1. Global
Economic
Prospects
Assuring
growth over
the medium term
January 2013
THE WORLD BANK
2. DEFAULT RISK IS DOWN IN EURO AREA
SOVEREIGNS
Credit default swap rates, basis points
1800
Portugal
1600 Ireland
1400 Spain
1200 Italy
Euro Area (GDP weighted)
1000
800
600
400
200
0
Jan '10 Jul '10 Jan '11 Jul '11 Jan '12 Jul '12 Jan '13
Source: World Bank, Datastream.
3. DEFAULT RISK IS DOWN IN EURO AREA
SOVEREIGNS
Credit default swap rates, basis points
1800
Portugal
1600 Ireland
1400 Spain
1200 Italy
Euro Area (GDP weighted)
1000
800
600
400
200
0
Jan '10 Jul '10 Jan '11 Jul '11 Jan '12 Jul '12 Jan '13
Source: World Bank, Datastream.
4. GROSS CAPITAL FLOWS TO DEVELOPING
COUNTRIES HAVE REBOUNDED
$ billions
70 New equity issuance
Bond issuance
60
Syndicated Bank-lending
50
40
30
20
10
0
Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12
Source: World Bank, Dealogic.
5. BUT RAPID GROWTH REMAINS ELUSIVE AND
BUSINESS CONFIDENCE WEAK
Manufacturing purchasing managers index (PMI), points
61
59
57
55
Other high-income Other
53 developing
51
China
49
47 Euro Area
45
43
Jan '10 Jul '10 Jan '11 Jul '11 Jan '12 Jul '12
5
Source: World Bank, Markit/Haver Analytics.
6. WEAKNESS IN HIGH-INCOME COUNTRIES SAPPED
IP GROWTH IN DEVELOPING COUNTRIES IN 2012
Industrial production, percent growth, 3m/3m saar
20
15
10
5
0
Other
-5 Euro Area high income
-10
Jan '11 Jul '11 Jan '12 Jul '12
Source: World Bank, Datasteam.
7. WEAKNESS IN HIGH-INCOME COUNTRIES SAPPED
IP GROWTH IN DEVELOPING COUNTRIES IN 2012
Industrial production, percent growth, 3m/3m saar
20
15
China
10
5
0
Other
-5 Euro Area high income
-10
Jan '11 Jul '11 Jan '12 Jul '12
Source: World Bank, Datasteam.
8. WEAKNESS IN HIGH-INCOME COUNTRIES SAPPED
IP GROWTH IN DEVELOPING COUNTRIES IN 2012
Industrial production, percent growth, 3m/3m saar
20
15
China
10
5
Other developing
0
Other
-5 Euro Area high income
-10
Jan '11 Jul '11 Jan '12 Jul '12
Source: World Bank, Datasteam.
9. GROWTH PROJECTIONS HAVE BEEN DOWNGRADED FOR 2012
AND 2013, ALTHOUGH GROWTH WILL MAINTAIN A POSITIVE
TRAJECTORY
Annual GDP growth, %
8.0
7.0
6.0 Developing countries
5.0
4.0 World
3.0
2.0
1.0
0.0
2010 2011 2012 2013 2014 2015
9
Source: World Bank, Global Economic Prospects 2013A.
10. GROWTH PROJECTIONS HAVE BEEN DOWNGRADED FOR 2012
AND 2013, ALTHOUGH GROWTH WILL MAINTAIN A POSITIVE
TRAJECTORY
Annual GDP growth, %
8.0
7.0
6.0 Developing countries
5.0
4.0 World
3.0
2.0
1.0
0.0
2010 2011 2012 2013 2014 2015
10
Source: World Bank, Global Economic Prospects 2013A.
11. GROWTH PROJECTIONS HAVE BEEN DOWNGRADED FOR 2012
AND 2013, ALTHOUGH GROWTH WILL MAINTAIN A POSITIVE
TRAJECTORY
Annual GDP growth, %
8.0
7.0
6.0 Developing countries
5.0
4.0 World
3.0
2.0
1.0
0.0
2010 2011 2012 2013 2014 2015
11
Source: World Bank, Global Economic Prospects 2013A.
12. GROWTH PROJECTIONS HAVE BEEN DOWNGRADED FOR 2012
AND 2013, ALTHOUGH GROWTH WILL MAINTAIN A POSITIVE
TRAJECTORY
Annual GDP growth, %
8.0
7.0
6.0 Developing countries
5.0
4.0 World High-income countries
3.0
2.0
1.0
0.0
2010 2011 2012 2013 2014 2015
12
Source: World Bank, Global Economic Prospects 2013A.
13. GROWTH PROJECTIONS HAVE BEEN DOWNGRADED FOR 2012
AND 2013, ALTHOUGH GROWTH WILL MAINTAIN A POSITIVE
TRAJECTORY
Annual GDP growth, %
8.0
7.0
6.0 Developing countries
5.0
4.0 World High-income countries
3.0
2.0
1.0
0.0
2010 2011 2012 2013 2014 2015
13
Source: World Bank, Global Economic Prospects 2013A.
14. GROWTH PROJECTIONS HAVE BEEN DOWNGRADED FOR 2012
AND 2013, ALTHOUGH GROWTH WILL MAINTAIN A POSITIVE
TRAJECTORY
Annual GDP growth, %
8.0
7.0
6.0 Developing countries
5.0
4.0 World High-income countries
3.0
2.0
1.0
0.0
2010 2011 2012 2013 2014 2015
14
Source: World Bank, Global Economic Prospects 2013A.
