89633 DECPG Weekly Global Economic Brief Number 80 For more information, see www.worldbank.org/gem 24 February 2011 The spread of social unrest and violence to Libya (which supplies Europe with almost 12% of its imported oil) caused a spike in Brent crude oil prices to $119/bbl in intra-day trades on February 24. A quick pass-through to petrol users and industry is possible; and, if sustained, the price hike could dampen global growth by 0.2 to 0.3 percentage points in coming quarters. Domestic credit flows within developing countries are recovering, with credit expanding at a 12.2% annualized pace on average in November. For high-income economies, credit is also rebounding, but at a 5% annualized rate is well below pre-crisis growth of 10.5%. Grounded in strong U.S. performance, retail volumes for high-income economies were growing 4.5% in the final quarter of 2010 (3m/3m, saar). Oil prices surged following the escalation of violence in Libya and Brent oil prices surge to $112/bbl on ongoing demonstrations elsewhere in the Middle East and North heightened uncertainty about crude supply Africa. As threats of crude oil supply losses mount, prices have soared, 115 U.S. dollars per barrel with Brent closing at $112/bbl on February 23, up 11.6% over the prior 110 Brent week (hitting intra-day highs of $119/bbl on February 24). WTI is also 105 100 up, but much lower at $96.50/bbl. Libya’s exports amount to just 2.5% 95 of global oil trade, but are particularly important for Europe, 90 accounting for 11.7% of total oil imports there. The IEA reports that as 85 WTI 80 of February 24, as much as 40% of Libyan oil output has been shut 75 down; though OPEC has stated that it will make-up any shortfall. The 70 immediate supply threat to Europe is also mitigated by high crude 65 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 stocks (66 days of forward consumption, vis-à-vis a 5-year average of Sources: Datastream and World Bank DEC Prospects Group 60 days). But if sustained, these oil price hikes could dampen global growth, with back-of-the-envelope calculations suggesting a reduction of 0.2% to 0.3% in world growth over a 2- year period. Global domestic credit grew 9.9% in Q4-2010 (median, q/q, Global domestic credit growth firms in Q4- annualized), led by credit expansion among developing countries. 2010 —remains below pre-boom rate in HICs Banking-sector credit, median rate, %-change, 3m/3m, annualized Broadening of the global recovery has led to higher capacity utilization 30 and strenghtening demand for credit, which has also been supported by 25 Low- and Middle-income High-income (HICs) improving bank and borrower balance-sheets. The revival in credit Pre-boom (2003-06) 20 average = 12% growth among developing countries has been most pronounced in Sub- Saharan Africa, where credit posted median growth of 28.9% in the 15 three-months ending November. In contrast, Europe