89872 DECPG Development Prospects Group Weekly Global Economic Brief Number 172 For more information, see www.worldbank.org/gem 28th March 2013 Employment has staged a sustained rebound in the United States, but continues to languish in much of the Euro Area amid ongoing economic weakness. The sharp movements in major high-income country currencies in recent months, in particular the nearly 20 percent depreciation of the yen in real effective terms since July, appear to have had limited impact on developing-country currencies outside of East Asia. In commodity markets, the divergence in U.S and international prices of crude oil and natural gas is narrowing, perhaps reflecting market forces. Employment has staged a sustained rebound in the United States, but Employment has recovered in the United continues to languish in much of the Euro Area. The US suffered steep job States and risen robustly in Germany losses in the post-Lehman crisis period, with employment falling 5.6% (Employed population, aged 15 and over, index, July 2008=100) between July 2008 and December 2009. But with a gradual upturn in 104 Germany economic activity, US employment rose steadily and is now only 1.5% 102 below the pre-crisis level of mid-2008. Japan’s employment fell by 2% United States after the crisis and has remained sluggish. The Euro Area debt crisis took a 100 heavy toll, with employment still 3% lower, but country outcomes vary. France 98 German employment rose robustly, causing the unemployment rate to fall Japan 96 to 5.3% in January from 7.7% in mid-2008. But in France, employment, though stable, failed to keep up with labor force increases, causing the 94 Other Euro Area unemployment rate to rise to 10.6%. In the rest of the Euro Area, 92 Jul-08 Apr-09 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 employment is still 6.7% lower than mid-2008 levels, with large declines Note: Non-farm payroll employment for the United States. in Ireland (12.5%), Portugal (13.2%), Spain (17.2%) and Greece (19.3%). Source: OECD, US Bureau of Labor Statistics, and Development Prospects Group. The recent sharp movements in major high-income country currencies Depreciation of Japanese yen had limited appear to have had limited impact on developing-country currencies, on effect on developing-country currencies average. The yen depreciated 18% in real effective (REER) terms between outside of East Asia July 2012 and February 2013 in response to policy initiatives to support (Real effective exchange rate index, January 2009=100) economic growth. In parallel, the euro appreciated 9% (REER) after the 120 Other East Asia 115 European Central Bank’s pledge of support for distressed Euro Area 110 Other developing economies. These movements appear to have had limited impact on 105 China developing-country currencies, on average. Emerging market countries in 100 some regions experienced appreciation pressures from higher commodity 95 90 prices (Latin America) and