Special Focus: Fiscal Policy Challenges in Developing Economies

Transcription

1 Aug-4 Sep-4 Oct-4 Nov-4 Dec-4 Jan-5 Feb-5 Mar-5 Apr-5 For more information, visit Overview The global economy appears to be on track for another year of modest growth. In the first quarter, activity was soft in the United States, partly for one-off reasons, whereas a broad-based strengthening is underway in the Euro Area. Growth in China is slowing as expected, with policy interventions cushioning activity. In other emerging and developing countries, growth has disappointed, especially in Russia, oil-exporting countries in Sub-Saharan Africa, and Brazil. Surveys suggest that global growth momentum is improving in the second quarter. Interest rates remain at historically low levels in the Euro Area, partly because of the ECB s quantitative easing (QE) program, which started in March. Sovereign bond yields in several countries have fallen below zero. Developing countries international reserves have fallen as a result of valuation effects and interventions to stem depreciation pressures. Since mid-march, currency pressures have receded. This, combined with continued low interest rates and stabilizing oil prices, has contributed to rising asset price valuations. Oil prices should remain low as expected in January, while forecasts for most other commodity prices for 5 have been revised downwards on ample supplies, weak demand, and an appreciated U.S. dollar. Chart of the Month The stalemate in discussions between Greece and its official creditors over reform commitments is preventing the release of external financial support, while the government s cash flow position is rapidly deteriorating. Heightened default risks have pushed three-year sovereign bond yields in Greece above 5 percent at the end of April. Contagion to other periphery economies has been mitigated by the ECB s QE program and better crisis management instruments. Foreign bank exposures to Greek debt have declined sharply since, but banking systems in some Eastern European and Balkan countries remain vulnerable to spillovers through sizeable local subsidiaries of Greek banks. Special Focus: Fiscal Policy Challenges in Developing Economies - Year Bond Yields Greece (LHS) Germany Portugal Italy Spain Source: World Bank, Haver Analytics - During the Great Recession of 8-9, fiscal deficits widened in emerging market and frontier market economies (EMEs and FMEs) and have yet to return to pre-crisis levels. Government debt has steadily increased, especially in FMEs. Weakening fiscal positions have been accompanied by rising private sector debt. The balance sheet vulnerabilities associated with higher private debt constrain monetary policy room to support activity. EMEs and FMEs need to rebuild fiscal space, which could allow them to buffer growth slowdowns with fiscal stimulus and increase the effectiveness of stimulus. Prepared by Marc Stocker with contributions from John Baffes, Raju Huidrom, Eung Ju Kim, Ekaterine T. Vashakmadze and data support from Trang Nguyen. DECPG - April, 5.

2 APRIL 5 Monthly Highlights Global economy on track for another year of modest growth. Soft activity in the United States and China, combined with contracting activity in Russia and Brazil, is likely to translate in weak global growth outcomes for the first quarter of 5. However, the global composite Purchasing Managers Index (PMI) has continued to edge higher in recent months, consistent with a growth momentum of around percent heading into the second quarter of 5. This reinforces the view that slower growth in Q could be temporary, with better prospects ahead. The improvement in the global PMI in March was driven in particular by expanding services sector activity on the back of rising consumer spending, while manufacturing indices posted smaller gains and new export orders declined, in line with evidence of still subdued global import demand in Q (Figure ). An encouraging U.S. composite PMI reading for March and strong outcomes in the Euro Area underscore the ongoing support of high-income countries. On the other hand, PMI surveys from developing countries have been less encouraging, with a steep deterioration in business conditions in Brazil weighing on March outcomes. Gap in economic performance between U.S. and Euro Area narrowing. Since the beginning of 5, data releases in the Euro Area have been consistently better than expected, while those for the United States have worsened. As a result, Euro Area growth in Q is currently tracking close to percent, while activity came to a standstill in the United States over the same period, according to preliminary GDP estimates. A marked shift in the relative performance of these two economies in Q partly reflects the impact of a sharp appreciation of the U.S. dollar against the euro, but mostly relates to temporary one-off factors. In the United States, weak exports, manufacturing and construction data in Q reflected poor weather conditions in the East and port