and Central Asia 10 (where banks were hit hard in the crisis) lags, with a median increase of 5 Pre-boom (2003-06) 12.5% over the period. Among OECD countries credit growth remains average = 9.2% 0 relatively subdued, but in the United States it has firmed to 3.9% in Q3- Jan-05 Dec-05 Nov-06 Oct-07 Sep-08 Aug-09 Jul-10 2010 (latest available), the strongest pace since the onset of the crisis. Sources: IMF and DEC Prospects Group High-income retail sales revive in fourth quarter on U.S. advance. Retail spending remains a key driver for industrial production, and during most High-income retail sales volumes of 2010 was a pillar of support for the Japanese and U.S. economic rebounding once more PCE-weighted index, 23 countries, ch% 3m/3m saar recoveries. Following a falloff in sales volume growth toward the middle 15 of 2010, a moderate rebound has since carried growth momentum to 10 4.5% by November (3m/3m, saar), slightly above its 3.8% long-term 5 average. The revival, however, is almost wholly due to stronger performance in the United States, where retail volumes surged to 12% 0 (q/q, saar), the strongest since 1992, grounded in improved job and -5 income growth. In contrast, sales dropped sharply in Japan and Germany (down 6.3% and 8.3%, respectively) in the fourth quarter (q/q, saar). And -10 a number of Euro Area economies (Greece, Ireland, Portugal, Spain, -15 Netherlands) also saw negative outturns, as government incentives Apr-05 Mar-06 Feb-07 Jan-08 Dec-08 Nov-09 Oct-10 Sources: Thomson Datastream and DEC Prospects Group dried up, or austerity measures were instituted or intensified. 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 24-Feb-11 2010 2010 2008 2009 2010 Q1 Q2 Q3 Q4 Sep Oct Nov Dec Jan Industrial Production, S. A. World 0.5 -8.0 8.9 11.4 9.0 0.3 7.4 6.9 6.4 7.5 6.9 - High Income Countries -1.8 -12.3 7.8 10.2 10.4 -0.8 4.9 5.9 5.2 6.7 6.3 - Developing Countries 5.8 1.3 10.9 13.7 6.3 2.4 11.8 8.6 8.5 8.9 7.9 - East Asia and Pacific 10.7 8.4 14.5 18.5 7.4 5.9 17.4 12.1 12.1 12.3 12.1 - East Asia x. China 2.3 -4.2 8.7 11.8 3.4 -7.5 13.3 4.8 5.5 5.8 3.6 - Europe and Central Asia 0.1 -10.1 9.1 7.6 8.5 -2.3 13.2 7.3 7.2 7.7 4.9 6.1 Latin America and Caribbean 1.0 -6.9 6.4 6.8 6.3 -0.6 4.1 5.3 2.6 5.7 4.1 - Middle East and N. Africa 3.1 -3.0 - 6.2 -0.4 -6.4 - 1.1 0.9 - - - South Asia 4.5 5.4 9.6 13.4 2.8 4.6 -2.0 4.4 9.8 3.3 0.8 - Sub-Saharan Africa 1.0 -6.7 - 13.5 2.2 -8.1 - 2.2 1.9 - - - 1 Inflation, S. A. High Income Countries 4.3 1.2 1.9 1.5 2.0 1.9 2.5 2.0 2.4 2.3 2.6 2.7 Developing Countries 10.3 4.0 - 4.6 4.5 3.9 - 3.7 4.5 5.1 6.0 - East Asia and Pacific 9.5 1.5 - 4.4 4.3 3.4 - 3.3 4.0 4.6 3.8 - Europe and Central Asia 10.2 3.1 6.5 4.5 4.4 6.8 7.6 7.3 7.7 7.5 8.0 - Latin America and Caribbean 8.8 3.3 - 4.0 4.0 4.0 - 3.7 4.5 5.3 5.9 5.4 Middle East and N. Africa 9.9 3.4 - 4.5 4.9 3.7 - 4.1 5.1 4.6 4.0 - South Asia 10.9 10.8 8.8 11.7 