Global Economic Prospects

Global Volume 5 | June 2012 Economic Prospects Managing growth in a volatile world The World Bank © 2012 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: [email protected] All rights reserved 1 2 3 4 13 12 11 10 This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this volume do not neces- sarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, col- ors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development / The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA. fax: 202-522-2422; e-mail: [email protected]. Global Economic Prospects Managing growth in a volatile world June 2012 3 Acknowledgments This report is a product of the Prospects Group in the Development Economics Vice Presidency of the World Bank. Its principal authors were Andrew Burns and Theo Janse van Rensburg. The project was managed by Andrew Burns, under the direction of Hans Timmer and the guidance of Justin Yifu Lin. Several people contributed substantively to the report. The modeling and data team was led by Theo Janse van Rensburg assisted by Irina Magyer, Sabah Zeehan Mirza and Muhammad Adil Islam. The projections, regional write-ups and subject annexes were produced by Dilek Aykut (Finance, Europe & Central Asia), John Baffes & Shane Streifel (Commodities) Sanket Mohapatra (South Asia and Exchange Rates), Allen Dennis (Sub-Saharan Africa and International Trade), Eung Ju Kim (Finance), Theo Janse van Rensburg (High-Income Countries), Elliot (Mick) Riordan (East Asia & the Pacific, Middle-East & North Africa, and Inflation), Cristina Savescu (Latin America & Caribbean, Industrial Production). Regional projections and annexes were produced in coordination with country teams, country directors, and the offices of the regional Chief Economists and PREM directors. The short- term commodity price forecasts were produced by John Baffes, Betty Dow, and Shane Streifel. The remittances forecasts were produced by Dilip K. Ratha and Ani Silwal. Simulations were performed by Theo van Rensburg, Irina Magyer and Sanket Mohapatra. The accompanying online publication, Prospects for the Global Economy, was produced by a team comprised of Sarah Crow, Sanket Mohapatra, Sabah Mirza, Muhammad Adil Islam, Betty Dow, Vamsee Krishna Kanchi, and Katherine Rollins with technical support from David Horowitz, Ugendran Machakkalai, and Malarvishi Veerappan. Roula I. Yazigi and Sabah Zeehan Mirza were responsible for the cover artwork. Indira Chand, Cynthia Case-McMahon and Merrell Tuck-Primdahl managed media relations and the dissemination. Hazel Macadangdang managed the publication process. Several reviewers offered extensive advice and comments. These included Inger Andersen, Ulrich Bartsch, Maria Teresa Benito-Spinetto, Fabio Bittar, Zeljko Bogetic, Otaviano Canuto, Shubham Chaudhuri, Jeff Chelsky, Punam Chuhan-Pole, Tito Cordella, Jorg Decressin, Augusto de la Torre, Shantayanan Devarajan, Tatiana Didier, Pablo Fajnzylber, Manuela V. Ferro, Caroline Freund, Bernard G. Funck, David Michael Gould, Marcelo Giugale, Bert Hofman, Zahid Hussain, Elena Ianchovichina, Kalpana Kochhar, Auguste Tano Kouame, Roumeen Islam, Jeffrey D. Lewis, Philippe H. Le Houerou, Jose R. Lopez Calix, Ernesto May, Alexey Morozov, Antonio M. Ollero, Sam- uel Pienknagura, Bryce Quillin, Christine M. Richaud, Sudhir Shetty, Vijay Srinivas Tata, Phil Suttle, Anthony G. Toft, Yvonne M. Tsikata, Willem van Eeghen, Jan Walliser. 4 Table of Contents Main Text …………………………………………………………………………..…... 1 Topical Annexes Industrial production ………………………………………………………………….....31 Inflation. ………………………………………………………………………………....37 Recent developments in financial markets ……………………………………………....43 Trade …………………………………………………………………………….…….....53 Exchange rates ……………………………………………………………………..….…59 Prospects for commodity markets ……………………………………………….….…...67 Regional Annexes East Asia & the Pacific ………………………………………………...…...…..…….…79 Europe & Central Asia …………………………………………………..………..…..…89 Latin America & the Caribbean ……………………………………...……………..….101 Middle East & North Africa ………………………………………………………..…..115 South Asia ………………………………………………………….………………......127 Sub-Saharan Africa ……………………………………………….…………………....143 The cut off date for information included in this edition of the Global Economic Prospects reflects data as of June 8, 2012. 5 Global Economic Prospects June 2012: Managing growth in a volatile world Overview & main messages Economic developments of the past year have Other financial market indicators have also been volatile, punctuated by natural disasters, deteriorated, with developing– and high-income large swings in investor sentiment, and periods country stock markets losing about 10 percent of relative calm and improving prospects. Output (at their recent trough) since May 1st, giving up in the second half of 2011, was particularly almost all of the gains generated over the weak, buffeted by flooding in Thailand, the preceding 4 months. They have since recovered delayed impact of earlier policy tightening and a about half that value. Yields on high-spread resurgence of financial market and investor economies were also driven upwards, while jitters. those of safe-have assets declined. Virtually all developing economy currencies have depreciated In contrast, economic news during the first four against the US dollar, while industrial months of 2012 was generally positive. commodity prices such as oil and copper have Significant structural, fiscal and monetary policy also fallen sharply (19 and 14 percent steps in high-income Europe during the fourth respectively). quarter of 2011 and the first quarter of 2012 contributed to a significant improvement in Renewed tensions will add to pre-existing market sentiment, and less constraining financial headwinds to keep GDP gains modest conditions. This combined with monetary policy easing in developing countries was reflected in a Assuming that conditions in high-income Europe strengthening of real-side economic activity in do not deteriorate significantly, the increase in both developing and high-income countries. tensions so far can be expected to subtract about Annualized growth rates for industrial 0.2 percentage points from Euro Area growth in production, import demand and capital goods 2012. The direct effect on developing country sales returned to positive territory with growth will be smaller (in part because there has developing countries leading the rebound. been less contagion), but increased market jitters, reduced capital inflows, high-income Increased Euro Area jitters have reversed fiscal and banking-sector consolidation are all earlier improvements in market sentiment expected to keep growth weak in 2012. These drags on growth are expected to ease somewhat, Most recently, market tensions have jumped up and global growth strengthen during 2013 and again, sparked by fiscal slippage, banking 2014, although both developing-country and downgrades, and political uncertainty in the high-income country GDP will grow less quickly Euro Area. The renewed market nervousness has than during the pre-crisis years of this century. caused the price of risk to spike upwards globally. In the Euro Area, measures of financial Taking these factors into account, global GDP is market tension, such as Credit Default Swap projected to increase 2.5 percent in 2012, with (CDS) rates, have risen to levels close to their growth accelerating to 3.0 and 3.3 percent in peaks in the fall of 2011. In other high-income 2013 and 2014 (table 1). Output in the Euro Area countries, CDS rates have risen somewhat less is projected to contract by 0.3 percent in 2012, sharply. Among most developing countries, CDS reflecting both weak carry over and increased rates are currently about 65 to 73 percent of precautionary saving by firms and households in peak levels, and between 77 and 90 percent for response to renewed uncertainty. Overall, high- countries in the Europe & Central Asia region. income GDP is expected to expand only 1.4 percent this year weighed down by banking- sector deleveraging and ongoing fiscal Table 1 The Global Outlook in summary (percent change from previous year, except interest rates and oil price) 2010 2011 2012e 2013f 2014f Global Conditions World Trade Volume (GNFS) 13.0 6.1

Load more