Syndicate content

Global Economy

The growing economic clout of the biggest emerging markets in five charts

Ayhan Kose's picture

Global economic growth is accelerating. After registering the slowest pace since the 2007-2009 financial crisis in 2016, global growth is expected to rise to a 2.7 percent pace this year and 2.9 percent over 2018-19.

While much has been said about better economic news from the major advanced economies, the seven largest emerging market economies—call them the Emerging Market Seven, or EM7 – have been the main drivers of this anticipated pickup.

Chart 1:

The contribution of the seven largest emerging market economies to global output has climbed substantially over the last quarter century.

The EM7 -- Brazil, China, India, Indonesia, Mexico, Russia and Turkey – accounted for 24 percent of global economic output over 2010-2016, up from 14 percent in 1990s. Although this is a smaller share than the Group of Seven major industrialized economies, the G7’s portion of global economic output has narrowed to 48 percent from 60 percent over the same time frame.
 

Contribution to global output (percent)

Should emerging markets worry about U.S. monetary policy announcements?

Poonam Gupta's picture

Emerging economies are routinely affected by monetary policy announcements in the US. This was starkly evident on May 22, 2013, when Federal Reserve Chairman Ben Bernanke first spoke of the possibility of the Fed tapering its security purchases. This “tapering talk” had a sharp negative impact on financial conditions in emerging markets in ensuing days—their exchange rates depreciated, bond spreads increased, and equity prices fell; so much so that some of the countries seemed on the verge of a full-fledged balance of payments crisis. The event helps explain why issues related to the spillover of US monetary policy have gained prominence in recent contributions to the literature and in policy discussions (Rajan, 2015).

U.S. post-crisis trade weakness in 4 charts

Franziska Ohnsorge's picture
Trade growth has slowed sharply since the 2007-2009 financial crisis. An analysis of U.S. trade data shows that trade between unaffiliated firms (arm’s-length trade) – as opposed to trade between firms linked by control or ownership (intra-firm trade) – accounted for the lion’s share of this slowdown. Arm’s-length trade depends more heavily on sectors of the economy, such as textiles and apparel, that have languished since the crisis.

Global Economic Prospects in 10 Charts: June 2017

Ayhan Kose's picture
Also available in: Chinese

The World Bank forecasts that global economic growth will strengthen to 2.7 percent in 2017 as a pickup in manufacturing and trade, rising market confidence, and stabilizing commodity prices allow growth to resume in commodity-exporting emerging market and developing economies.  Growth in advanced economies is expected to accelerate to 1.9 percent in 2017, a benefit to their trading partners. Amid favorable global financing conditions and stabilizing commodity prices, growth in emerging market and developing economies as a whole will pick up to 4.1 percent this year from 3.5 percent in 2016. Nevertheless, substantial risks cloud the outlook. These include the possibility of greater trade restriction, uncertainty about trade, fiscal and monetary policy, and, over the longer term, persistently weak productivity and investment growth.

Download the June 2017 Global Economic Prospects report.
 
Global growth is projected to strengthen to 2.7 percent in 2017, as expected. Emerging market and developing economies are anticipated to grow 4.1 percent – faster than advanced economies.
 
Global Growth

Should a country limit unskilled immigrant workers to safeguard national productivity growth?

Sharmila Devadas's picture

There are about 245 million migrants worldwide – around 3% of the world population. Roughly one-fifth are tertiary educated. Middle-income countries have a smaller proportion of immigrants than high-income countries (about 1% versus 12%). But for a number of middle-income countries with more immigrants than others, there is uneasiness about relying on unskilled foreigners as they strive to leap from low-wage labor and imitation to high-skilled labor and innovation. There are palpable concerns in Malaysia, for example, with some 2.1 million registered immigrants – about 7% of its population - and likely over 1 million undocumented immigrants. Things reached a crescendo early last year when all new hiring of unskilled foreign workers was suspended as the Malaysian government re-evaluated the management and need for foreign workers. The freeze was subsequently lifted for select sectors amid complaints of labor shortages.

Charting a new path to income convergence

Margaret McMillan's picture

Developing countries made considerable gains during the 2000s, resulting in a large reduction in extreme poverty and a significant expansion of the middle class. More recently that progress has slowed—and the prognosis is for more of the same, given an environment of lackluster global trade, a lack of jobs coupled with skills mismatches, greater income inequality, unprecedented population aging in richer countries, and youth bulges in the poorer ones. As a result, developing countries are unlikely to close the development gap anytime soon.

The global commodities outlook in nine charts

John Baffes's picture
Prices for most industrial commodities, notably energy and metals, continued on a strengthening trajectory in the first quarter of 2017 while agriculture prices remained on a steady path. Those trends – rising energy and metals prices, stable ag prices – are expected to continue through 2017. 
 
Commodity Price Indices, Monthly

Energy prices rose almost 3 percent in April: Pink Sheet

John Baffes's picture

Energy commodity prices rose 2.7 percent in April as the crude oil average rose 2.5 percent, according to the World Bank’s Pink Sheet.

Non-energy prices declined 2.4 percent as agriculture fell 1.4 percent, food and beverages prices dipped by 2.1 percent and 1 percent, respectively, and raw materials rose 0.3 percent. Fertilizer prices declined 6 percent.

Metals and minerals prices slid 4.3 percent, led by an almost 20 percent tumble in iron ore. Precious metals eased 2.7 percent.

The Pink Sheet is a monthly report that monitors commodity price movements.

Energy, metals commodity prices seen strengthening

John Baffes's picture

Prices for most industrial commodities, notably energy and metals, are projected to rise in 2017 while agricultural prices are expected to remain stable, the World Bank says in its April 2017 Commodity Markets Outlook.

Closely watched crude oil prices are forecast to rise to an average of $55 per barrel (bbl) over 2017 from $43/bbl in 2016, climbing to $60/bbl next year. The forecast is unchanged since October and reflects the balancing effects of production cuts agreed by the Organization of Petroleum Exporting Countries (OPEC) and other producers on one side and a faster-than-expected rebound in the U.S. shale oil industry on the other. World oil demand is growing strongly, although at a slower pace than the 2015 spike triggered by lower oil prices.

Are capital flows fickle? And does the answer still depend on type?

Poonam Gupta's picture

According to conventional wisdom, capital flows are fickle. They are fickle more or less independent of time and place. But different flows exhibit different degrees of volatility: FDI is least volatile, while bank-intermediated flows are most volatile.  Other portfolio capital flows rank in between, and within this intermediate category debt flows are more volatile than equity-based flows. 

Pages