Value chains are an ever more prominent feature of global commerce, with goods being processed – and value being added – in multiple countries that are part of the chain. No longer is trade as simple as manufacturing in one country and selling in another. Rather, goods often cross many borders, undergoing processing and accruing components in diverse settings before ending up in a retail store. A new database developed by the OECD and WTO provides greater clarity into value-added trade trends. Looking at the world through a “value-added” lens challenges our conventional thinking about trade policy, and in particular, the focus of where policy makers should be spending their efforts. This new perspective makes clear that to truly benefit from the dynamism of value chains, governments will need to cooperate in new ways -- with each other and with members of the private sector.
A company importing desktop computers into Russia expects border processing times of up to six weeks. Chinese customs authorities take so long inspecting drug shipments that a global healthcare company must hold nine days’ worth of inventory. Concerned about the prevalence of theft, a cell phone manufacturer must provide a security detail for overland shipments in Mexico.
These are examples of the supply chain barriers that, as a whole, are more detrimental to world trade than tariffs, according to a new report, Enabling Trade: Valuing Growth Opportunities, released today at the World Economic Forum in Davos. The study, a collaborative effort between Bain & Co., the World Bank and the World Economic Forum, concludes that a concerted effort to reduce supply chain barriers to levels observed in the best performing countries could increase global GDP by some 4.7 percent – six times more than what could be achieved from eradicating all remaining import tariffs.
Remittances sent by migrant workers have emerged as a key driver of poverty reduction in many developing countries. Bangladesh has caught up with growing migration trends since the mid-70s when only 6,000 Bangladeshis were working abroad. Today, there are about 8 million. Migration has now become a major source of gainful employment for Bangladesh’s growing number of unemployed and under-employed labor force. The sharpest increase in the level of manpower exports occurred during 2006--2009. Remittances have grown at a rapid pace, particularly since 2004.
So, what are the key correlates of aggregate remittance inflows in Bangladesh? What does the data tell us about Bangladesh? Many researchers have used aggregate data to analyze the macro-economic factors affecting the behavior of remitters. For example, Barua et al (2007) show that income differentials between host and home country and devaluation of home country currency positively and high inflation rate in home country negatively affect workers’ remittances1. Hasan (2008) finds remittances respond positively to home interest rate and incomes in host countries2. Ordinary Least Squares estimation is frequently used to characterize the statistical relationships between aggregate remittance inflows and their proximate macro correlates.
The key finding is that a limited number of macroeconomic factors are important in predicting the behavior of aggregate remittances.
Financial Markets…Global stock markets rallied on Friday, with the benchmark MSCI world equity index hitting a 20-month high level of 552.16, as positive economic data from the two world’s largest economies boosted market sentiment. Along with robust U.S. labor and housing market reports, China’s better-than-expected fourth-quarter GDP growth (y/y), buoyant industrial production and retail sales figures added to signs that the global economic recovery is gaining traction.
Japanese yen fell further against the dollar, sliding to a 2 1/2 –year low of 90.21 per dollar in early-morning New York trade, amid speculation the Bank of Japan may start open-ending asset buying program later this month. The yen has depreciated 13% versus the dollar in the past 3 months as the Japanese government signaled greater stimulus measures to boost slumping economy, which may lower the currency and stoke inflation.
U.S. Treasuries rose slightly on Friday, with the benchmark 10-year yields sliding 2 basis points from the highest level in a week to 1.87%, as growing concerns over the country’s debt ceiling debate revived demand for the safe-haven government securities. U.S. lawmakers need to raise the nation’s $16.4 trillion debt ceiling next month, and they will also have to deal with the $110 billion in automatic spending cuts and an expiring short-term measure that funds government agencies in March.
High-income Economies…US consumer confidence fell for the second month in a row in December, with the Thomson Reuters/University of Michigan consumer confidence index declining to 71.3 from 72.9 the previous month. More than a third of consumers referred to concerns related to fiscal cliff negotiations. The consumer expectations sub-index slipped to its lowest since November 2011.
UK retail sales fell 0.1% (m/m) in December, with sales only 0.3% (y/y) higher than a year earlier, underscoring the weakness of consumer spending as the economy continues to struggle after emerging from a double-dip recession in the third quarter of 2012.
Poland's industrial production plunged 14.2% (m/m) in December, the steepest fall in almost four years, with annual industrial output falling 10.6% (y/y). A part of the decline was due to fewer working days in December, but also reflects weak domestic demand and difficult economic conditions in key Euro Area export markets.
