Global Economic Prospects and the Developing Countries 2000 William Shaw December 1999
Prospects for Growth and Poverty Reduction in Developing Countries Recovery from financial crisis uneven International environment poses substantial risks Progress on poverty reduction remains slow
Real GDP growth for developing countries (percent) 5 4 March forecast Current forecast 3 2 1 0 1998 1999 2000 2001 Source: DECPG staff estimates.
Distribution of per capita growth across developing countries excl. China, India (percent) Share of Per capita # of ctrys population* growth 1996 1999 1996 1999 <0% 23 49 11 35 0-2% 24 29 9 11 >2% 55 24 34 8 *of total developing countries Source: DECPG staff estimates.
Financial misery index since December 1998 (mean of % changes in currency, stock market, interest rates) Argentina India Hungary South Africa Philippines Mexico Poland Czech R. Thailand Korea Malaysia Indonesia Brazil Turkey Russia Better off Worse off -90-80 -70-60 -50-40 -30-20 -10 0 10 20 Source: DECPG staff estimates
Spread on Brady Bonds Basis points 1800 1800 1400 1400 1000 1000 600 600 200 91 92 93 94 95 96 97 98 99 200 Aug Source: Bloomberg and World Bank
Change in household net worth in relation to income* in the United States and the personal savings rate (percent) Personal Period Change savings rate 1980s 17.9 4.8 1990-4 4.0 3.5 1995 27.3 2.7 1996 23.6 2.2 1997 32.4 1.5 1998 32.6 0.4 * Disposable income plus IRA investment and capital gains adjusted for inflation and accrued taxes. Source: Gale & Sabelhaus.
Share of population in poverty (less than $1 per day) 60 50 40 30 20 10 0 1987 1990 1993 1996 1998 East Asia South Asia Sub-Saharan Africa
External Shocks, Financial Crises, and Poverty in Developing Countries The crisis increased poverty in East Asia and elsewhere Social sector expenditures fell in East Asia crisis countries Reducing volatility of income important for poverty reduction
Poverty in East Asia 1996-1998 (% of total population) 25 20 1996 1998 15 10 5 0 Korea (Urban) Indonesia Malaysia Thailand
Changes in real wages in East Asia 0 1997-1998 (percent) -15-30 -45 Korea Indonesia Malaysia Thailand
Unemployment Rates in East Asian Countries during the Crisis (percent) 8 7 6 5 4 3 2 1 0 7.4 1997 1998 5.5 4.7 4.1 2.6 2.7 3.2 1.6 Korea Indonesia Malaysia Thailand Sources: Korea: Urban, for 1998 second half, Shin (1999); Indonesia: Data for August,, Islam (1999); Malaysia: Labor Force Survey; Thailand: Unemployed as % of current labor force, average for February and August figures, World Bank (1999d)
Terms of Trade and GDP Growth Volatility, 1961-1997 (standard deviations, in percent, unweighted averages) 14 12 10 8 6 4 2 0 13.1 11.3 11.4 9.7 8.1 7.4 3.9 Terms of Trade High Income OECD East Asia and Pacific Middle East and North Africa Sub Saharan Africa 8.6 5.3 4.2 4.7 5.6 2.5 2.5 Real GDP Low and Middle Income South Asia Latin America and the Carribean
Asian Restructuring: From Cyclical Recovery to Sustainable Growth Severe structural problems remain Absent restructuring, growth slower, costs higher, and economies vulnerable Healthy banks would contain systemic risks and fiscal cost Corporate restructuring requires allocation of losses
Industrial production before and after the crises (index=100 at the start of the crisis) 110 100 Pre-crisis Thailand Post-crisis Malaysia Korea 90 80 Indonesia 70-24 -18-12 -6 0 6 12 18 24 Months *3 months moving averages Source: Datastream
Thai nonperforming loans compared with interest rates, June 1998-July 1999 (percent) 50 20 18 NPLs ratio (percent) 45 40 35 30 25 Jun- 98 Jul- 98 Aug- 98 Sep- 98 Oct- 98 Nov- 98 Dec- 98 Jan- 99 Feb- 99 Mar- 99 Apr- 99 May- 99 Jun- 99 Jul- 99 16 14 12 10 8 6 4 2 0 3 months money market rate (percent) Source: Bank of Thailand
Bankruptcies in Malaysia 500 450 400 350 300 250 200 150 100 50 0 Number of bankruptcies 12/1/92 6/1/93 12/1/93 6/1/94 12/1/94 6/1/95 12/1/95 6/1/96 12/1/96 6/1/97 12/1/97 6/1/98
Managing the Recent Commodity Price Cycle Primary commodity prices volatile and declining Oil exporters had mixed savings performance and lower investment Non-oil oil exporting countries of SSA increased savings and investment
Oil and non-oil prices, Sep 91 to Aug 99 (US$/bbl for oil, index 1990=100 for others) $24 $22 $20 $18 $16 $14 $12 Non-oil commodities Metals & minerals Oil 140 130 120 110 100 90 80 70 $10 S'91 S'92 S'93 S'94 S'95 S'96 S'97 S'98 60 Source: DECPG, World Bank
Current and previous declines of non-oil commodity prices (Peak =100) 105 100 95 90 85 80 75 70 65 60 Feb 1980 - Jan 1985 June 1998 - May 1993 May 1996 - Aug 1999 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 Source: World Bank data. Months from peak
Oil exporters savings and investment (change from base period as percent of GDP) 6 4 2 0-2 -4-6 1996-97 1998 Savings Investment Real income
Real income, savings and policies in Sub-Saharan African non-oil exporters (change relative to base years, by policy rating) 8 7 6 5 4 3 2 1 0 GDP Savings/GDP Real Income/GDP Greater than 3.5 3.5 or less