disruptions on the West Coast. Similarly, the significant slide in employment gains in March should be seen as an outlier in an otherwise robust labor market, with job openings and employment surveys in both manufacturing and services pointing upwards. Growth in the United States is expected to rebound significantly in Q, and remain above potential until the end of the year. In this context, the U.S. unemployment rate is predicted to fall to 5. percent by end-5, in line with estimates of structural unemployment by members of the Fed policy committee. In the Euro Area, recent economic indicators point to a strengthening of the recovery momentum. Consumer confidence was particularly strong in March, with a significant jump in major purchase intensions and a sharp drop in unemployment expectations, raising hopes of a further acceleration in private consumption ahead. In addition, the ECB s quarterly bank lending survey showed that Euro Area banks have eased credit standards in Q, and that about half of them see a positive effect of the ECB s expanded asset purchase program on their market-financing conditions. Prospects for developing countries revised further down. While growth prospects for high-income countries remain on the whole broadly unchanged from January 5 forecasts, they have been further downgraded for major emerging and developing economies, according to regional economic updates released in April. While China is slowing mostly as expected, a deepening recession in Russia, contraction in Brazil and weakening activity among key oil exporters in Sub- Saharan Africa have cast a shadow over growth prospects for their respective regions. The windfalls from lower oil prices should help mitigate some headwinds in Turkey, South Africa and other major developing oil importers, while providing additional momentum to growth in India. Activity in China soft, buttressed by policy support. According to preliminary estimates, China s GDP growth decelerated to 7. percent in year-on-year terms and to 5. percent in quarter-on-quarter annualized terms in the first quarter of 5. The slowdown reflected weakening activity in industry and construction due to ongoing adjustments in sectors with excess capacity and in real estate. The decomposition of GDP by expenditure component has not been released yet, but available indicators suggest that investment weakened further while private consumption growth appears sustained. In recent years, targeted stimulus measures were implemented after weak quarterly growth results, leading to acceleration activity in subsequent quarters. With ample room for policy accommodation, the central bank is expected to continue lowering both benchmark interest rates and reserve requirement ratios, while the central government suggested a more gradual implementation of the new local government debt framework, with transitional arrangements to support ongoing infrastructure projects and help refinance maturing debts. Liquidity conditions remain tight, mainly due to a moderation of deposit growth, capital outflows and sharp deceleration in non-bank credit. Interest rates remain at historic lows. The impact of the ECB s QE program that began in March, combined with disappointing growth outcomes in the United States and a dovish turn in Fed communication, has contributed to global interest rates remaining at historically low levels in April. U.S. -year Treasury yields continued to hover around percent, while Japan s -year yields were stable at. percent and Germany s declined to as low as.5 percent, before recovering to.5 by the end of April (Figure ). Record low interest rates in core Euro Area countries partly reflect the impact of ECB s QE program. Sovereign bond purchases by the ECB are expected to significantly outpace net debt issuance by Euro Area governments this year, putting downward pressure on yields. A growing number of bonds trade with negative yields that approach the lower limit for eligibility under ECB s QE program (-bp). Spreads for periphery countries credit markets remain exceptionally low despite renewed concerns about Greece in April. The search for higher yields has led to a significant acceleration of net portfolio outflows from the Euro Area and increasing demand for long-

