Republic of Korea

1
Asian-European Finance Ministers
Meeting Takatoshi Kato Deputy Managing Director
Republic of Korea June 15-17, 2008
2
Leading Indicators Point to Slower Growth Ahead
Global IP and PMI (percent change 3m saar)
Global GDP Growth (percent change year-over-year)
PMI (RHS)
Emerging Economies
Industrial Production (LHS)
Advanced Economies
3
Financial Conditions Have Eased, But Remain
Fragile (5-year CDS spreads in basis points)
United States
Major Economies 1/
Below Investment Grade
Asia ex. Japan
Investment Banks
U.S.
Europe
Investment Grade Corp.
Commercial Banks
Japan
Source IMF staff estimates. 1/ Consolidated
series based on investment grade entities from
various sectors. Asia ex. Japan includes some
non-investment grade entities.
4
Inflation Has Become a Key Concern, Especially in
Emerging Economies
World Inflation (percent change year over year)
Headline Inflation (12 month percent change)
Headline
Core
5
More Flexible Exchange Rates in Some Countries
Would Help Control Inflation and Reduce Imbalances
Exchange Rates 1/ (percent changes 6/6/08 vs.
1/30/08-2/27/08 average)
Current Account Balances (In percent of GDP
estimates for 2008)
1/ Positive numbers denote appreciation of local
currency.
6
Advanced Economies Are Most Affected by
Financial Turbulence
GDP Growth Rates (percent change year-over-year)
06 07 08 09 United States
06 07 08 09 Euro area
06 07 08 09 Japan
7
Emerging and Developing Economies Slowing, but
Still Above Trend
Real GDP Growth Rates (percent change)
06 07 08 09 Middle East
06 07 08 09 Latin America
06 07 08 09 Emerging Europe CIS
06 07 08 09 Africa
06 07 08 09 Emerging Asia
8
Financial Risks Have Eased, While Inflation and
Oil Market Risks Have Increased (Percentage
points of global GDP growth)
9
Bank Surveys Indicate Tighter Lending Conditions
in US and Europe (Change in credit standards
over past 3 months in percent 1/)
ECBs Lending Survey
Feds Lending Survey
1/ Change in the balance of respondents between
the tightened considerably and tightened
somewhat" and the "eased somewhat and eased
considerably.
10
How Much Higher Will Commodity Prices Go?
Selected Food Prices (January 2006 100)
Selected Commodity Prices (January 2002 100)
Wheat
Metals
Energy
Beverages
Corn
Futures curves as of June 10, 2008
Rice
Soybean
Agricultural raw materials
Food
2006
07
08
09
04
08
2002
06
11
Inflation Risks Have Intensified in Several
Advanced Economies
Inflation Exp. (Percent from 10yr index linked
bonds)
Headline Inflation (12 month percent change)
Core Inflation (12 month percent change)
12
Containing Inflation is an Overarching Challenge
in Emerging Economies
Real Policy Rates (percent policy rate minus cpi
inflation)
Food Price Inflation (12 month percent change)
EMEA Asia Latam
May 08