global economic prospects · source: world bank, global economic prospects 2013a. concluding...
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Andrew Burns World Bank March 2013
Global
Economic
Prospects
Assuring
growth over
the medium term
![Page 2: Global Economic Prospects · Source: World Bank, Global Economic Prospects 2013A. Concluding remarks • May-June Euro Area pessimism has had larger than expected real-side effects,](https://reader033.vdocuments.net/reader033/viewer/2022043003/5f83e9a094a5cd59df343601/html5/thumbnails/2.jpg)
Despite better financial conditions,
stronger growth remains elusive
• More than 4 years after financial crisis hit, high-income countries continue to suffer from volatility and slow growth
• Developing country prospects solid, but need to focus on productivity enhancing domestic policies if they are to regain pre-crisis growth rates
• Risks have declined but remain and countries are vulnerable to commodity price shocks, high-income volatility, and a freezing of capital flows
• A steady hand is required to avoid pro-cyclical policy and in order to rebuild macroeconomic buffers so that authorities can react in case of new external (or domestic) shocks
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Financial market jitters have eased significantly
Yield on 10 year sovereign debt, percent
Source: World Bank, Datastream
0
2
4
6
8
10
12
14
16
18
Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
United States
Italy
Spain
Germany
Portugal
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0
50
100
150
200
250
300
350
400
450
500
Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
East Asia & Pacific
Latin America
& Caribbean
Middle-East & North Africa
Europe & Central
Asia
Credit Default Swap rates, basis points
Source: World Bank, Datastream
Price of risk for most developing regions has
fallen below 2010 levels
4
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0
50
100
150
200
250
300
350
400
450
500
Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
East Asia & Pacific
Latin America
& Caribbean
Middle-East & North Africa
Europe & Central
Asia
Credit Default Swap rates, basis points
Source: World Bank, Datastream
Price of risk for most developing regions has
fallen below 2010 levels
5
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0
50
100
150
200
250
300
350
400
450
500
Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
East Asia & Pacific
Latin America
& Caribbean
Middle-East & North Africa
Europe & Central
Asia
Credit Default Swap rates, basis points
Source: World Bank, Datastream
Price of risk for most developing regions has
fallen below 2010 levels
6
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0
5
10
15
20
25
30
Italy Spain Portugal
Italian, Portuguese, and Spanish borrowing costs have climbed on Cyprus concerns(change in 10-year bond yields since the Cyprus
announcement , basis points)
Source: Bloomberg and Development Prospects Group
High-Spread EA yields up, following Cyprus deal,
but not by enough to undo earlier gains
Source: Bloomberg and Development Prospects Group 7
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After declining in May/June, capital flows to
developing countries have rebounded
8
Gross international capital flows to developing countries, billions USD
0
10
20
30
40
50
60
70
Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12
New equity issuance
Bond issuance
Syndicated Bank-lending
Source: World Bank, Dealogic.
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0
1
2
3
4
5
6
7
8
9
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
2004 2005 2006 2007 2008 2009 2010 2011 2012e 2013f 2014f 2015f
ST Debt Bank Lending Bond Flows Portfolio Equity FDI Inflows $ trillion % GDP
Capital flows expected to strengthen but remain
stable as % of GDP
9 Source: World Bank, Global Economic Prospects 2013A.
Total as a share of GDP (RHS)
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10
Developing countries appear to be escaping from
high-income weakness Industrial production, percent growth, 3m/3m saar
Source: World Bank, Datastream.
-10
-5
0
5
10
15
20
25
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
China
Other
developing
Other
High income
Euro Area
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Manufacturing purchasing managers index (PMI), balance of respondents
11
Purchasing manager’s indexes:
Better, but still weak
Source: World Bank, Markit/Haver Analytics.
44
46
48
50
52
54
56
58
60
Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
Other
developing
China
Other high-income
Euro Area
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Order books in USA and Japan are strengthening
6.1
18.6
-3.1
-40
-30
-20
-10
0
10
20
30
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13
JPN: Core orders ex ships, utilities
USA: New orders durable goods ex transport
DEU: Total new orders
Japan
United States
Germany
New orders, 3m/3m annualized growth rate
Source: World Bank, Datastream. 12
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Inflation remains in check across the developing
regions
13
0
1
2
3
4
5
6
7
8
9
10
East Asia & Pacific
ECA (excl. Belarus)
LAC (excluding Venezuela)
MENA (excl. Iran and Syria)
Sub-Saharan Africa
South Asia
2011 2012 2013
Annual percent increase in CPI, (2013 most recent value y/y)
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Growth to pick up but remain 1-2 percentage
points slower than pre-crisis rates
Annual GDP growth, %
14
0
1
2
3
4
5
6
7
8
2010 2011 2012 2013 2014 2015
Developing countries
High-income countries
Source: World Bank, Global Economic Prospects 2013A.
World
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Growth to be constrained by capacity in many
developing regions
-4
-2
0
2
4
6
8
10
High-income East-Asia & Pacific
Europe & Central Asia
Latin America & Caribbean
Middle-East & North Africa
South Asia Sub-Saharan Africa
2011 2012 2013 2014 2015
15
Annual GDP growth, %
Source: World Bank, Global Economic Prospects 2013A.