3 APRIL 5 term debt securities in the United States. This reallocation is putting downward pressure on the Euro and contributing to low long-term U.S. Treasury yields. In parallel, investors continued to revise down the expected path of U.S. policy rates over the medium term. Rising emerging market asset prices. Low global interest rates amidst expectations of a slower normalization of U.S. monetary policy, receding currency pressures, a stabilization of oil prices and some moderation in capital outflows have led to robust increases in emerging market asset valuations since mid-march. Stock market indices have been particularly buoyant, especially in China and India. In credit markets, hard currency bonds have outperformed local currency ones since the start of the year, both being supported by expectations of a more gradual increase in U.S. policy rates. Bond portfolio inflows remained positive in April and international bond issuance still sustained reflecting continued demand for higher yielding debt. Emerging market currency indices (measured against the U.S. dollar) are still significantly down from the start of the year, but have rebounded from their lows in mid-march. China s securities regulators seek to cap soaring stock markets. Regulatory authorities warned small investors, who have contributed to a percent rally in equity prices since the start of the year, not to borrow money or sell property to buy stocks. The regulator banned a type of financing called umbrella trusts that provided cash for margin trading, the practice of borrowing against the value of common shares, and placed limits on margin trading for highly risky small stocks that trade over the counter rather than on exchanges. In an attempt to cool rising equity prices, regulators also announced that fund managers would be allowed to lend shares for short selling (betting against stocks), while stock exchanges would push for an increase in the supply of available shares for lending. Decline in emerging market currency reserves driven by strong dollar. Foreign-currency reserves in emerging markets declined by 6 percent in U.S. dollar terms since the second quarter of 4, following a period of uninterrupted accumulation since the early s. The decline appears driven by two factors: valuation adjustments linked to a rapid appreciation of the U.S. dollar and capital outflows in some economies. For China, reserve holdings have fallen by 7 percent since June 4, to $.78 trn in March 5 (6. percent of GDP), largely driven by exchange rate valuation effects and to a lesser extent by pressure stemming from capital outflows. The impact of sharply lower oil prices on Russia and other oil exporting countries also contributed to falling foreign currency reserves in emerging markets since mid-4. Reserves in Russia fell to $9 billion in the first quarter of 5, a $5 billion decline versus the fourth quarter of 4, while Malaysia has seen since mid-4 its steepest loss in reserves since the 997 Asian crisis. Looking ahead, a shift in capital flows associated with prospects of U.S. monetary policy tightening and lower commodity prices will make the accumulation of foreign reserves in emerging markets more challenging, but current levels appear largely adequate in most cases. Remittance flows to developing countries slowing. Remittances remain a key source of funding for developing countries, far exceeding official development assistance. Remittances are generally a stable source of finance for developing countries but they are currently affected by important cross-currents, with a positive impact of a robust recovery in the United States being offset by the negative impact of lower oil prices on Russia and other oil exporting countries, a strengthening U.S. dollar, and tighter immigration controls. According to the latest Migration and Development Brief, remittance flows are projected to decline in all developing regions this year (in percent of recipient country GDP), with the exception of Latin America and the Caribbean, where a job-rich U.S. recovery and strong U.S. dollar are expected to provide significant support. In contrast, Russia s deepening recession and the sharp depreciation of the ruble will reduce remittances to the region. Central Asian countries will continue to feel the negative impact hardest because of their heavy dependency of remittance inflows from Russia. All main commodity price indices are expected to decline in 5. The April Commodity Markets Outlook maintains a central projection for oil prices at $5/bbl this year, implying a fall of 45 percent from average 4 prices. At present, oil markets remain oversupplied, with large inventories, especially in the United States. The U.S. rig count fell by half in the past five months but U.S. oil production continued to grow in March and is only leveling off in the second quarter of 5. OPEC production also rose during the first quarter, with Saudi Arabia averaging mb/d in March. Uncertainty on ongoing supply adjustments has led to increased price volatility since November last year. Natural gas prices are expected to decline significantly this year given that many gas contracts are tied to oil prices. All main non-energy price indices will also fall this year, by an estimated percent on average. Metals prices are projected to decline percent due to capacity increases and slowing demand in China. The largest decline is expected for iron ore (-5 percent) due to new low-cost mining capacity (mainly in Australia) coming online this year and next. Agricultural prices are projected to fall by an average of 9 percent and fertilizer prices (a key cost for most agricultural commodities) by 4 percent on weaker demand, ample supply and reduced energy costs.

