“Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100

1. The External Environment for Developing CountriesJuly 2008The World BankDevelopment EconomicsProspects Group

2. “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100 TOPIX Dow Jones CACI MSI Source: Thomson/Datastream.

3. U.S. inflation pipeline suggests further price hikes for consumerHeadline CPI, PPI- and Import price indexes, ch% 3mma y/y Import price [right] PPI [left] CPI [left] Source: U.S. Department of Commerce.

4. Industrial countries

5. Stimulus checks boost disposable incomes in May – but outlays rise less disposable income and personal consumption, ch% saar personal consumption income retail sales Source: U.S. Department of Commerce.

6. Consumer expectations at record lows... a threat to second-half growthexpectations for economy: percentage of survey responses, 3mma expectations “worse” expectations “better” “better” minus “worse” Source: Conference Board.

7. Manufacturing losses had been spared worse outturns by overseas demand goods export volume and IP, ch% saar IP manufacturing [L] Export volume [R] Source: Department of Commerce, Thomson/Datastream.

8. Japan’s households retrench after strong spending in first quarter retail sales volume and houshold expenditure, ch% 3mma y/y HH expenditures Retail sales Source: Cabinet Office-- Thomson/Datastream.

9. Japan’s export growth waning as import demand plummetsExport- and import volume growth, ch% saar Exports Imports Source: Japan Cabinet Office.

10. Fall of the yen and new orders growth sustain export hopes USD per Yen index [right], and factory orders [left] ch% 3mma y/y Factory orders [left] Dollar per Yen index [right] Source: Japan Cabinet Office; Thomson/Datastream.

11. Euro Area first-quarter GDP marked down on investment and net-X growth of real GDP, and contributions to growth in percentage points Change in Stocks Fixed Investment Government Consumption Net exports Source: Eurostat and DECPG calculations.

12. German exports drop sharply in May in step with export orders growth export volumes and overseas factory orders, ch% 3mma Export orders Export volume Source: Bundesbank-- Thomson/Datastream.

13. HICP breaches 16-year highs illiciting ECB 25-bp rate hike HICP ch% y/y and ECB policy rate (%) HICP Source: Eurostat through Thomson/Datastream.

14. Industrial production

15. Industrial production growth across developing regions is slowingIP ch% saar: ECA, LAC [left]; Other East Asia [right] Europe and Central Asia Other East Asia Latin America and the Carribean Source: Thomson/Datastream, DECPG.

16. China remains strong; output in the remainder of East Asia is lapsingIP ch% saar China Other East Asia Source: Thomson/Datastream, DECPG.

17. Weaker manufacturing orders take a toll on German productionIP ch% saar: production [left], orders [right] IP Manufacturing orders* Source: Thomson/Datastream, DECPG. * One month lag

18. International trade

19. G-3 exports slow into second quarter of 2008 export volumes, ch% saar Japan USA Germany Source: Thomson/Datastream, DECPG calculations.

20. Export market demand falling more quickly than anticipated nominal imports, ch% saar Taiwan, China Non-OECD High-income Brazil East Asia High-income Russia Source: Thomson/Datastream, DECPG calculations.

21. High-tech exporters see slowdown in outbound shipments nominal exports, ch% saar Thailand Taiwan, China Malaysia Hong Kong SAR China Source: Thomson/Datastream, DECPG calculations.

22. Oil prices

23. Oil prices climb on low stocks and sluggish supply growth $/bbl million bbl OECD stocks [R] WB Oil price [L scale] Source: IEA and DECPG Commodities Group.

24. Tight distillate market bidding up prices for light crudes $/bbl Distillate Crude (WTI) Price differentials relative to crude Gasoline Source: Datastream and DECPG Commodities Group.

25. Open Interest Crude Oil NYMEX (‘000 lots) Open interest $/bbl Source: NYMEX and DECPG Commodities Group.

26. Non-oil commodity prices

27. Continued gains in food prices (2000=100) Source: DECPG Commodities Group.

28. Copper and aluminum remain firmwhile other metals prices drop Cu/Al $/ton Ni $/ton Copper Nickel Aluminum Source: LME and DECPG Commodities Group.

29. Iron Ore Prices ($/mt) Source: LME and DECPG Commodities Group.

30. International Finance

31. Bank lending leads flows in June Source: DECPG Finance Team.

32. Equity market downturn appears mirrored in commodity market gains MSCI global equities (USD) [left]; Reuters/Jeffries CRN [right] MSCI equity [left] CRN commodities [right] Source: Bloomberg.

33. Returns on high-yield assets suffer amid flight to quality Developed market- high-yield bond index [left]; EMBIG [right] EMBIG [right] JPMorgan Developed HY [left] Source: JPMorgan-Chase and Morgan-Stanley.

34. Currencies

35. Dollar continues move-up on yen... step-down on euro at ECB rate hike USD per Euro (inverse) [Left] and Yen per USD [right] yen/USD USD/Euro (inverse) Source: Thomson/Datastream.

36. Is oil being viewed as a dollar hedge? USD nominal effective rate [left], oil price [right], index 2000=100 Oil price [right] USD NEER [left] Source: Thomson/Datastream, DECPG Commodities Group.

37. Emerging market currencies show mixed movements against the dollar LCU per USD indexes, Jan1 2008=100 [*increase = weaker LCU] Korean won Turkish lira Philippine peso Indonesian rupiah Brazilian reis Source: Thomson/Datastream.

38. FOCUSJuly 2008Difficulties at Fannie and Freddie

39. Fannie and Freddie share prices halve over the 2nd week of July Source: Thomson/Datastream.

40. Mortgage portfolios and guarantees held by Fannie and Freddie Source: OFHEO.

41. Market tension eases post actions by Treasury and Federal Reserve Source: Thomson/Datastream.

42. Further difficulties could carry worldwide repercussions Source: U.S. Treasury.

43. The External Environment for Developing CountriesJuly 2008The World BankDevelopment EconomicsProspects Group