75 6.2 Japan 117.74 103.37 93.52 97.40 93.57 89.62 91.39 90.25 90.55 93.79 -12.7 Brazil 1.95 1.83 2.32 2.08 1.87 1.74 1.78 1.84 1.79 1.75 -1.9 Russia 25.57 24.88 34.09 32.18 31.31 29.48 29.88 30.15 29.57 29.21 14.2 India 41.35 43.52 49.83 48.83 48.40 46.64 45.96 46.34 45.51 44.44 -2.8 China 7.61 6.95 6.84 6.83 6.83 6.83 6.83 6.83 6.83 6.82 -0.4 Egypt 5.64 5.44 5.58 5.62 5.54 5.47 5.45 5.48 5.49 5.54 1.9 South Africa 7.05 8.26 9.95 8.47 7.81 7.49 7.45 7.68 7.41 7.39 -8.4 Memo: USA nominal effective rate 89.39 84.39 91.12 88.61 84.17 81.30 82.43 83.90 83.80 83.80 -2.4 1 MRV = Most Recent Value. 2 MSCI Indices for Asia, Africa, and Europe and C. Asia, for 2008 are calculated from February-December, due to data availability. 3 Change expressed in levels for interest rates and spreads; percent change for stock market and exchange rates. Commodity Prices 2007 2008 2009 2010 MRV Chg since Q1 Q2 Q3 Q4 Jan Feb Mar Sep-12 '08 3 Oil price, $/b, nominal 1 71 97 44 59 68 75 77 74 79 85 -12.8 Non - Oil Index 2 165 197 132 150 159 172 183 177 180 183 -8.4 Food Index 2 155 218 162 182 175 182 192 186 180 176 -17.1 Metals and Minerals Index 2 184 184 103 123 146 160 173 164 175 185 -0.5 Baltic Dry Index 3 7072 6348 1557 2661 2795 3378 3161 2678 3207 3009 -37.3 1 Simple average of Brent, Dubai and WTI. April 15 values for US Corporate High Yields, Non-Oil, Food and Metals & Minerals Index. 2 Base Date = Jan 1, 2005 3 Base Date = May 1, 1985 Weekly Global Economic Brief – 29 April 2010 3