4 APRIL 5 Figure : Soft activity in the United States and China, combined with contracting activity in Russia and Brazil, is likely to translate into weak global growth outcomes for the first quarter of 5. However, global composite PMI has continued to edge higher in recent months, pointing to better prospects ahead. Growth continued to disappoint across large emerging and developing countries, while slowing broadly as expected in China, cushioned by policy interventions. A. Global PMI indices B. Composite PMI indices 6 Manufacturing Output Service Output New export orders 6 Emerging markets High-income countries C. U.S. unemployment rate D. Euro Area retail sales Index, 5= Source: World Bank, Haver Analytics, FOMC (5). Note: Dotted line is the central estimate of structural unemployment by members of the Federal Open Markets Committee. E. GDP growth forecast, 5 F. China s GDP growth GEP Jan 5 8 April 5 Updates Year/year rate Annualized Quarterly Rate IND CHN EGY TUR MEX ZAF BRA RUS Q Q Q Q Q Q Q Q Q 4 5 Source: World Bank.

5 Q 4Q 4Q 4Q4 5-Q Jan- May- Sep- Jan-4 May-4 Sep-4 Jan-5 APRIL 5 Figure : Global interest rates remain at historically low levels. This, combined with receding currency pressures and stabilizing oil prices, has contributed to rising asset price valuation across emerging markets. International reserves have fallen as a result of valuation effects and interventions to stem depreciation pressures. Oil prices should remain low, as expected in January, while forecasts for most other commodity prices for 5 have been revised downwards on ample supplies, weak demand, and an appreciated U.S. dollar. A. -year government bond Yields B. U.S. policy rate expectations.5 US German Japan Apr-5 Jun-4 Dec Note: The last observation is for April 7, 5. Source: World Bank, Bloomberg. Note: U.S. policy rate expectations are based on forward swap rates. C. Financial markets year-to-date returns D. Emerging markets foreign-exchange reserves Europe equity EM equity World equity EM bond - $ Corp US bond - High Y. EM Bond - $ Sov. US equity EM bond - local EM currency US$ billion Foreign reserve in USD Y-o-Y percent change (RHS) Source: World Bank, Bloomberg. Note: YTD returns as of April 8, 5. E. Remittance flows F. Change in commodities prices, 4-5 Share of GDP, DEV EAP ECA LAC MNA SAS SST Source: World Bank. change Crude oil, avg, spot Iron ore Natural gas, US Natural gas LNG, Japan Soybean meal Tin Nickel Wheat, US, HRW Natural gas, Europe Palm oil Soybeans Soybean oil Coffee, Arabica Lead Copper Source: World Bank

6 APRIL 5 Special Focus: Fiscal Policy Challenges in Developing Economies During the Great Recession, public debt stocks rose and primary deficits widened in many developing countries. Since then, primary deficits remain wider than they were pre-crisis (Figure ). Although debt has grown slowly under benign post-crisis market conditions and prevailing low interest rates, debt-to-gdp ratios could increase rapidly if domestic growth slows and global interest rates rise. This is especially relevant for FMEs that have placed sovereign bonds in international markets recently, which could become more vulnerable to sharp increases in borrowing costs. Weaker fiscal position in EMEs and FMEs were accompanied by rising private debt. Corporate and household debt in EMEs and FMEs has risen since the crisis. This rise has been substantial in some EMEs, with aggregate non-financial corporate debt growing by 9 percent over 7. Moreover, in some countries, rising private sector debt has been accompanied by deteriorating fiscal sustainability. Some countries including China, Thailand, Malaysia, and Vietnam have already taken measures to restrain private credit growth. Rapid currency depreciations can be another source of risk in some countries, such as in parts of Latin America and the Caribbean. Nonfinancial firms have been borrowing substantially in international markets in foreign currencies and depositing the proceeds in local currencies in domestic financial systems. Sharp depreciations might strain the solvency of domestic firms and weaken the soundness of domestic financial sectors. Over the medium term, developing economies will need to return their fiscal positions to more sustainable levels to increase fiscal space. A wider fiscal space would increase the likelihood that fiscal stimulus is both available and effective as a countercyclical policy tool if monetary policy normalization in advanced economies constrains monetary policy. The appropriate speed of adjustment, however, depends on a host of country-specific factors, including the cyclical position of the economy and constraints on monetary policy. The recent slump in oil prices presents both risks and opportunities for