This monthly background note is prepared for review by the Bank's Short-term Risk Monitoring Group (STRMG), and later distributed to a wider internal Bank audience and the Board of Executive Directors. The note helps to keep readers informed on high-frequency developments in areas that are crucial for setting the global environment for growth among developing countries: | ² | Global economic activity is strengthening, but progress is very uneven. Developing countries (including China, Brazil and India) have been leading the upswing in economic activity with industrial production strong at a 5.8 percent annualized pace in Q3. In China, GDP expanded by 9.1% (q/q, annualized) up from 8.2% in Q2 with the services sector recording the fastest growth. Among high-income countries the situation is more nuanced. In the United States Q3 GDP growth accelerated to 2.0% (q/q, annualized) up from 1.3% in Q2, supported by strong growth in residential investment (14.4%) reflecting the pick-up in the housing market. | | ² | Private capital flows to developing countries remain high, despite easing in October. Supporting the expected strengthening of real-side activity in developing countries in Q4, gross international capital flows to developing countries equaled $49 billion in October, the second highest inflow over the past 15 months, but down from the record $71bn of inflows during September. Euro Area debt turmoil in May caused capital flows to slow, but stabilization of financial market tensions and high-income monetary policy prompted the recent uptick in flows. Bond issuance was particularly strong at $32 billion in October, with 44% of the total destined for the financial sector. | | ² | The overall picture of a picture of a hesitant firming of activity continues to be challenged by the downside risks. Increasingly the US fiscal cliff is of concern, with mounting evidence that it is impacting growth and investment already in Q3 and Q4 as firms hesitate to invest prior to a policy induced recession in 2013 H1. Reflecting these concerns, equity markets have declined and “safe haven” bonds have performed better in recent weeks. By our estimations, if the fiscal cliff materializes, the US economy will be thrown back into a recession in 2013 (-0.2% GDP growth). Direct impacts on the developing countries GDP growth range between a decline of 0.6 and 1.3 percentage points, with East Asia and Latin America regions and oil exporters being amongst the hardest hit. | | ² | Were external conditions to deteriorate, some developing countries have room for policy easing to support domestic demand, but others with higher inflation are more constrained. Subdued inflation rates relative to central bank targets (or historical averages) in China, Malaysia, Chile, Colombia and Indonesia indicate some space to reduce policy rates to support domestic demand and growth were an external shock to arise from a US “fiscal cliff” situation or an escalation of Euro Area debt tensions. But in spite of a recent downtick in food and crude oil prices, inflation remains high relative to targets (or historical averages) in Turkey, India, Mexico, and South Africa. |
Full Issue  PDF Documents: |  Charts: (Excel)
|  September 2011 (786 KB) | September 2011 (1,598 KB) | | July 2011 (1.601 KB) | July 2011 (1,330 KB) | | June 2011 (1,632 KB) | June 2011 (1,331 KB) | | March 2011 (2,000 KB) | March 2011 (1,678 KB) | | February 2011 (1,861 KB) | February 2011 (2,339 KB) | | January 2011 (1,191 KB) | January 2011 (967 KB) | | December 2010 (1,609 KB) | | | November 2010 (1,170 KB) | November 2010 (1,073 kb) | | October 2010 (989 KB) | October 2010 (1,660 KB) |
PDF Documents: |  Charts: (Power Point)
| | September 2010 (1,276 KB) | September 2010 (809 KB) | | July 2010 (1,471 KB) | July 2010 (608 KB) | | June 2010 (1,436 KB) | June 2010 (931 KB) | | May 2010 (1,374 KB) | May 2010 (1,049 KB) | | April 2010 (1,738 KB) | April 2010 (1,221 KB) | | March 2010 (1,452 KB) | March 2010 (858 KB) | | February 2010 (1,180 KB) | February 2010 (856 KB) | | January 2010 (1,121 KB) | January 2010 (894 KB) | | December 2009 (1,228 KB) | December 2009 (958 KB) | | November 2009 (1,273 KB) | November 2009 (1,318 KB) | | October 2009 (1,150 KB) | October 2009 (705 KB) | | September 2009 ( 656 KB) | September 2009 (746 KB) | | July 2009 (759 KB) | July 2009 (1,070 KB) | | June 2009 (677 KB) | June 2009 (1,857 KB) | | April 2009(380 KB) | April 2009 (1,386 KB) | | March 2009 (443 KB) | March 2009 (1,701 KB) | | February 2009 (442 KB) | February 2009 (1,732 KB) | | January 2009 (421 KB) | January 2009 (1,820 KB) | | December 2008 (445 KB) | December 2008 (1,795 KB) | | September 2008 (500 KB) | September 2008 (2,266 KB) | | July 2008 (434 KB) | July 2008 (1,312 KB) | | June 2008 (418 KB) | June 2008 (1,618 KB) | | May 2008 (443 KB) | May 2008 (1,659 KB) | | March 2008 (593 KB) | March 2008 (1,263 KB) | | February 2008 (497 KB) | February 2008 (1,303 KB) |
To receive email alerts for the STRMG, please contact GEM Administrators at gem@worldbank.org |
RSS