Global Economic
Prospects for Developing Countries 2009:
Commodity Markets at the Crossroads
Published December 9 2008
Complete
report as one file
(5.4mb pdf)
Table of Contents, Foreword and Acknowledgements (62k pdf)
Overview in English
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The release of this year’s Global Economic
Prospects finds the world economy at a
crossroads. Markets all over the world are engulfed
in a global economic crisis, with stock
markets sharply down and volatile, almost all
currencies having depreciated substantially
against the dollar, and risk premiums on a wide
range of debt having increased by 600 or more
basis points. Commodity markets too have
turned a corner. Following several years of increase,
prices have plummeted, and although
well above their 1990s levels, they have given
up most of the increases of the past 24 months.
Chapter 1:
Prospects for the Global Economy
(see related interactive website: Prospects
for the Global Economy)
The stresses in the financial markets of the
United States that first emerged in the
summer of 2007 transformed themselves into a
full-blown global financial crisis in the fall of
2008: credit markets froze; stock markets
crashed; and a sequence of insolvencies threatened
the entire international financial system.
Massive liquidity injections by central banks
and a variety of stopgap measures by governments
proved inadequate to contain the crisis
at first...
Virtually no country, developing or highincome,
has escaped the impact of the widening
crisis, although those countries with stronger
fundamentals going into the crisis have been
less affected. The deterioration in financing
conditions has been most severe in countries
with large current account deficits, and in
those that showed signs of overheating and
unsustainably rapid credit creation before the
financial crisis intensified...
Chapter 2:
The Commodity Boom:
Longer-Term Prospects
The enduring importance of commodities to
the world economy and their volatility has
been driven home with the rise, and recent
decline, of prices for energy, metals, and food.
Before they began to fall in the second half
of 2008, the real prices of energy and metals
more than doubled over the past five years,
while the real price of internationally traded
food commodities increased 75 percent (see
chapter 1 for more detail on the most recent
developments in commodity markets).
This chapter reviews the main characteristics
of this most recent boom in commodity
markets and examines the structure and behavior
of both their demand and supply, with a
view to better understanding prospects over the
medium to long term...
Chapter 3:
Dealing with Changing Commodity Prices
As discussed in chapter 2, the rise in primary
commodity prices between 2003
and mid-2008 was much larger and more sustained
than those of earlier decades. Although
commodity prices have fallen sharply from
their recent highs, they remain well above their
levels in the early 2000s and are projected to
remain high relative to their levels in the 1990s
for a significant period of time.
The boom in commodity prices has generated
dramatic transfers of income within and
among countries.
Appendix: Regional
Economic Prospects
Substantial headwinds buffeted the economies
of East Asia and the Pacific during 2008,
causing GDP growth to slow sharply, from the
10.5 percent pace of 2007 to 8.5 percent in
the year...
The rapid GDP growth in Europe and Central
Asia of the past 20 years, which largely
reflected the enormous reform efforts undertaken
by countries in the region (including
those associated with accession to the European
Union), eased in 2008 and is expected to
give way to a sharp slowdown in 2009...
During 2008, Latin American GDP advanced
4.4 percent, still robust, albeit down
from the strong 5.7 percent pace of the previous
year. Buffers in the form of large levels of
reserves and current account surpluses mitigated
the impact of slowing exports to the
United States to a degree. Latin America’s exports
lost momentum, however, growing only
1.7 percent in 2008 compared with 5 percent in
2007, while the region’s current account position
dropped from a surplus of 0.5 percent of
GDP to a deficit of the same magnitude...
The Middle East and North Africa region
has been affected dramatically by developments
in global commodity markets over the
last three years, notably in 2008. As a result
there have been substantial up- and downshifts
in terms of trade, current account positions,
and external financing requirements. These
shifts have occurred at the same time as the external
environment for growth and for international
finance deteriorated markedly...
GDP growth in South Asia slowed markedly
in 2008 to 6.3 percent from 8.4 percent in
2007. The onset of the financial crisis in the
United States and Europe in mid-September
2008—which led to severe financial turmoil in
emerging markets, including in many South
Asian countries—ushered in a downshift in activity
that started to take hold in late-2008.
Growth had already begun to wane in the region
prior to the onset of the global crisis,...
Sub-Saharan Africa’s economy expanded
5.4 percent in 2008, the first time in more
than 45 years that growth exceeded 5 percent
for five years in succession—this despite substantial
deterioration in the external environment
during the year...
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Commodities at the Crossroads |
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The eruption of the worldwide financial crisis
has radically recast prospects for the world
economy. Global Economic Prospects 2009:
Commodities at the Crossroads analyzes the
implications of
the crisis for low- and middle-income countries,
including an in-depth look at long-term prospects
for global commodity markets and the policies of
both commodity producing and consuming nations.