New industrial orders in Spain fell 1.5% (y/y) in November, reversing the 5.5% gain seen in October. While consumer goods orders fell 1.4% (y/y), orders of capital goods and energy products increased 4.7% and 7.5%.
Developing Economies…China's GDP growth was reported at 7.9% (y/y) in the fourth quarter of 2012 showing a strong rebound from 7.4% growth in the third quarter.
Quarterly GDP growth rates have been revised for the last three quarters of 2011 and the third quarter of 2012. The revised quarterly growth rates were reported at: 11Q1 - 2.2%, 11Q2 - 2.4%, 11Q3 - 2.3%, 11Q4 - 1.9%, 12Q1 - 1.5%, 12Q2 - 2.0%, 12Q3 - 2.1% and 12Q4 - 2.0% respectively compared with the earlier 11Q1 - 2.2%, 11Q2 - 2.5%, 11Q3 - 2.4%, 11Q4 - 1.7%, 12Q1 - 1.5%, 12Q2 - 2.0% and 12Q3 - 2.2%. The revised quarterly numbers suggest a deceleration in GDP growth to 8.2% in the fourth quarter of 2012 from 8.7% reported in the third quarter.
Annual GDP growth was reported at 7.8% in 2012, the weakest growth rate since 1999 and lower than 9.3% achieved in 2011.
Industrial production in China grew 10.3% (y/y) in December, accelerating from 10.1% rise in November. Retail sales expanded 15.2% (y/y) in December, faster than the 14.9% growth in November. China's urban fixed asset investment in the 12 months through December increased 20.6% (y/y). Monthly price increase for the newly built homes was registered in 54 of the 70 cities surveyed. On an annual basis, 40 cities reported increase in prices in December compared to 25 cities in November.
Chile's central bank kept its monetary policy rate steady at 5.0%. Inflation in Chile eased to 1.5% in December 2.1% in November remaining below the central bank’s 3.0% annual target.
Mexico's central bank left its benchmark interest rate unchanged at 4.50%, but indicated that it is considering monetary easing in light of weak growth and moderating inflation.
World Bank’s Global Economic Prospects, January 2013 featured in The Economist.
The Ouagadougou-Accra-Tema corridor, a road stretching from Ouagadougou in West Africa’s Burkina Faso through Ghana’s bustling capital city Accra and onto the country’s port city Tema, is one of Africa’s most well-known corridors. In October, we joined Albert, a 50-year-old driver from Burkina Faso, on a 750 kilometer journey to highlight the high economic costs faced by landlocked countries and the cumbersome border crossings that impede trade.
The journey, which should have taken seven hours by car, took us 17 hours, 1 border crossing and 20 checkpoints.
The dawn of a new year is a good time to reflect on the past year and look ahead. As it turns out, 2012 was a pretty average year for Kenya, mainly because the much anticipated national and regional elections, which will determine the course of the nation and its economy for years to come, were postponed to March next year.
Why do I say that 2012 was such a normal economic year for Kenya? Let’s rewind 12 months back. Kenya was facing major macroeconomic challenges: inflation stood at almost 20 per cent, the exchange rate was volatile and public debt increased markedly due to the weakening shilling. Economic pessimists predicted a global economic storm as the challenges in the euro-zone seemed unmanageable.
This is the fifth in a series of six posts about the recent report, Bangladesh: Towards Accelerated, Inclusive and Sustainable Growth. The previous post looked at the numbers behind Bangladesh’s goal of middle income status by 2021. The next and last post will look at the way forward.
For Bangladesh, achieving its goal of middle income status by 2021 will require more than business-as-usual: the average annual GDP growth rate will have to rise from the current 6 percent to 7.5-8 percent, while sustaining remittance growth at 8 plus percent. Faster growth in turn will depend on four main factors: (i) increased investment, (ii) faster human capital accumulation, (iii) enhanced productivity growth, and (iv) increased outward orientation.
Increase investment by at least 5 percentage points of GDP. Investment is constrained by infrastructure, business environment, land, and skills. Analysis based on Investment Climate Assessment surveys highlights the role of infrastructure in triggering a virtuous cycle of growth: better infrastructure will improve productivity which in turn will make exports more competitive and attract FDI, thus leading to further increase in productivity. Expanded provision of infrastructure has to come with easing difficulties in doing business, increasing access to serviced land, and meeting skill shortages.
Build on achievements in human capital formation. Bangladesh has done well in increasing the stock of human capital, topping the list of Asian countries along with Vietnam by improving average years of schooling by 1.3 during 2000-10. Our analysis indicates that achieving the needed GDP growth rate will require further increases from the current 5.8 to 7.3 average years of schooling. In addition, relatively low returns to schooling point to the importance of improving quality of education. These will require addressing external and internal inefficiency as well as weaknesses in education management and finance.