10.1 9.9 8.1 8.8 8.4 8.2 9.7 - Sub-Saharan Africa 10.4 7.3 - 3.9 4.3 3.1 - 3.0 3.2 3.6 - - 1 Inflation is calculated as medians for all groups. Trade and Finance indicators expressed as %ch y/y, except International Reserves are %ch p/p and trade quarterly figures are %ch q/q, annualized 2010 2010 2008 2009 2010 Q1 Q2 Q3 Q4 Sep Oct Nov Dec Jan Exports, N ominal, US$, S. A. World 15.2 -22.8 21.4 24.4 2.7 1.8 39.6 15.3 14.9 18.0 15.3 - High Income Countries 12.6 -22.9 18.1 19.7 -1.6 4.3 34.7 11.6 13.2 14.1 12.9 - Developing Countries 21.1 -22.4 28.6 34.7 12.1 -3.1 50.0 23.4 18.5 26.3 20.3 - East Asia and Pacific 16.8 -16.4 30.8 34.6 25.2 -2.0 42.8 24.8 20.8 33.1 18.6 35.8 Europe and Central Asia 30.9 -32.7 25.3 37.9 -7.5 -22.6 89.8 15.6 13.8 13.4 23.4 - Latin America and Caribbean 11.9 -20.4 28.3 39.5 16.3 3.3 48.3 26.8 21.8 28.7 26.0 - Middle East and N. Africa 34.6 -32.5 - 38.8 -15.8 19.2 - 25.8 12.0 - - - South Asia 24.9 -11.5 25.2 13.2 14.1 -5.7 114.9 20.3 20.3 25.0 36.1 - Sub-Saharan Africa 29.0 -31.3 - 29.9 0.1 -8.0 - 20.3 12.1 - - - Imports, N ominal, US$, S. A. World 15.7 -23.4 21.1 26.8 4.3 1.0 36.7 14.0 14.9 19.7 14.3 - High Income Countries 12.1 -24.6 17.5 22.5 2.7 1.7 28.9 10.5 12.0 15.7 12.2 - Developing Countries 25.7 -20.4 29.4 36.7 8.0 -0.5 55.5 22.2 21.4 29.0 18.8 - East Asia and Pacific 21.3 -15.5 37.8 50.1 3.9 -6.9 88.3 22.6 24.7 36.6 25.0 48.4 Europe and Central Asia 27.1 -33.5 25.8 21.1 22.2 16.2 46.2 26.3 26.4 28.8 22.8 - Latin America and Caribbean 22.2 -24.7 28.7 51.5 31.3 1.2 24.8 25.7 25.5 30.9 21.6 - Middle East and N. Africa 46.6 -8.1 - -0.9 -8.5 6.6 - 8.3 9.7 - - - South Asia 38.8 -17.3 26.5 29.8 -11.1 -6.7 9.2 26.4 8.0 12.7 -6.1 - Sub-Saharan Africa 25.4 -18.5 - 8.2 -5.3 7.7 - 11.2 9.0 - - - International R eserves, US$ High Income Countries 5.8 15.8 10.7 1.7 2.6 5.7 0.3 3.3 1.0 -1.6 1.0 - Developing Countries 12.8 15.0 15.1 1.1 0.5 7.6 5.0 3.8 3.2 -0.5 2.2 - East Asia and Pacific 23.5 22.7 19.6 2.0 0.6 8.2 7.6 4.2 4.4 0.3 2.8 - Europe and Central Asia -8.8 2.4 7.1 0.9 0.4 7.9 -2.0 3.7 1.0 -3.1 0.1 2.1 Latin America and Caribbean 11.3 10.3 15.7 0.4 2.7 7.6 4.2 3.9 2.3 0.0 1.8 - Middle East and N. Africa 22.7 5.6 - -1.4 -0.4 5.2 - 2.8 1.9 - - - South Asia -9.0 11.0 5.2 -1.1 -0.9 6.1 1.3 3.3 1.8 -2.1 1.8 0.6 Sub-Saharan Africa 8.0 2.2 - -0.5 -2.1 3.7 - 1.6 -0.2 -1.6 - - Weekly Global Economic Brief - 24 February 2011 2 Financial Markets 24-Feb-11 2008 2009 2010 2010 2010 2011 MRV 1 Chg since Q1 Q2 Q3 Q4 Oct Nov Dec Jan Sep-12 '08 3 Interest rates and LIBOR (%) U.S. Fed Funds Effective 1.93 0.16 0.18 0.13 0.19 0.19 0.19 0.19 0.19 0.18 0.17 0.15 -1.95 ECB repo 3.78 0.70 0.48 0.36 0.37 0.50 0.69 0.73 0.73 0.62 0.65 0.76 -3.61 US$ LIBOR 3-months 2.91 0.69 0.34 0.26 0.43 0.39 0.29 0.29 0.29 0.30 0.30 0.31 -2.51 EURIBOR 3-months 4.63 1.23 0.81 0.66 0.69 0.87 1.02 1.00 1.04 1.02 1.02 1.08 -3.88 US 10-yr Treasury yield 3.65 3.24 3.20 3.71 3.47 2.77 