robust private capital inflows (East Asia and 85 United States Eastern Europe). But some other countries, notably South Africa and India, 80 Euro Area Japan have experienced depreciation mainly due to domestic difficulties. The 75 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 large yen depreciation has added to appreciation pressures in some of Note: GDP-weighted average REERs for relevant country groups. Japan’s East Asian trade partners, notably Singapore (4.8% REER Source: IMF IFS, JP Morgan, and Development Prospects Group. appreciation since July), South Korea (6.7%) and Thailand (8.8%). U.S and international crude oil and natural gas prices may be starting to converge in response to market forces. The US energy boom saw oil and gas production rise by 15% and 24% since 2007 causing domestic gas prices to plummet to one-fourth of prices in Europe and Japan. Cheap US gas, and the possibility that it might be exported (despite administrative impediments and a lack of liquefied natural gas (LNG) capacity), have put some downward pressure on European gas prices, which no longer track crude prices as closely as in the past. Japanese LNG prices, however, remain in lock-step with oil. International (Brent) and US (WTI) oil prices may also be converging as US pipeline bottlenecks are being bypassed with rail shipments to Gulf Coast refineries. However, stronger demand in the US than in Europe (reflecting divergent economic performance) also helps explain the narrowing of Brent and WTI crude prices. Weekly Global Economic Brief – 28 March 2013 Development Prospects Group Economic Developments indicators expressed as %ch y/y, except Industrial Production quarterly figures are %ch q/q, annualized 2012 2012 2013 2009 2010 2011 2012 Q1 Q2 Q3 Q4 Oct Nov Dec Jan Industrial Production, S.A. World -8.1 9.0 4.3 2.4 5.6 0.1 0.3 1.1 1.5 2.0 1.8 1.5 High Income Countries -12.7 8.0 2.5 0.5 2.5 -1.0 -2.7 -2.4 -1.2 -1.0 -0.6 -1.2 Developing Countries 1.3 10.6 7.3 5.5 10.8 1.8 5.2 6.6 5.7 6.8 5.6 5.8 East Asia and Pacific 8.5 14.5 11.6 9.2 16.9 3.3 8.4 14.4 10.1 11.4 10.3 9.6 East Asia x. China -3.3 9.5 0.2 4.0 44.4 1.4 -2.4 23.3 13.3 20.9 11.8 7.8 Europe and Central Asia -10.1 9.4 6.0 2.1 4.5 -2.6 2.0 0.9 -0.6 4.3 -0.2 0.2 Latin America and Caribbean -6.8 6.7 3.3 0.4 1.1 -1.1 3.6 -2.1 1.6 0.6 -1.0 1.3 Middle East and N. Africa -2.7 1.6 -9.9 - 12.5 12.1 -7.6 - 0.8 -0.7 - - South Asia 0.2 9.9 5.7 1.3 10.9 -5.4 -1.3 6.0 7.5 0.5 -0.5 1.8 Sub-Saharan Africa 0.7 4.1 4.0 - -3.9 5.2 5.0 - -7.2 1.0 - - Inflation, S.A. 1 High Income Countries 0.2 1.6 2.7 2.0 2.4 1.9 1.8 1.8 2.0 1.7 1.7 1.5 Developing Countries 4.3 5.8 7.1 6.1 6.4 6.1 5.9 6.0 5.8 5.9 6.3 6.1 East Asia and Pacific -0.2 3.5 5.5 2.8 3.9 3.0 2.2 2.3 2.0 2.3 2.7 2.3 Europe and Central Asia 8.7 6.9 7.9 7.0 7.6 6.8 7.4 6.2 6.7 6.0 5.9 6.6 Latin America and Caribbean 5.8 7.6 12.5 17.1 6.8 6.3 6.2 6.3 6.3 6.2 6.3 6.2 Middle East and N. Africa 9.0 6.1 6.8 6.4 14.3 15.4 17.8 21.3 20.2 21.4 