Financial Markets…The Standard & Poor’s 500 Index added 0.1% in Friday morning trade and the dollar weakened 0.2% versus the euro after a U.S. Labor Department report showed a slightly slower than expected employment growth in December. The S&P500 has advanced 4.1% this week, gearing for its largest weekly gain in 13 months.
10-year U.S. Treasury yields rose 4 basis points to 1.95%, paring some losses after climbing to a nine-month high of 1.97% before a government report on U.S. employment. Treasuries extended losses yesterday as investors feared the possibility of U.S. Federal Reserve ending its $85 billion monthly bond purchase program sometime this year.
Developing-stock markets fell for the first time in 10 days, with the benchmark MSCI index sliding 0.6% from a 17-month high closing yesterday, after Fed policy makers said they may end their stimulus monetary policy. Emerging-market stocks jumped 108% during the first round of so-called quantitative easing, and they have advanced 9.5% since the U.S. Federal Reserve announced a third round on September 13.
High-income Economies…U.S. nonfarm payroll employment rose 155,000 in December, below the 161,000 increase in November, with a slower pace of increase in private sector employment and a drop in public sector employment. The unemployment rate held steady at 7.8% in December.
U.S. factory orders were flat in November, following a 0.8% (m/m) rise the previous month. However, nondefense capital goods order excluding aircrafts – a proxy for future business investment – rose a robust 2.6% (m/m) following a 3% rise the previous month. The ISM non-manufacturing index for the U.S. index rose to 56.1 in December (the highest reading since February) from 54.7 in November.
Euro Area consumer price inflation remained steady at 2.2% (y/y) in December according to preliminary estimates, the same rate as November, as a weakening pace of year-on-year increases in energy prices was offset by a slight pickup in food and services inflation. The overall inflation rate remains above the European Central Bank’s 2% target.
Markit’s services Purchasing Managers’ Index (PMI) for the Euro Area rose to 47.8 in December from 46.7 in November, suggesting a slower pace of contraction in services sectors (An index level below 50 indicates contraction). Despite an earlier reported modest decline in the manufacturing PMI (to 46.1 from 46.2), a composite index that includes both manufacturing and services rose to 47.2 from 46.5 in November.
Services PMI for Germany rose above the 50-mark to 52.0 in December from 49.7 in November. PMIs rose in Italy (to 45.6 from 44.6) and Spain (to 44.3 from 42.4), but fell in France (to 45.2 from 45.8). Services PMI for Ireland fell to 55.8 from 56.1, but indicating a still robust pace of expansion.
German retail sales rose 1.2% (m/m) in November, almost reversing a 1.3% drop the previous month. Retail sales were 0.9% lower than a year earlier in November.
Developing Economies…China’s HSBC business activity index for service sector declined to 51.7 in December from 52.1 in November suggesting a continued, but somewhat weaker expansion of service sector activity in December compared to November. An earlier survey by China Federation of Logistics and Purchasing (CFLP) and the National Bureau of Statistics suggested that that China's service sector growth accelerated to a four-month high in December.
Residential property prices in China increased for the first time in nine months in December, though at a marginal rate, indicating that the property market is on a recovery path. The house price index, which measures the average cost of a new home in 100 major cities, moved up 0.03% on an annual basis in December, ending eight months of declines.
Inflation in the Philippines edged up to 2.9% in December from 2.8% in November, mainly on the account of higher inflation for food, beverages and tobacco. The annual average inflation rate in 2012 at 3.1% was the lowest registered over the past five years. Inflation in 2012 was also significantly lower than 4.7% attained in 2011.
Brazil's industrial production decreased 1% (y/y) in November following a 2.5% growth in October, pulled down by decrease in production of capital goods. On a monthly basis, industrial production also fell by 0.6% in November.
Meanwhile, Brazil’s Markit Economics activity index for services sector, which increased to 53.5 in December from 52.5 in November, suggests that service sector expanded at the fastest rate in nine months in December.
- United States
- Latin America & Caribbean
- Europe and Central Asia
- East Asia and Pacific
- Macroeconomics and Economic Growth
- Financial Sector
- U.S. treasury yields
- U.S. payrolls
- Standard & Poor's
- purchasing managers' index
- Industrial Production
- Global stock markets
- factory orders
- consumer price inflation
The Prospects Daily will be on Winter recess and will resume on
Wednesday January 2nd, 2013.
