Global Development Finance 2002

1
Global Development Finance 2002

• Financing the Poorest Countries

2
The Coming Global Recovery

• Global slowdown sharpest in 30 years
• Recovery begins in U.S. and high-tech Asia
• Commodity exporters in Sub-Saharan Africa remain
  under pressure
• Largest downside risks are in financial markets

3
A shallow recession?(World and Industrial and
Developing Country GDP growth, 1997-2004)
Percentage change
Forecast
Developing countries
World
Industrial countries
4
A shallow recession? -notes cont .
5
High-tech exporters hit hard(Export growth
1999-2003)
Percent
Note High-tech exporters are Korea, Malaysia,
Singapore and Taiwan. Source Datastream.
6
Real non-oil commodity prices fell
sharply,especially in Africa (Indices 1980
100 deflated by MUV)
Developing countries
Sub-Saharan Africa
Note MUV is the unit value of manufactures
exports from the G-5 countries to developing
countries, expressed in U.S. dollars.
7
No productivity increase in Sub-Saharan Africa
(agricultural per capita production index, 1980
100)
Developing countries
Sub-Saharan Africa
Source FAO Statistical Office (FAOSTAT).
8
No productivity increase in Sub-Saharan Africa
notes cont
9
Private capital flows to emerging markets

• Global slowdown depressed capital market flows in
  2001
• FDI was resilient
• Limited contagion from the Argentine crisis

10
Capital market flows to developing countries have
fallen(percent of GDP)
Note Refers to long-term commitments of bank
loans, bond issues, and equity issues.
11
FDI to developing countries is resilient(US
billions)
FDI to developing countries
Global FDI
Sources World Bank staff estimates UNCTAD,
World Investment Report 2001.
12
Contagion from Argentine crisis is limited(basis
point change in spreads during crisis episodes)
   October 2000 April2001  July 2001 December 2001 

Argentina 317 363 874 3806
Developing countries1 64 -1 68 -46
1 excluding Argentina, Turkey Source World Bank
staff estimates JP Morgan Chase
13
The Poor Countries International Financial
Transactions

• Poor countries integration with global economy
  increased
• Poor countries with good policies saw increased
  FDI flows
• Capital outflows depend on policies
• Foreign bank participation in poor countries rose
  sharply

14
Private external financial transactions are
important in poor countries(percent of GDP, 1999)
15
Countries with better policies saw rapid growth
in FDI(average annual percent change in FDI/GDP
ratio, 1996-99)
Note Policies as of 1995
16
Outflows smaller in poor countries with better
policies (percent of GDP, 1999)
Note Estimate of stock of outflows, calculated
by summing annual outflows from early 1980s to
1999 Policies as of 1996
17
Foreign bank presence has sharply increased in
the poor countries(percent)
SourceWorld Bank staff estimates Bankscope
18
Official Support to Developing Countries

• Aid fell in 2001
• Countries with good policies can absorb more aid
• Government commitment key to effective
  conditionality

19
Aid is falling again(US billions and percent of
GNP)
Billions of U.S. dollars
Percent of donor GNP
Source OECD and World Bank
20
Compliance with conditionality means better
economic performance(percent of countries
showing improvement)
21
Global Development Finance 2002

• Financing the Poorest Countries