Global Economic Prospects 2014

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Prospects Weekly: Developing countries to become major sources of global capital flows, Inflation in most developing countries remains contained, Global grain supplies are expected to improve markedly in 2013/14

Developing countries are expected to become major sources, destinations and potentially also intermediaries of global capital flows over the medium term, and will by 2030 account for more than 60 cents of every US dollar invested. Inflation in some of the major inflation targeting developing countries has been near or above the upper bound of the target range for extended periods and could threaten to de-anchor inflation expectations. Meanwhile the grains markets are expected to be well supply in the 2013/2014 season.
Developing economies are fast becoming major investors in the world economy, and by 2030 will account for more than 60 cents of every dollar invested. According to the new edition of the World Bank report Global Development Horizons- Capital for the Future (http://www.worldbank.org/CapitalForTheFuture) this represents a dramatic change with respect to historical performance: for almost 4 decades (through the 1990s) developing countries have accounted for just about 20 cents for every dollar of global saving and investment. By 2016-18 total investment in the developing world is expected to overtake that in high income countries. Developing countries will—for the first time—become major sources, destinations, and potentially also intermediaries of global gross capital flows. These trends will not be realized automatically, however. Without timely efforts by policy makers, some countries will be left behind, and more importantly, even within otherwise successful countries, some people will be left behind.
nflation in most developing countries remains contained but is near or exceeding the upper bound of the target in some economies. Inflation remains within target in many of the developing countries that follow some type of inflation targeting regime. However annual inflation has exceeded the upper bound of the target range in at least 4 months over the past year in some large developing economies, including Indonesia, Mexico, Nigeria, Peru, Russia, and Turkey. As of April headline inflation was above target in Turkey, Russia, Mexico, and Indonesia, while Brazil and South Africa were very near the upper bound of the target. Meanwhile, in India, which does not follow explicit inflation targeting, annual CPI inflation rate fell below 10% in April. The wholesale price inflation – a measure more commonly used for guiding monetary policy– fell below 5% for the first time in more than 3 years.
Global grain supplies are expected to improve markedly in 2013/14.The US Department of Agriculture assessed the grain outlook as positive in its first global assessment of agricultural commodities markets for the 2013/14 season. The stock-to-use (S/U) ratio for maize is expected to reach 16.6%, a 2.2 percentage point increase over the current season's ratio, which marked the lowest ratio since the early 1970s. Wheat and rice markets are expected to be adequately supplied as well, with S/U ratios of 26.9% and 22.7%, respectively. Maize and wheat prices have lost most of last summer's weather-driven gains. Yet upside price risks persist for maize as delayed plantings in the United States, the world's largest supplier could cause marked reduction in yields. In contrast, the risks for rice prices, which have been remarkably stable during the past two years, are skewed to the downside and depend crucially on how the Thai government handles the stocks it has built under its rice purchasing program.

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