developing countries. For oil exporters, the slump could result in loss of oil revenues, eroding their fiscal space. At the same time, in countries with substantial food and fuel subsidies, the continued soft commodity prices (as projected for 5-6) would offer an opportunity to implement subsidy reform that could help rebuild fiscal space and also lessen distortions associated with these subsidies. Fiscal rules impose numerical constraints on budgetary aggregates debt, overall balance, expenditures or revenues. Fiscal rules, and in particular cyclically-adjusted or structural balance rules, have become increasingly popular in developing countries. The adoption of rules, per se, has had mixed success in limiting procyclicality. Rules are best when simply defined and supported by surveillance arrangements, respected by the government. Chile s use of a technical fiscal council that facilitates transparency in the conduct of fiscal policy is a good example of a well-designed, credible and successfully operated fiscal rule. Stabilization funds set aside receipts from significant natural resource revenues during favorable times to cushion revenue shortfalls and mitigate negative shocks to government expenditures. Stabilization funds were adopted widely in the s, when high international oil prices along with the discovery of oil in a number of countries facilitated their establishment. Since stabilization funds separate government expenditure from fluctuations in the availability of revenues, they can be important institutional mechanisms for improving fiscal space, while mitigating fiscal procyclicality. The effectiveness of these funds depends largely on government commitment to fiscal discipline and macroeconomic management, rather than on just the existence of the instrument itself. Norway and Chile are examples of economies with stabilization funds that are associated with good fiscal management. Medium-term expenditure frameworks (MTEFs) aim to establish or improve credibility in the budgetary process. More than two-thirds of all economies have adopted MTEFs of some form. The most common design of MTEFs translates macroeconomic objectives into budget aggregates and detailed spending plans. While credible MTEFs can significantly improve fiscal discipline, significant heterogeneity exists across countries possibly reflecting shortcomings in the practical implementation of MTEFs. Keys to robust implementation are coordination with broader public sector reform, and sensitivity to country characteristics. One of the lessons from the experiences of South Africa, Tanzania and Uganda is the need for realistic expectations during preparation of the budget.

7 APRIL 5 Figure : In emerging and frontier market economies, fiscal deficits widened during the Great Recession of 8-9 and have yet to return to pre-crisis levels. Government debt has steadily increased, especially in frontier markets. Weakening fiscal positions have been accompanied by rising private sector debt. The balance sheet vulnerabilities associated with higher private debt constrain monetary policy room to support activity. EMEs and FMEs need to rebuild fiscal space, which could allow them to buffer a growth slowdown with fiscal stimulus and increase the effectiveness of stimulus. A. Fiscal balance (percent of GDP) B. Government debt (percent of GDP) EME FME LIC Source: Global Economic Prospects, January 5. Note: All figures are based on unweighted averages across the country grouping. EME: emerging market economies; FME: frontier market economies; LIC: low-income countries. C. Private sector debt D. Credit and sustainability gap, of GDP 7 Sustainability gap () EME FME Source: Global Economic Prospects, January 5 Source: Global Economic Prospects, January 5 Note: Circle size is proportional to domestic private credit-to-gdp ratio. The sustainability gap is the difference between the primary balance and an estimated debt-stabilizing primary balance based on interest rates and growth rates in. A negative value suggests that the balance is debt increasing and positive values suggest that the balance is debt reducing. E. Fiscal rules trends F. Stabilization funds - trends 4 Developing economies Advanced economies LBN HRV EME FME LIC Change in private sector credit to GDP ratio - (%) MYS CHN ZAF 6 THA UKR RUS 4 CHL VNM BRA CZE COL IND BGR POL Number of funds 4 Number of stabilization funds Number of oil-related funds Oil price, US$ per barrel (right axis) 8 Dollars per barrel Source: Global Economic Prospects, January 5. Note: The graph shows the number of countries with balanced budget rules Source: Global Economic Prospects, January 5. Note: Oil-related stabilization funds are those for which funding sources include petroleum.

