Global Development Finance 1999 Main Messages

Global Economic Environment Main Messages n n Global output slowdown deeper than anticipated   Developing countries terms of trade, exports, external finance deteriorate   Recession-level growth likely in 1999   Downside risks: Japan, Brazil, U.S. stock market, protectionism

World industrial production (3-month moving average, y/y) Note: World = developing countries + G-7 + other industrial countries + Asian NIEs. Source: Datastream and DECPG staff estimates. Percent

Export growth for World, Latin America and Asia Crisis 4 Countries* (current US$, 3-month moving average, y/y)

Current account balances, Source: IMF International Financial Statistics and World Bank US$ billions All developing countries East Asia and Pacific Latin America and Caribbean

Source: World Bank. Price index for energy and non-energy commodities

Private Capital Flows Main Messages   Capital market financing deteriorated further in 1998   Enhanced risk perceptions likely to slow recovery of flows   FDI resilient in face of financial crisis   Financial crisis reduced prospects for growth in FDI flows

Net flows from international capital markets to developing countries Source: Debtor Reporting System US$ billions a Loans Bonds Portfolio equity flows

Spreads on Brady Bonds & U.S. high yield bonds Basis points Source: Bloomberg and World Bank Jan-95Jan-96Jan-97Jan-98Jan US High Yield Bond Spread Brady Bond Spread

Monthly averages: emerging market bond financing versus bank lending st Half2nd HalfJan-AprMay-JulAug-SepOct-Dec Bond financing Bank lending Source: Euromoney Bondware / Loanware and World Bank US$ billions

FDI flows to developing countries, and their share of global FDI, Source: World Bank Debt Reporting System

FDI flows by region Source: World Bank Debtor Reporting System

FDI flows to crises countries Source: World Bank Debt Reporting System a. Preliminary Indonesia Malaysia Thailand Rep. Of Korea Philippines US$ billions

Official Flows and Debt Restructuring Main Messages   Aid remains low   Improved policies have increased aid effectiveness   Sovereign and banking system debt restructured, but not corporate debt   Rescue packages helped alleviate systemic risk and reduced the cost of adjustment in crisis countries

ODA from major countries,

Poverty and Policy, 1996 Source: World Bank

International rescue packages for crisis countries Source: IMF and World Bank