Financial Markets…Global equities declined and US Treasuries gained after the Congress failed to agree on a plan to allow higher taxes on those earning more than $1 million as budget talks stalled. The MSCI All-Country World Index dropped 0.8% at 10:44 a.m. in New York and the Standard Poor’s 500 Index slumped 0.9%. The Stoxx Europe 600 Index slid 0.4%, falling from a 19-month high. US Treasuries rose, with the yield on 10-year Treasuries decreasing five basis points to 1.75 percent.
The MSCI Emerging Market Index slid 1.1%, its biggest drop in more than five weeks. China’s stocks retreated from a four-month high on concern that the rally from the beginning of this month was excessive. The Shanghai Composite Index fell 0.7%. India’s Sensex slid 1.1%.
High-income Economies…US durable goods orders rose 0.7% (m/m) in November, following an upwardly revised 1.1% gain in October. Orders for capital goods excluding defense and aircraft – a proxy for future business investment – rose 2.7% (m/m) building on an upwardly revised 3.2% gain in October.
US consumer sentiment, however, slumped in December, with the Thomson Reuters/University of Michigan consumer sentiment index falling sharply to 72.9 from 82.7 in November, reflecting consumers’ concerns about uncertainty over negotiations on tax hikes and spending cuts that are set to come into effect in the new year.
UK GDP growth for the third quarter was revised slightly down to 0.9% (q/q) (implying an annualized rate of 3.6% q/q) from the earlier reported 1.0%. Despite the downward revision, this was the UK economy's best performance since the second quarter of 2010.
Denmark’s GDP grew at an annualized 1.2% (q/q) in the third quarter, following a 2.8% annualized decline in the second quarter.
Canada’s consumer price fell to the lowest in three years in November, declining to 0.8% (y/y) compared with 1.2% in October. On a monthly basis, prices fell 0.2% due to declines in fuel costs and automobile prices. Inflation is now below the central bank’s 1%-3% target range.
Poland’s retail sales growth slowed to 2.4% (y/y) in November from 3.3% in October, falling 6.4% (m/m), pointing to a slowing consumer demand amid high unemployment. Poland's unemployment rate rose to 12.9% in November from 12.5% in October.
Developing Economies…Argentina's industrial production dropped 1.4% (y/y) in November and declined 2.1% (m/m) versus October, due to slowing down of Brazilian demand for Argentine automobiles as well as decline in investment and domestic demand.
Brazil's unemployment rate dropped to 4.9% in November from 5.3% in October. November figure was the lowest since December 2011, when the jobless rate was 4.7%.
Colombia’s GDP growth slowed to 2.1% (y/y) in the third quarter from 4.9% in the second quarter, to a large extent due to a 12.3% drop in construction. On a quarterly basis Colombian economy contracted 0.7% (q/q) in the third quarter. The Government of Colombia lowered economic growth forecast for full-year 2012 to 4-4.5%, due to weak expansion in the third quarter, from a previous targeted 4.8%.
- United States
- United Kingdom
- Latin America & Caribbean
- Europe and Central Asia
- East Asia and Pacific
- Macroeconomics and Economic Growth
- Financial Sector
- retail sales
- Industrial Production
- global unemployment
- Global financial markets
- Global equities
- GDP growth
- consumer confidence
With a double dip recession––after just two years of sluggish recovery––now taking hold across the Western Balkans it is time for policy makers to begin looking at ways the ongoing financial crisis can be leveraged to bring about lasting fiscal reform in these countries. After just two years of sluggish recovery, these countries as a group––Albania, Bosnia and Herzegovina, Kosovo, FYR Macedonia, Montenegro, and Serbia––are experiencing a drop in real GDP by 0.6 percent and it is now clear that the road to recovery in 2013 will be arduous.
Let's think together: Every week the World Bank team in Tanzania wants to stimulate your thinking by sharing data from recent official surveys in Tanzania and ask you a couple of questions. This post is also published in theTanzanian Newspaper The Citizen every Sunday.
Gold, gems, uranium, coal, iron, copper and nickel…Tanzania is rich in mineral resources. These 'treasures' have attracted considerable attention within the country and abroad. It is estimated that over 500,000 Tanzanians are employed in this sector, principally in traditional small scale activities.
The sector has also attracted enormous foreign direct investment. As a result, the mining sector has been one of the driving forces of the Tanzanian economy over several years as illustrated by the following statistics:
Financial Markets… The euro rose to a six-week high against the dollar, appreciating to $1.3077, and Europe’s benchmark stock index (Stoxx Europe 600) gained for a second day, as growing optimism over a successful Greek buyback program boosted investor sentiment. Greece started the €10 billion ($13 billion) repurchase of government bonds maturing between 2023 and 2042 on Monday.