8 APRIL 5 Major Data Releases 8 Mar, 5-9 Apr 5 Upcoming releases: Apr, 5- May 5 Country Date Indicator Period Actual Forecast Previous Country Date Indicator Period Previous France /6/5 GDP(Y/Y) Q4.%.%.4% France 4//5 Consumer Spending (Y/Y) MAR.% South Africa /6/5 PPI (Y/Y) FEB.6%.%.5% Eurozone 4//5 Unemployment Rate MAR.% UK /6/5 Retail Sales (Y/Y) FEB 5.7% 4.7% 5.9% Japan 4//5 CPI (Y/Y) MAR.% US /7/5 GDP (Y/Y) Q4.4%.%.7% United States 5//5 PMI Manufacturing APR 55.7 Greece //5 PPI (Y/Y) FEB -4.8% -8.5% -9.6% Thailand 5//5 CPI (Y/Y) APR -.6% Turkey //5 GDP (Y/Y) Q4.4%.6%.8% China 5//5 PMI Manufacturing APR 49.6 Germany //5 Unemployment Rate FEB 4.8% - 4.8% Turkey 5/4/5 PPI (Y/Y) APR.4% UK //5 GDP (Y/Y) Q4.%.7%.8% South Africa 5/5/5 Unemployment Rate Q 4.% Brazil 4//5 Industrial Production (Y/Y) FEB -9.% - -5.% Eurozone 5/5/5 PPI (Y/Y) MAR -.8% Thailand 4//5 CPI (Y/Y) MAR -.4% -.6% -.5% Brazil 5/5/5 PPI (Y/Y) MAR.8% Romania 4//5 Retail Sales (Y/Y) FEB.5% - 6.7% France 5/7/5 Industrial Production (Y/Y) MAR.6% United States 4//5 Unemployment Rate MAR 5.5% 5.5% 5.5% Czech Republic 5/7/5 Industrial Production (Y/Y) MAR.% Brazil 4/6/5 PMI Composite MAR Malaysia 5/7/5 Interest Rate Decision APR.% Philippines 4/6/5 CPI (Y/Y) MAR.4%.7%.5% Mexico 5/8/5 PPI (Y/Y) APR.6% Romania 4/7/5 GDP (Y/Y) Q4.6% -.9% Turkey 5/8/5 Industrial Production (Y/Y) MAR.% Eurozone 4/7/5 PPI (Y/Y) FEB -.8% -.% -.5% United States 5/8/5 Participation Rate APR 6.7% Germany 4/9/5 Industrial Production (Y/Y) FEB -.%.% -.% Canada 5/8/5 Unemployment Rate APR 6.8% Greece 4/9/5 Unemployment Rate MAR 5.7% 6.% 5.9% Malaysia 5//5 Industrial Production (Y/Y) MAR 5.% Canada 4//5 Unemployment Rate MAR 6.8% 6.9% 6.8% Denmark 5//5 CPI (Y/Y) APR.6% Japan 4//5 Industrial Production (M/M) FEB -.% - -.8% Greece 5//5 Industrial Production (Y/Y) MAR.9% Portugal 4//5 CPI (Y/Y) MAR.4% -.% -.% United Kingdom 5//5 Industrial Production (Y/Y) MAR.% Eurozone 4/4/5 Industrial Production (Y/Y) FEB.6%.8%.4% South Africa 5//5 Manufacturing Production (Y/Y) MAR -.5% United States 4/4/5 PPI (Y/Y) MAR -.8% -.9% -.6% Germany 5//5 GDP (Y/Y) Q.4% South Korea 4/4/5 Unemployment Rate MAR.7%.6%.9% Eurozone 5//5 GDP (Y/Y) Q.9% China 4/4/5 GDP(Y/Y) Q 7.% 7.% 7.% France 5//5 GDP (Y/Y) Q.% Germany 4/5/5 CPI (Y/Y) MAR.%.%.% Poland 5/4/5 CPI (Y/Y) APR -.5% Turkey 4/5/5 Unemployment Rate JAN.%.%.4% Brazil 5/4/5 Retail Sales (Y/Y) MAR -.% Czech Republic 4/7/5 PPI (Y/Y) MAR -.9% - -.6% Japan 5/5/5 Consumer Confidence Index APR 4.7 Eurozone 4/7/5 CPI (Y/Y) MAR -.% -.% -.% Czech Republic 5/5/5 GDP (Y/Y) Q.4% Switzerland 4/7/5 Retail Sales (Y/Y) MAR -.7% - -.% Greece 5/5/5 GDP (Q/Q) Q -.4% Malaysia 4//5 CPI (Y/Y) MAR.9%.9%.% South Korea 4//5 GDP (Y/Y) Q.4%.5%.% Thailand 5/7/5 GDP(Q/Q) Q 7.9% Japan 5/8/5 Industrial Production (Y/Y) MAR -.% Germany 4//5 PMI Manufacturing APR United Kingdom 5/9/5 CPI (Y/Y) APR.% United Kingdom 4//5 Retail Sales (Y/Y) MAR 4.% 5.9% 5.4% Eurozone 5/9/5 CPI (Y/Y) APR -.% Argentina 4/4/5 Industrial Production (Y/Y) MAR -.9% - -.% Japan 5/9/5 GDP(Q/Q) Q.4% Mexico 4/7/5 Unemployment Rate MAR 4.% 4.% 4.4% Malaysia 5//5 CPI (Y/Y) APR.9% United States 4/7/5 PMI Composite APR Sweeden 5//5 Unemployment Rate APR 7.7% Germany 4/9/5 CPI (Y/Y) APR.4%.4%.% South Africa 5//5 Retail Sales (Y/Y) MAR 4.% United States 4/9/5 GDP (Q/Q) Q.%.%.% Mexico 5//5 GDP (Q/Q) Q.7%