15. PROSPECTS ARE VULNERABLE TO A
RANGE OF EXTERNAL RISKS
Change in 2013 real GDP from baseline, percent
Abrupt decline in Chinese
Prolonged fiscal paralysis Contained Euro crisis investment
0
-0.2
-0.4
-0.6
-0.8
-1
-1.2
East Asia & Pacific Europe & Central Asia
-1.4 Latin America & Caribbean Middle-East & North Africa
South Asia Sub-Saharan Africa
15
Source: World Bank, Global Economic Prospects 2013A.
16. PROSPECTS ARE VULNERABLE TO A
RANGE OF EXTERNAL RISKS
Change in 2013 real GDP from baseline, percent
Abrupt decline in Chinese
Prolonged fiscal paralysis Contained Euro crisis investment
0
-0.2
-0.4
-0.6
-0.8
-1
-1.2
East Asia & Pacific Europe & Central Asia
-1.4 Latin America & Caribbean Middle-East & North Africa
South Asia Sub-Saharan Africa
16
Source: World Bank, Global Economic Prospects 2013A.
17. PROSPECTS ARE VULNERABLE TO A
RANGE OF EXTERNAL RISKS
Change in 2013 real GDP from baseline, percent
Abrupt decline in Chinese
Prolonged fiscal paralysis Contained Euro crisis investment
0
-0.2
-0.4
-0.6
-0.8
-1
-1.2
East Asia & Pacific Europe & Central Asia
-1.4 Latin America & Caribbean Middle-East & North Africa
South Asia Sub-Saharan Africa
17
Source: World Bank, Global Economic Prospects 2013A.
18. PROSPECTS ARE VULNERABLE TO A
RANGE OF EXTERNAL RISKS
Change in 2013 real GDP from baseline, percent
Abrupt decline in Chinese
Prolonged fiscal paralysis Contained Euro crisis investment
0
-0.2
-0.4
-0.6
-0.8
-1
-1.2
East Asia & Pacific Europe & Central Asia
-1.4 Latin America & Caribbean Middle-East & North Africa
South Asia Sub-Saharan Africa
18
Source: World Bank, Global Economic Prospects 2013A.
19. ECONOMIES WITH FISCAL SPACE CAN REDUCE
THE IMPACTS OF EXTERNAL SHOCKS
% of GDP impact on developing economies of a 5% decline in high-income activity
0
-1
-2
-3
-4
-5
East Asia & Europe & Latin America Middle-East & South Asia Sub-Saharan
Pacific Central Asia & Caribbean North Africa Africa
Source: World Bank, Global Economic Prospects 2013A.
20. ECONOMIES WITH FISCAL SPACE CAN REDUCE
THE IMPACTS OF EXTERNAL SHOCKS
% of GDP impact on developing economies of a 5% decline in high-income activity
0
-1
-2
-3
-4
with adequate fiscal space
-5
East Asia & Europe & Latin America Middle-East & South Asia Sub-Saharan
Pacific Central Asia & Caribbean North Africa Africa
Source: World Bank, Global Economic Prospects 2013A.
21. ECONOMIES WITH FISCAL SPACE CAN REDUCE
THE IMPACTS OF EXTERNAL SHOCKS
% of GDP impact on developing economies of a 5% decline in high-income activity
0
-1
-2
-3
-4 with adequate fiscal space
without adequate fiscal space
-5
East Asia & Europe & Latin America Middle-East & South Asia Sub-Saharan
Pacific Central Asia & Caribbean North Africa Africa
Source: World Bank, Global Economic Prospects 2013A.
22. SMALL IMPROVEMENTS IN POTENTIAL GROWTH
RESULT IN SUBSTANTIAL LONG RUN GAINS
Developing country, per capita income, % of 2010 high-income level
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
1990 2000 2010 2020 2030 2040 2050
Source: World Bank, Global Economic Prospects 2013A.
23. SMALL IMPROVEMENTS IN POTENTIAL GROWTH
RESULT IN SUBSTANTIAL LONG RUN GAINS
Developing country, per capita income, % of 2010 high-income level
0.8
0.7
0.6
Baseline projection
0.5
0.4
0.3
0.2
0.1
0
1990 2000 2010 2020 2030 2040 2050
Source: World Bank, Global Economic Prospects 2013A.
24. SMALL IMPROVEMENTS IN POTENTIAL GROWTH
RESULT IN SUBSTANTIAL LONG RUN GAINS
Developing country, per capita income, % of 2010 high-income level
0.8
Rapid growth (+ 1.0 pp per annum)
0.7 High growth scenario results in
developing-country incomes of 75% Faster growth (+ 0.5 pp pa)
0.6 high-income 2010 levels in 2050 versus
52% in baseline
Baseline projection
0.5
0.4
0.3
0.2
0.1
0
1990 2000 2010 2020 2030 2040 2050
Source: World Bank, Global Economic Prospects 2013A.
25. SMALL IMPROVEMENTS IN POTENTIAL GROWTH
RESULT IN SUBSTANTIAL LONG RUN GAINS
Developing country, per capita income, % of 2010 high-income level
0.8
Rapid growth (+ 1.0 pp per annum)
0.7 High growth scenario results in
developing-country incomes of 75% Faster growth (+ 0.5 pp pa)
0.6 high-income 2010 levels in 2050 versus
52% in baseline
Baseline projection
0.5
Weaker growth (-0.5 pp pa)
0.4
0.3
0.2
Slow growth (- 1.0 pp pa)
0.1
0
1990 2000 2010 2020 2030 2040 2050
Source: World Bank, Global Economic Prospects 2013A.