1. The External Environment for Developing Countries July 2008 The World Bank Development Economics Prospects Group

2. Source: Thomson/Datastream. “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100 Dow Jones MSI TOPIX CACI

3. U.S. inflation pipeline suggests further price hikes for consumer Headline CPI, PPI- and Import price indexes, ch% 3mma y/y Source: U.S. Department of Commerce. PPI [left] Import price [right] CPI [left]

4. Industrial countries

5. Stimulus checks boost disposable incomes in May – but outlays rise less disposable income and personal consumption, ch% saar Source: U.S. Department of Commerce. income personal consumption retail sales

6. Consumer expectations at record lows... a threat to second-half growth expectations for economy: percentage of survey responses, 3mma Source: Conference Board. expectations “worse” “better” minus “worse” expectations “better”

7. Manufacturing losses had been spared worse outturns by overseas demand goods export volume and IP, ch% saar Source: Department of Commerce, Thomson/Datastream. Export volume [R] IP manufacturing [L]

8. Japan’s households retrench after strong spending in first quarter retail sales volume and houshold expenditure, ch% 3mma y/y Source: Cabinet Office-- Thomson/Datastream. HH expenditures Retail sales

9. Japan’s export growth waning as import demand plummets Export- and import volume growth, ch% saar Source: Japan Cabinet Office. Exports Imports

10. Fall of the yen and new orders growth sustain export hopes USD per Yen index [right], and factory orders [left] ch% 3mma y/y Source: Japan Cabinet Office; Thomson/Datastream. Dollar per Yen index [right] Factory orders [left]

11. Source: Eurostat and DECPG calculations. Euro Area first-quarter GDP marked down on investment and net-X growth of real GDP, and contributions to growth in percentage points Change in Stocks Fixed Investment Government Consumption Net exports

12. German exports drop sharply in May in step with export orders growth export volumes and overseas factory orders, ch% 3mma Source: Bundesbank-- Thomson/Datastream. Export volume Export orders

13. HICP breaches 16-year highs illiciting ECB 25-bp rate hike HICP ch% y/y and ECB policy rate (%) HICP Source: Eurostat through Thomson/Datastream.

14. Industrial production

15. Other East Asia Latin America and the Carribean Industrial production growth across developing regions is slowing IP ch% saar: ECA, LAC [left]; Other East Asia [right] Source: Thomson/Datastream, DECPG. Europe and Central Asia

16. China remains strong; output in the remainder of East Asia is lapsing IP ch% saar Source: Thomson/Datastream, DECPG. Other East Asia China

17. Weaker manufacturing orders take a toll on German production IP ch% saar: production [left], orders [right] Source: Thomson/Datastream, DECPG. IP Manufacturing orders* * One month lag

18. International trade

19. G-3 exports slow into second quarter of 2008 export volumes, ch% saar Source: Thomson/Datastream, DECPG calculations. Japan USA Germany

20. Export market demand falling more quickly than anticipated nominal imports, ch% saar Source: Thomson/Datastream, DECPG calculations. Taiwan, China Russia East Asia High-income Brazil Non-OECD High-income

21. High-tech exporters see slowdown in outbound shipments nominal exports, ch% saar Source: Thomson/Datastream, DECPG calculations. Taiwan, China Thailand Malaysia Hong Kong SAR China

22. Oil prices

23. Oil prices climb on low stocks and sluggish supply growth $/ bbl million bbl WB Oil price [L scale] OECD stocks [R] Source: IEA and DECPG Commodities Group.

24. Tight distillate market bidding up prices for light crudes $/bbl Crude (WTI) Gasoline Distillate Price differentials relative to crude Source: Datastream and DECPG Commodities Group.

25. Open Interest Crude Oil NYMEX (‘000 lots) $/bbl Open interest Source: NYMEX and DECPG Commodities Group.

26. Non-oil commodity prices

27. Continued gains in food prices (2000=100) Source: DECPG Commodities Group.

28. Copper and aluminum remain firmwhile other metals prices drop Cu/Al $/ton Ni $/ton Nickel Copper Aluminum Source: LME and DECPG Commodities Group.

29. Iron Ore Prices ($/mt) Source: LME and DECPG Commodities Group.

30. International Finance

31. Bank lending leads flows in June Source: DECPG Finance Team.

32. Source: Bloomberg. Equity market downturn appears mirrored in commodity market gains MSCI global equities (USD) [left]; Reuters/Jeffries CRN [right] MSCI equity [left] CRN commodities [right]

33. Source: JPMorgan-Chase and Morgan-Stanley. Returns on high-yield assets suffer amid flight to quality Developed market- high-yield bond index [left]; EMBIG [right] EMBIG [right] JPMorgan Developed HY [left]

34. Currencies

35. Source: Thomson/Datastream. yen/US D USD/Euro (inverse) Dollar continues move-up on yen... step-down on euro at ECB rate hike USD per Euro (inverse) [Left] and Yen per USD [right]

36. Is oil being viewed as a dollar hedge? USD nominal effective rate [left], oil price [right], index 2000=100 Source: Thomson/Datastream, DECPG Commodities Group. Oil price [right] USD NEER [left]

37. Source: Thomson/Datastream. Emerging market currencies show mixed movements against the dollar LCU per USD indexes, Jan1 2008=100 [*increase = weaker LCU] Turkish lira Brazilian reis Indonesian rupiah Korean won Philippine peso

38. FOCUS July 2008 Difficulties at Fannie and Freddie

39. Source: Thomson/Datastream. Fannie and Freddie share prices halve over the 2 nd week of July

40. Source: OFHEO. Mortgage portfolios and guarantees held by Fannie and Freddie

41. Source: Thomson/Datastream. Market tension eases post actions by Treasury and Federal Reserve

42. Source: U.S. Treasury. Further difficulties could carry worldwide repercussions

43. The External Environment for Developing Countries July 2008 The World Bank Development Economics Prospects Group