|After declining 30% between September 2008 and March 2009 (values), global trade is growing very rapidly. And, while there was an uptick in trade protectionist measures in 2009, thus far it has been relatively muted. New estimates suggest that net FDI flows to developing countries declined 35% in 2009, posting the sharpest contraction in over 20 years. Nevertheless, FDI flows were more resilient than private bank-lending that plunged 134% in the year. Mirroring the recovery in global activity, global oil demand turned positive in Q4-2009, led by robust demand in China. Oil market conditions have continued to tighten on falling stocks and rising demand, buoying crude prices.|
|Protectionism remains largely muted, according to a recent WTO/UNCTAD/OECD report —although the number of restrictive trade measures reported since October 2008 sharply exceeds liberalization measures by nearly 10:1 (374 vs. 39). The relatively modest rise in protectionist measures reflects the reaction to the rapid and sharp plunge in trade activity with the onset of the crisis. Given the current rebound in trade—with global exports rising by 21% (y/y) in value and volume terms in January 2010—much worsening of protectionism is not expected. Notably, initiation of antidumping investigations by G20 countries contracted 21% in 2009, although given lags between initiation and imposition of trade remedies, a backlog of
investigations could raise the number of barriers imposed in 2010.
|While global net FDI inflows posted a rebound since their trough in Q1-2009, they contracted an estimated 40% overall in 2009. FDI flows to developing countries (LMICs) fell by estimated 35% in 2009, and even China recorded a record 30% drop in FDI flows to an estimated $95bn. In 2010, net FDI flows to LMICs are expected to grow 30%, with Asia continuing to receive the lion’s share. In coming years, private capital flows to LMICs are projected to continue to recover to levels witnessed during the late-1990s and early-2000s, but not to levels witnessed during the per-crisis boom—as capital is expected to be less abundant and more expensive, due to the reversal of nontraditional central bank easing and increased financing needs in high-income countries, balance sheet consolidation, and tighter regulations.|
|Global oil demand turned positive in Q4-2009 after falling for five consecutive quarters, buoying oil prices. While OECD demand remains negative, the pace of decline has moderated and is projected to turn positive in Q2-2010. Among non-OECD countries, demand growth has been concentrated in China, with Q4-2009 up a resounding 17% (y/y). This reflects a level shift (not a change in trend growth), as more than half of this increase is tied to capacity expansion of Chinese petrochemical feedstock and should moderate in the future. Continued tightening of market conditions has supported higher crude oil prices (World Bank average), which have traded between $70-80/bbl for over five months. And, the futures curve has flattened, suggesting that markets see price stability moving forward.|
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