Developing countries face sharply higher borrowing
costs and reduced access to capital. This will cut
into their capacity to finance investment
spending—ending a five-year stretch of
developing-country growth in excess of 6 percent
annually. The looming recession presents new
risks, coming as it does on the heels of the
recent food and fuel crisis.
Commodity markets, meanwhile, are at a crossroads.
Following decades of low prices and weak
investment in supply capacity, commodity prices
first spiked—spurred on by five years of very
fast developing-country growth—and have now
plummeted in response to the financial crisis.
In the longer run, commodities are not expected to
be in short supply. Prices should be higher than
they were in the 1990s but much lower than in the
recent past. These higher prices should provide
producers with sufficient incentive to discover
new supplies, improve output from existing
resources,
and promote greater conservation and substitution
with more abundant alternatives. At the same time,
slower population growth will ease the pace at
which commodity demand grows. Policies to limit
carbon emissions and boost agricultural
investment, along with the dissemination of
efficient techniques, should also contribute to
this long-term outcome.
This year’s Global Economic Prospects
also looks at government responses to the recent
price boom. Producing-country governments have
saved more of their windfall revenues, and are
therefore less likely to be forced to cut into
spending now that prices have declined. The spike
in food prices tipped more people into poverty,
which led governments to expand social assistance
programs.
These programs need to be better targeted to the
needs of the very poor so that governments can
respond effectively the next time there is a
crisis.
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Bibliographic
references
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Economic Prospects 2009 |
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Chapter
1
Chen,
Shaohua, and Martin Ravallion. 2008.
"The
Developing World is Poorer than We
Though, But No Less Successful in
the Fight Against Poverty."
World Bank Policy Research
Working Paper 4703, August.
World Bank, Washington, D.C.
Hebling,
Thomas, and Marco Terrones. 2003.
"Real and Financial Effects of
Bursting Asset Bubbles." In IMF
World Economic Outlook, April. Available
at http://www.imf.org/external/pubs/ft/weo/2008/02/.
IMF
(International Monetary Fund). 2008. "Financial
Stress and Economic Downturns."
in IMF World Economic Outlook.
October. http://www.imf.org/external/pubs/ft/weo/2008/02/.
Ratha,
Dilip, Sanket Mohapatra, and Zhimei
Xu. 2008. "Outlook
for Remittances Flows 2008-2010."
Migration and Development Brief 8.
World Bank, Washington, D.C.
World
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Purchasing Power Parities and Real
Expenditures: 2005 International
Comparison Program. Washington,
D.C.: World Bank.
Regional
Outlooks
Arbache,
Jorge Saba, and John Page. 2007.
"More
Growth or Fewer Collapses? A New
Look at Long Run Growth in
Sub-Saharan Africa." World
Bank Policy Research Working Paper
4384, November. World Bank.
Calvo,
Guillermo and Ernesto Talvi. 2007.
"Current Account Surplus in
Latin America: Recipe against
Capital Market Crises." http://www.rgemonitor.com/latam-blog/58/current_account_surplus_in_latin_america_recipe_against_capital_market_crise
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DJF
(Dow Jones Factiva). 2008. http://www.factiva.com
Fajnzylber,
Pablo and J. Humberto Lopez. 2008.
“The Development Impact of
Remittances in Latin America.” In Remittances
and Development: Lessons from Latin
America, eds. Pablo Fajnzylber,
J. Humberto Lopez. Washington, D.C.:
World Bank.
ISI
(ISI Emerging Markets). 2008. http://www.securities.com
Izquierdo,
Alejandro, Randall Romero, and
Ernesto Talvi. 2008. “Booms and
Busts in Latin America: the Role of
External Factors.” Research
Department Working Paper 631.
Inter-American Development Bank,
Washington,D.C. http://www.imf.org/external/np/seminars/eng/2007/whd/.
Österholm,
Pär, and Jeromin Zettelmeyer. 2007. "The
Effect of External Conditions on
Growth in Latin America." Working
Paper 07/176. International Monetary
Fund, Washington, D.C.
World
Bank. 2008a. Migration
and Remittances Factbook 2008.
Washington, D.C.: World Bank.
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2008b. Rising
Food Prices: The World Bank’s
Latin America and Caribbean Region
Position Paper. Washington, D.C.
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2008c. "Shockwaves
from the North: Latin America and
the Caribeean Region Position Paper."
Chief Economist Office, Latin
America and the Caribbean Region,
Washington, D.C.
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Prospects for the global economy:
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