The External Environment for Developing Countries April 2010 The World Bank Development Economics Prospects Group

Source : Thomson - Datastream Equity and commodity markets echo the pickup in global economic activity Dow - Jones Industrial average [ left ]; Copper price ($/ ton ) [ right ] Copper price [ right ] Dow Jones [ left ]

Greek CDS spread drops sharply in the wake of Euro - Group / IMF financial package Source : Bloomberg.

OECD developments

ISM surveys show step - up in U. S. services Source : Institute for Supply Management ( ISM ). headline activity indexes, mfgr and services

U. S. business investment and employment turn the corner to growth bus. investment, ch % ( q / q ) saar [ left ]; change in employment ‘000 [ right ] Source : U. S. Departments of Commerce and Labor.

Source : U. S. Department of Commerce and National Association of Realtors. U. S. housing hit by a wave of foreclosures Home sales, ch % 3 mma y / y

Japanese prices still falling despite pickup in economic activity consumer and producer prices, GDP deflator and Industrial Production ch % ( y / y ) Source : Japan Cabinet Office, METI.

Greek CDS spread drops sharply in the wake of Euro - Group / IMF financial package Source : Bloomberg.

European sentiment steps up…with little evidence for growth Source : IFO, Bank du France and Bundesbank. IFO ( overall ), Bank du France ( business climate ) [ left ]; German export volumes, ch % saar [ right ]

Country Focus: China

China ’ s growth remains robust in 2010 Source : World Bank Real growth ( percent )

Net external trade subtracted heavily from growth in 2009 Source : World Bank Contribution to growth ( real, percent y - o - y )

China ’ s exports have recovered impressively Source : World Bank Index, constant prices ( October 2008 = 100)

The composition of growth is likely to change substantially this year Source : World Bank Contribution to growth ( real, percent y - o - y )

The external surplus is likely past its peak Source : World Bank Share of GDP ( percent )

China ’ s cyclical condition differs sharply from that in the United States Source : World Bank Percent

Industrial production

Global industrial production continues to expand at a rate near 10% Source : World Bank calculations based on Thomson Datastream data global industrial production, ch % (3 m /3 m, saar )

Pace of recovey in production mixed across developing regions industrial production, ch % (3 m /3 m saar ) Source : World Bank data

Growth in retail sales picking up but volumes yet to breach pre - crisis levels Source : DEC Prospects Group calculations global retail sales proxy, ( excl United States ), ch % ( y / y )

International trade

Developing country trade increased above pre - crisis peaks as of early 2010 Source : World Bank, DEC Prospects Group export and import volumes, billions USD

China ’ s share in U. S. trade deficit in part a reflection of East Asia ’ s production chain Source : U. S. ITC data and World Bank calculations share of selected countries in U. S. trade deficit

LPI 2010 – performance varies around the world Source : Connecting to Compete, World Bank, 2010 No data Logistics friendly Logistics unfriendly Partial performers Consistent performers

Oil prices

Oil prices and OPEC production $/ bbl million b / d Oil price [ L scale ] OPEC production [ R scale ] Source : IEA, Bloomberg and DECPG.

U. S. petroleum inventories remain relatively high million barrels 5- year range U. S. petroleum inventories Source : U. S. EIA.

U. S. natural gas prices remain low on unconventional production gains $/ mmbtu Oil price U. S. gas price Source : IEA, Bloomberg and DECPG.

Non-oil commodity prices

Food - beverage prices fall but cotton & rubber prices up on supply constraints (2000=100) Source : DECPG.

Metals prices rise on demand expectations $/ ton Copper [ L scale ] Nickel [ R scale ] Source : IEA, Bloomberg and DECPG. Aluminum [ L scale ]

Global steel production (000 tons ) Source : IISI.

International Finance

Capital flows to EM surged in March Source : DECPG. $ billion Q1Q1 Total Q1Q1 JanFebMarQ1Q1 Total Bonds Banks Equity Lat. America Bonds E. Europe Bonds Asia Bonds Others

Source : JPMorgan, Bloomberg, World Bank. Volatility of risky assets continues to ease in 2010 VIX index [ left ], daily change in weighted EMBIG spreads (30- day movavg )[ right ] EM bond volatility, EMBIG [ R ] Equity volatility, VIX index [ L ]

Source : Bloomberg and World Bank. U. S. Treasury yields increasing…European and EM bonds remain subdued 10- year government bonds yields (%)

Currencies and inflation

Source : Thomson / Datastream. yen / USD USD / Euro ( inverse ) Euro regains some ground vs dollar on partial relaxation of Greek debt tensions USD per Euro ( inverse ) [ Left ] and Yen per USD [ right ]

Source : Thomson - Datastream Volatility in USD - Libor increases sharply with UST yields moving well above Bund USD - Libor, EURIBOR, US Treasuty 10- year yield and 10- yr Bund yield, percent EURIBOR USD - LIBOR UST -10- yr Bund 10- yr

Inflation picking up as the period of high commodity prices passes from calculation Source : World Bank, DEC Prospects Group headline CPI indexes, ch % yr / yr

Focus Financing gaps in 2010

External financing needs decline in $ trillion Source : DataStream and World Bank, DEC Prospects Group Maturing foreign debt [ left ] Current account deficit [ left ] % of GDP of those countries with financing needs [ right ]

Modest recovery in private capital expected in 2010 and 2011 Net private capital flows to developing countries, $ billion Source : DataStream and World Bank, DEC Prospects Group

External financing gaps are projected to fall Source : World Bank DEC Prospects Group staff estimates Total gap ($ bn ):

Financing gaps were closed through current account adjustment and higher - than expected capital flows Source : World Bank, DEC Prospects Group billions dollars

World Bank IMF Other official Total Source : World Bank Debtor Reporting System, IMF Net official flows increased sharply in response to the crisis billions dollars

Sovereign debt issuance by high - income countries, Source : IMF and World Bank trillions dollars

The External Environment for Developing Countries April 2010 The World Bank Development Economics Prospects Group

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