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Outlook remains precarious
• Risks have declined and are more balanced,
but remain:
– Persistent fiscal uncertainty in the U.S.
– Euro Area risks
– A sharp drop of investment in China
– Oil or food supply shock
16
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Developing countries need to focus on domestic
issues
• Overall aggregates hide vulnerabilities at the
country level
• Current account deficits in oil-importing
countries have deteriorated 3.2 percentage
points since 2007
• Fiscal deficits of all developing countries
have deteriorated by 2.9 pp.
• Rising debt (public and private increases
vulnerabiities)
17
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-6
-4
-2
0
2
4
00 01 02 03 04 05 06 07 08 09 10 11 12
SSTM2_NGDPS
-2
-1
0
1
2
3
00 01 02 03 04 05 06 07 08 09 10 11 12
LACM2_NGDPS
-4
-2
0
2
4
6
8
10
12
00 01 02 03 04 05 06 07 08 09 10 11 12
ECAM2_NGDPS
Monetary conditions have eased in most regions
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
00 01 02 03 04 05 06 07 08 09 10 11 12
EAPM2_NGDPS
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
00 01 02 03 04 05 06 07 08 09 10 11 12
SASM2_NGDPS
-5.0
-2.5
0.0
2.5
5.0
7.5
10.0
12.5
00 01 02 03 04 05 06 07 08 09 10 11 12
MNAM2_NGDPS
Difference between rate of growth of money supply and potential output
East Asia & Pacific
Europe & Central Asia
Latin America & Caribbean
South Asia
Middle-East & North Africa
Sub-Saharan Africa
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0
5
10
15
20
25
-10
-9
-8
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
8
9
10
More
2007 2012 2007
2012
25% had a deficit greater than 3% of GDP
49% were in balance or running a surplus
52% have a deficit in excess of 3% of GDP
23% are in balance or running a surplus
*
*
*
*
Many developing countries need to continue
growing fiscal space
19
# of developing economies
General government balance, % of GDP
Source: World Bank, Global Economic Prospects 2013A.
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Estimated total debt for exceeds 50% of GDP
in many developing countries
20
Share of GDP
Source: World Bank and IMF.
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Near record low stocks of maize, but wheat and
rice markets are relatively well supplied
0
5
10
15
20
25
30
35
40
45
50
Maize Rice Wheat ‘75 ‘90 ‘08
21
End of crop-year stocks as a % of total consumption
Source: World Bank, USDA
‘60
2008
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Strong growth is not guaranteed
• Short-term fluctuations feel urgent, but
durable depends on the sustainability of
growth
• Requires renewed focus on structural policies
– Infrastructure investments
– Education (quality and quantity)
– Regulatory environment
– Macroeconomic stability
22
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0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
1992 2002 2012 2022 2032 2042
Assuming continued strong productivity
growth, per capita incomes in developing
countries could rise to 52% of high-
Baseline projection
Developing country, per capita income, % of 2010 high-income level
Small improvements in potential growth result in
substantial long run gains
Source: World Bank, Global Economic Prospects 2013A.
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0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
1992 2002 2012 2022 2032 2042
Weaker growth (-0.5 pp pa)
However, that progress is not
guaranteed and even small under
performance can have large negative
Baseline projection
Developing country, per capita income, % of 2010 high-income level
Small improvements in potential growth result in
substantial long run gains
Source: World Bank, Global Economic Prospects 2013A.
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0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
1992 2002 2012 2022 2032 2042
Slow growth (- 1.0 pp pa)
Weaker growth (-0.5 pp pa)
However, that progress is not
guaranteed and even small under
performance can have large negative
Baseline projection
Developing country, per capita income, % of 2010 high-income level
Small improvements in potential growth result
in substantial long run gains
Source: World Bank, Global Economic Prospects 2013A.
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0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
1992 2002 2012 2022 2032 2042
Rapid growth (+ 1.0 pp per annum)
Faster growth (+ 0.5 pp pa)
Slow growth (- 1.0 pp pa)
Weaker growth (-0.5 pp pa)
By the same token relatively small
increases in potential growth can have
large long-term payoffs
Baseline projection
Developing country, per capita income, % of 2010 high-income level
Small improvements in potential growth result in
substantial long run gains
Source: World Bank, Global Economic Prospects 2013A.
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Concluding remarks
• May-June Euro Area pessimism has had larger than
expected real-side effects, global economy is much
weaker
• Financial conditions have improved but weak growth in
high-income countries remains a factor for developing
countries
• Developing countries need to focus on domestic policy
needs and vulnerabilities
• Sustained strong growth in developing countries will
depend on productivity enhancements, investments in
infrastructure, human capital and governance
27
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Andrew Burns World Bank March 2013
Global
Economic
Prospects
Assuring
growth over
the medium term
28
http://www.worldbank.org/globaloutlook
http://www.worldbank.org/propsects