Italian and Spanish bonds advanced on Tuesday, with their 10-year yield dropping 4 basis points to 4.41% and 2 bps to 5.22%, respectively, as Greek optimism boosted demand for high-yielding region’s government debt into year-end. Meanwhile, Greek bonds turned slightly lower after Monday’s surge with results of the debt buyback due on December 7.
Gold for February settlement fell 0.9% to $1,705 an ounce on Tuesday, after falling a four-week low of $1,698.50 earlier, as concern over U.S. economy amid stalled budget talks weighed negatively on commodity prices. Copper for delivery in three months also dropped as much as 0.5% to $7,963.50 a metric ton, after reaching a six-week high of $8,045 yesterday.
High-income Economies…The Reserve Bank of Australia cut its benchmark interest rate by a quarter percentage point to 3%, the lowest in three years. The sixth rate cut in the past 14 months reflects Australia’s contained wage pressure, lower projected mining spending, and an unemployment rate at a 2½-year high—as well as concerns that the Australian dollar remains “higher than might have been expected” given lower export prices and a weaker global outlook, according to the central bank.
Producer prices in the Euro Area rose 0.1% (m/m) in October from the previous month, but producer price inflation edged down to 2.6% (y/y) in October from 2.7% in September due to base effects. A deceleration in energy-cost growth to 5.9% (y/y) in October from 6.9% in September was offset by acceleration in price increases for intermediate and non-durable consumer goods, partly reflecting strengthening demand.
Canada’s central bank kept its benchmark overnight rate at 1%. In explaining its decision, the central bank said that although economic activity in the third quarter was weak, global economic conditions remain stimulative (though vulnerable to major shocks from the U.S. or Europe) and the pace of Canada’s economic growth is expected to pick up through 2013, while inflation is expected to increase and reach the targeted 2 percent rate over the course of the next 12 months.
The number of people registering for unemployment benefits in Spain rose for the fourth month in November, rising by 74,296 from October to reach 4.91 million, as some firms used newly introduced labor rules to reduce the size of their workforce.
Developing Economies…Brazil’s industrial production increased by 2.3% (y/y) in October compared to a one percent decline in September. On a monthly basis, industrial production rose by 0.9% in October reversing a one percent decline in September.
China and South Korea agreed to use proceeds of existing currency swap deals to settle bilateral trade between two countries.
Malawi continues to be an outlier from the global policy easing cycle, as it continues to tighten monetary policy to achieve macroeconomic stability, raising the policy rate by 400 basis points to 25.0%. Foreign exchange reserves have been falling since July, to an alarming level equivalent to 0.8 months of import cover as of end-October. Inflation rate rose to 30.6% (y/y) in October, up from 28.3% in September, with food price increases accounting for the bulk of the increase in inflation.
Uganda's central bank cut its Central Bank Rate (CBR) by 50 basis points to 12.0% as subdued inflationary pressure allows the bank to stimulate economic growth. November headline inflation rose to 4.9% from 4.5% in October, but remains within the central bank’s 5% medium-term inflation target.
I recall the first time I visited Nakheel Palestine for Agricultural Investments Company fields at Jericho two years ago, when MIGA was still at the early stages of underwriting the project constituting planting date trees. The land was empty and, at the first glance, the first thought that came to mind was “how can this be developed into arable land?” When MIGA’s Executive Vice President Izumi Kobayashi visited the site for the first time a couple of weeks ago, we found ourselves in fields filled with baby date trees that have beautified the land with their green leaves. And in a tour in the packing facility of the project, we saw how young female workers were sorting and packing the dates, realizing that each of these workers is supporting a household of minimum five members in a very impoverished area.
Almost 20 years ago, the World Bank released a groundbreaking report – The East Asian Miracle – that called worldwide attention to the economic success of eight economies in the region, leading to a discussion on the extent to which policies followed by them could be replicated.
Let's think together: Every week the World Bank team in Tanzania wants to stimulate your thinking by sharing data from recent official surveys in Tanzania and ask you a couple of questions. This post is also published in the Tanzanian Newspaper The Citizen every Sunday.
Tourism is among the world’s most lucrative industries. The latest figures from 2009 show that the industry generated US$852 billion in export earnings worldwide, accommodated more than 800 million travelers, and accounted for more than 255 million jobs or nearly 11 per cent of the global workforce in that year. It is no surprise then that this industry is considered a major driver for employment, growth and development.