22.8 - South Asia 10.5 11.7 9.3 9.3 7.7 10.2 9.6 9.7 9.0 9.3 10.6 10.8 Sub-Saharan Africa 8.7 7.2 8.5 8.4 9.2 8.8 8.0 7.7 7.8 7.9 7.6 - 1 Inflation is calculated as the GDP-weighted average 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 2012 2012 2013 2009 2010 2011 2012 Q1 Q2 Q3 Q4 Oct Nov Dec Jan Exports, Nominal, US$, S.A. World -22.8 21.8 19.2 0.6 12.3 -8.1 -7.9 12.6 4.1 0.4 0.7 6.8 High Income Countries -23.0 18.4 17.7 -0.9 12.9 -10.9 -7.1 8.9 2.7 -0.1 -1.2 5.2 Developing Countries -22.5 29.9 22.4 3.6 11.2 -1.9 -9.6 20.4 7.1 1.5 4.6 10.3 East Asia and Pacific -16.4 30.9 19.6 6.4 9.8 16.4 -10.4 21.4 10.0 4.5 11.3 21.0 Europe and Central Asia -32.6 26.8 29.4 3.9 11.9 -18.7 -1.7 12.4 3.2 1.4 -4.0 0.7 Latin America and Caribbean -20.0 28.1 22.4 1.6 11.2 -16.8 -1.0 14.5 7.2 -0.9 -2.6 -0.8 Middle East and N. Africa -35.9 26.6 17.2 - 10.8 -18.6 -19.3 - 8.1 - - - South Asia -13.3 33.4 32.5 -4.2 -2.0 -13.0 -10.2 17.5 -2.4 -4.5 -0.9 0.1 Sub-Saharan Africa -30.9 35.3 23.2 - 36.1 -10.2 -29.6 - 4.2 - - - Imports, Nominal, US$, S.A. World -23.9 21.2 19.7 0.5 13.4 -11.6 -6.1 12.4 3.9 0.6 -0.2 7.4 High Income Countries -25.0 17.6 17.5 -1.4 13.7 -12.0 -7.7 8.6 2.3 -0.7 -1.5 3.5 Developing Countries -20.7 30.4 24.9 4.8 12.8 -10.8 -2.7 21.2 7.3 3.4 2.6 16.2 East Asia and Pacific -15.5 37.1 24.4 5.4 13.0 -11.9 -5.7 25.6 5.5 3.0 4.2 25.3 Europe and Central Asia -33.7 26.0 29.9 3.1 17.3 -10.0 0.8 7.7 5.3 4.2 1.0 9.0 Latin America and Caribbean -24.7 29.1 21.9 3.5 11.1 -4.5 -14.8 25.8 12.2 0.2 -2.2 10.1 Middle East and N. Africa -6.8 14.2 16.0 - 3.0 30.3 -4.1 - 7.3 - - - South Asia -19.6 33.9 31.5 4.2 16.7 -39.3 32.9 32.5 7.8 5.7 3.6 4.3 Sub-Saharan Africa -18.3 13.9 23.1 - 7.9 2.0 1.2 - 10.5 - - - International Reserves, US$ High Income Countries 15.6 10.8 11.8 9.5 1.5 2.9 3.2 1.5 0.8 0.3 0.6 0.4 Developing Countries 15.1 14.7 9.6 4.8 2.9 -0.8 1.8 1.0 0.2 0.2 0.6 - East Asia and Pacific 22.7 19.3 11.8 4.2 3.6 -1.9 1.8 0.9 0.0 0.4 0.5 - Europe and Central Asia 2.4 7.5 2.0 6.6 2.5 -0.7 3.1 1.6 -0.1 0.1 1.6 -0.6 Latin America and Caribbean 10.3 15.6 16.9 7.9 3.2 2.9 1.1 0.3 0.1 0.6 -0.4 0.2 Middle East and N. Africa 5.1 5.9 2.6 - 0.3 0.9 0.8 - 1.7 - - - South Asia 10.9 5.4 -1.9 -0.3 -1.2 -1.0 1.6 0.6 0.2 -0.7 1.1 -0.8 Sub-Saharan Africa 2.9 0.7 8.9 - 2.2 1.2 5.1 - 1.8 0.5 - - Weekly Global Economic Brief – 28th of March 2013 2 Development Prospects Group Financial Markets 2009 2010 2011 2012 2012 2012 2013 MRV 1 Chg since Q1 Q2 Q3 Q4 Nov Dec Jan Feb Sep-12 '08 3 Interest rates and LIBOR (%) U.S. Fed Funds Effective 0.16 0.18 0.10 0.14 0.10 0.15 0.15 0.16 0.16 0.16 0.14 0.14 0.12 -1.98 ECB repo 0.70 0.48 0.82 0.06 0.15 0.12 0.00 -0.01 -0.01 -0.01 0.01 0.03 0.02 -4.35 US$ LIBOR 3-months 0.69 0.34 0.34 0.43 0.51 0.47 0.42 0.32 0.31 0.31 0.30 0.29 0.28 -2.54 EURIBOR 3-months 1.23 0.81 1.39 0.57 1.04 0.70 0.36 0.20 0.19 0.19 0.20 0.22 0.21 -4.75 US 10-yr Treasury yield 3.24 3.20 2.77 1.78 2.02 1.81 1.62 1.69 1.64 1.71 1.88 1.97 1.85 -1.88 German