9 APRIL 5 Financial Markets MRV Chg since Q4 Q Q Q Q4 Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Sep- '8 Interest rates and LIBOR (%) U.S. Fed Funds Effective ECB repo US$ LIBOR -months EURIBOR -months US -yr Treasury yield German Bund, yr Spreads (basis points) JP Morgan Emerging Markets Asia Europe Latin America & Caribbean Middle East Africa Stock Indices (end of period) Global (MSCI) High-Income ($ Index) United States (S&P-5) Euro Area (S&P-5$) Japan (Nikkei-5) Developing Markets (MSCI) EM Asia EM Europe EM Europe & Middle East EM Latin America & Caribbean Exchange Rates (LCU / USD) High Income Euro Area Japan Developing Brazil China Egypt India Russia South Africa Memo: USA nominal effective rate MRV = Most Recent Value. MSCI Indices for Asia, Africa, and Europe and C. Asia, for 8 are calculated from February-December, due to data availability. Change expressed in levels for interest rates and spreads; percent change for stock market and exchange rates. Commodity Prices 4 4 MRV Chg since Q4 Q Q Q Q4 Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Sep- '8 Oil price, $/b, nominal Non - Oil Index Food Index Metals and Minerals Index Baltic Dry Index Simple average of Brent, Dubai and WTI. Base Date = Jan, due to data availability. The Index component combination in the Weekly tables differs from that of the Pink Sheet. Base Date = Jan 4, due to data availability. The Index component combination in the Weekly tables differs from that of the Pink Sheet.

10 APRIL 5 Economic Developments indicators expressed as %ch y/y, except Industrial Production quarterly figures are %ch q/q, annualized Q Q Q Q4 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Industrial Production, S.A. World High Income Countries Developing Countries East Asia and Pacific East Asia x. China Europe and Central Asia Latin America and Caribbean Middle East and N. Africa South Asia Sub-Saharan Africa Inflation, S.A. High Income Countries Developing Countries East Asia and Pacific Europe and Central Asia Latin America and Caribbean Middle East and N. Africa South Asia Sub-Saharan Africa 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 4 5 Q Q Q Q4 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Exports, Nominal, US$, S.A. World High Income Countries Developing Countries East Asia and Pacific Europe and Central Asia Latin America and Caribbean Middle East and N. Africa South Asia Sub-Saharan Africa Imports, Nominal, US$, S.A. World High Income Countries Developing Countries East Asia and Pacific Europe and Central Asia Latin America and Caribbean Middle East and N. Africa South Asia Sub-Saharan Africa International Reserves, US$ High Income Countries Developing Countries East Asia and Pacific Europe and Central Asia Latin America and Caribbean Middle East and N. Africa South Asia