2.85 2.51 2.74 3.29 3.37 3.56 -0.17 German Bund, 10 yr 3.99 3.24 2.76 3.20 2.80 2.44 2.60 2.37 2.54 2.90 3.04 3.19 -0.98 Spreads (basis points) US Corporate (High Yield Bonds) 915 1011 538 522 531 577 521 554 530 479 459 394 -339 JP Morgan Emerging Markets 406 472 301 299 307 315 285 288 283 283 283 287 -71 Asia 355 374 206 231 221 200 172 183 169 165 175 180 -116 Europe 370 449 247 235 255 268 232 235 233 229 233 228 -86 Latin America & Caribbean 426 510 360 354 365 374 347 346 346 350 342 349 -39 Middle East 585 574 342 318 333 380 339 372 339 305 292 316 -182 Africa 452 431 274 224 256 324 294 293 283 307 351 373 38 Stock Indices 2 Global (MSCI) 327 250 299 297 292 289 319 314 319 325 335 347 8.4 High-Income ($ Index) 1297 987 1164 1161 1138 1121 1235 1214 1232 1261 1300 1358 5.8 United States (S&P-500) 1221 947 1139 1121 1134 1095 1204 1172 1199 1242 1283 1343 7.3 Euro Area (S&P-350$) 1544 1119 1266 1296 1198 1222 1348 1354 1347 1342 1384 1434 -2.5 Japan (Nikkei-225) 12156 9336 10021 10502 10385 9364 9834 9461 9783 10257 10443 10665 -12.7 Developing Markets (MSCI) 743 743 743 768 765 786 883 875 884 890 910 887 27.3 Asia 688 688 688 758 762 785 881 871 884 887 909 863 35.9 Europe & C. Asia 766 766 766 619 577 570 635 647 638 621 652 654 -12.9 Latin America & Caribbean 3771 3040 4110 3993 3910 4040 4498 4500 4506 4489 4568 4456 26.0 Middle East and N. Africa 733 439 … 492 502 474 474 … … … … 507 -27.3 Africa 772 772 773 807 824 850 976 953 970 1003 997 967 25.9 Exchange R ates (LCU / USD) High Income Euro Area 0.68 0.72 0.76 0.72 0.79 0.77 0.74 0.72 0.73 0.76 0.75 0.73 3.5 Japan 103.37 93.53 87.80 90.73 92.13 85.84 82.51 81.83 82.40 83.31 82.61 83.24 -22.6 Developing Brazil 1.83 2.00 1.76 1.80 1.79 1.75 1.70 1.68 1.71 1.69 1.68 1.66 -6.7 China 6.95 6.83 6.77 6.83 6.82 6.77 6.66 6.67 6.65 6.65 6.60 6.58 -3.9 Egypt 5.44 5.55 5.64 5.47 5.61 5.70 5.76 5.73 5.76 5.80 5.81 5.89 8.2 India 43.52 48.42 45.73 45.94 45.66 46.48 44.85 44.42 45.00 45.13 45.43 45.27 -1.0 Russia 24.88 31.76 30.38 29.87 30.33 30.60 30.71 30.31 31.02 30.80 30.14 29.24 14.3 South Africa 8.26 8.43 7.32 7.51 7.55 7.32 6.90 6.91 6.98 6.82 6.92 7.12 -11.7 Memo: USA nominal effective rate 84.39 86.30 83.47 83.38 86.26 83.68 80.56 79.80 80.42 81.46 80.56 80.56 -6.2 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 2008 2009 2010 2010 2010 2011 MRV Chg since Q1 Q2 Q3 Q4 Oct Nov Dec Jan Sep-12 '08 3 Oil price, $/b, nominal 1 97 62 79 77 78 76 85 82 84 90 93 97 -0.7 Non - Oil Index 2 197 153 191 180 176 187 222 212 221 234 0 242 21.4 Food Index 2 218 175 199 186 175 196 239 228 238 253 263 270 27.1 Metals and Minerals Index 2 184 133 176 171 168 170 194 191 191 201 0 209 12.6 Baltic Dry Index 3 6348 2598 2755 3015 3318 2358 2330 2693 2321 1975 1419 1295 -73.0 1 Simple average of Brent, Dubai and WTI. 2 Base Date = Jan 1, 2005 3 Base Date = May 1, 1985 Weekly Global Economic Brief - 24 February 2011 3