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November 18, 2008 PowerPoint Presentation
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November 18, 2008

November 18, 2008

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November 18, 2008

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  1. November 18, 2008 The Impact of the Global Financial Crisis on the Development Finance Prospects for LDCsDoug HostlandDevelopment Economics Prospects GroupTHE WORLD BANK

  2. Main messages • Expect moderate decline in private capital flows in 2009 • Very tight credit conditions expected to persist • private debt flows will fall dramatically from high levels • Mounting evidence of major global slowdown • curtail workers’ remittances • FDI flows expected to be more resilient • Impending fiscal pressures in high-income countries • from global slowdown & contingent liabilities • more difficult for donors to meet aid commitments

  3. Private capital flows expected to decline in 2009… Net private debt and equity flows 1990-2007, projected 2008-09 $ billions Percent Percent of GDP (right axis) Source: World Bank Debtor Reporting System (DRS) and staff estimates.

  4. Private capital flows expected to decline in 2009… Net private debt and equity flows 1990-2007, projected 2008-09 $ billions Percent Percent of GDP (right axis) Source: World Bank Debtor Reporting System (DRS) and staff estimates.

  5. …amid large external imbalances Current account / GDP in LDCs, 2008 (estimated) Source: World Bank staff estimates.

  6. Emerging market sovereign bond spreads have widened dramatically… Emerging market (EMBI Global) sovereign bond yields Jan 2004 – Nov 13, 2008 Percent Sept 15, 2008 Source: JPMorgan.

  7. …raising financing costs significantly Emerging market (EMBI Global) sovereign bond yields Jan 2004 – Nov 13, 2008 Percent Implied yield on EM sovereign bonds Yield on 10-year US Treasury bills June 2007 Source: JPMorgan and U.S. Board of Governors.

  8. Gradual downturn in credit cycle has been underway since mid-2007… Bank lending to / bond and equity issuance by developing countries Jan. 2004 – Oct. 2008 $ billions (12-month moving average) June 2007 Bank lending Equity issuance Bond issuance Source: Dealogic Analytics.

  9. …private debt flows expected to decline sharply… Net private debt inflows to developing countries 1990-2007, projected 2008-09 Percent $ billions Percent of GDP (right axis) Source: World Bank Debtor Reporting System (DRS) and staff estimates.

  10. …while FDI inflows exhibits resilience FDI inflows to developing countries 1991-2007, projected 2008-10 $ billions Percent Source: World Bank staff estimates.

  11. Bank lending to LDCs has continued to expand… Cross-border bank loan commitments to LDCs 1990-2007, estimated 2008 $ billions Percent Source: Dealogic Analytics and World Bank staff estimates.

  12. …but is concentrated in just a few countries Cross-border bank loan commitments to LDCs, Annual average: 2003-08 Source: Dealogic Analytics.

  13. Remittances as well have expanded… $ billions Source: World Bank staff estimates and Dealogic Analytics.

  14. …but again is concentrated in a few countries Workers’ remittances / GDP in 2007 5% of GDP Source: World Bank staff estimates.

  15. LCDs are more dependent on foreign aid… $ billions Source: World Bank staff estimates and Dealogic Analytics.

  16. …which increased modestly in 2000-06… Net ODA disbursements net of debt relief billions of constant $2005 Percent Source: OECD DAC.

  17. …but outlook bleak as donors face growing fiscal pressures Net disbursements of ODA, 1990-2007, commitments 2008-10 Constant 2006 $ billions Percent Percent of GNI in donor countries (right axis) Debt relief ODA less debt relief Source: OECD DAC.