Bund, 10 yr 3.24 2.76 2.63 1.49 1.86 1.47 1.33 1.30 1.27 1.23 1.53 1.54 1.28 -2.90 Spreads (basis points) US Corporate (High Yield Bonds) 1011 538 544 543 559 561 556 497 510 476 441 437 425 -308 JP Morgan Emerging Markets 472 301 341 342 379 377 327 285 295 273 261 278 308 -49 Asia 374 206 218 216 237 250 210 166 168 168 164 186 200 -96 Europe 449 247 301 320 389 370 291 231 237 217 202 230 264 -49 Latin America & Caribbean 510 360 404 393 416 421 384 351 367 333 321 330 362 -26 Middle East 574 342 366 449 435 451 475 435 438 433 400 411 444 -54 Africa 431 274 364 337 401 369 303 275 283 269 253 282 311 -24 Stock Indices (end of period) 2 Global (MSCI) 299 331 300 340 333 312 332 340 333 340 355 354 359 12.1 High-Income ($ Index) 1168 1280 1183 1339 1312 1236 1312 1339 1315 1339 1405 1405 1429 11.4 United States (S&P-500) 1115 1258 1258 1426 1408 1362 1441 1426 1416 1426 1498 1515 1563 24.9 Euro Area (S&P-350$) 1358 1353 1171 1354 1287 1172 1268 1354 1317 1354 1434 1388 1368 -7.0 Japan (Nikkei-225) 10546 10229 8455 10395 10084 9007 8870 10395 9446 10395 11139 11559 12336 1.0 Developing Markets (MSCI) 783 912 725 833 822 740 792 833 795 833 845 834 817 17.2 Asia 778 906 732 864 827 758 817 864 835 864 873 872 852 34.1 Europe & C. Asia 616 635 449 548 521 470 511 548 517 548 544 524 494 -34.2 Latin America & Caribbean 4117 4614 3602 3798 4108 3521 3675 3798 3580 3798 3938 3825 3795 7.3 Africa 815 1049 849 992 939 883 945 992 906 992 948 931 902 17.5 Exchange Rates (LCU / USD) High Income Euro Area 0.72 0.76 0.72 0.78 0.76 0.78 0.80 0.77 0.78 0.76 0.75 0.75 0.78 10.9 Japan 93.55 87.81 79.77 79.81 79.29 80.13 78.60 81.22 80.98 83.75 88.77 93.05 94.19 -12.4 Developing Brazil 2.00 1.76 1.67 1.95 1.77 1.96 2.03 2.06 2.07 2.08 2.03 1.97 2.01 12.8 China 6.83 6.77 6.47 6.31 6.31 6.33 6.35 6.24 6.23 6.23 6.22 6.23 6.21 -9.2 Egypt 5.55 5.64 5.94 6.07 6.04 6.04 6.08 6.12 6.10 6.17 6.56 6.72 6.80 25.0 India 48.42 45.73 46.67 53.43 50.26 54.08 55.17 54.21 54.86 54.67 54.28 53.84 54.38 18.9 Russia 31.76 30.38 29.41 31.06 30.16 31.07 31.95 31.07 31.38 30.70 30.24 30.21 31.06 21.5 South Africa 8.43 7.32 7.26 8.21 7.76 8.13 8.26 8.69 8.81 8.61 8.79 8.88 9.29 15.2 Memo: USA nominal effective rate 86.30 83.47 78.33 80.68 80.10 81.11 80.95 80.57 80.99 80.91 82.23 83.82 83.82 -2.4 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 2009 2010 2011 2012 2012 2012 2013 MRV Chg since Q1 Q2 Q3 Q4 Nov Dec Jan Feb Sep-12 '08 3 Oil price, $/b, nominal 1 62 79 104 105 112 103 103 102 101 101 105 108 104 6.1 Non - Oil Index 2 150 194 234 208 212 206 209 205 203 206 209 209 201 3.1 Food Index 2 173 193 238 240 229 232 257 242 241 239 237 237 236 16.2 Metals and Minerals Index 2 127 189 216 184 196 185 173 181 177 185 193 195 176 -5.0 Baltic Dry Index 3 2598 2755 1546 917 878 1017 841 932 1025 818 767 745 922 -80.8 1 Simple average of Brent, Dubai and WTI. 2 Base Date = Jan 1, 2005 3 Base Date = May 1, 1985 Weekly Global Economic Brief – 28th of March 2013 3