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Emerging Markets

What triggered the oil price plunge of 2014-2016 and why it failed to deliver an economic impetus in eight charts

Marc Stocker's picture
Also available in: Español

Download the January 2018 Global Economic Prospects report.

The 2014-16 collapse in oil prices was driven by a growing supply glut, but failed to deliver the boost to global growth that many had expected. In the event, the benefits of substantially lower oil prices were muted by the low responsiveness of economic activity in key oil-importing emerging markets, the effects on U.S. activity of a sharp contraction in energy investment and an abrupt slowdown in key oil exporters. 

Biggest drop in oil prices in modern history

Between mid-2014 and early 2016, the global economy faced one of the largest oil price declines in modern history. The 70 percent price drop during that period was one of the three biggest declines since World War II, and the longest lasting since the supply-driven collapse of 1986.

Real oil prices
Source: World Bank.
Notes: Real oil prices are calculated as the nominal price deflated by the international manufacturers unit value index, in which 100=2010. World Bank crude oil average. Last observation is November 2017.

Why 2018 global growth will be strong, and why there is still cause for concern, in 10 charts

Carlos Arteta's picture
Also available in: Español |  Français | 中文 |  العربية 

Download the January 2018 Global Economic Prospects report.

Global growth accelerated to 3 percent in 2017, supported by a broad-based cyclical recovery encompassing more than half of the world’s economies, and is expected to edge up to 3.1 percent in 2018. Global trade regained significant momentum, supported by an upturn in investment.

As headwinds ease for commodity exporters, growth across emerging and developing economies is expected to pick up. However, risks to the outlook remain titled to the downside, such as the possibility of disorderly financial market adjustment or rising geopolitical tensions.

A major concern in the subdued pace of potential growth across emerging market and developing economies, which is expected to further decline in the next decade. Structural reforms will be essential to stem this decline, and counter the negative effects of any future crisis that could materialize.

The broad-based recovery should continue

Global growth accelerated markedly in 2017, supported by a broad-based recovery across advanced economies and emerging market and developing economies (EMDEs), and it is expected to edge up in 2018.
 
Growth

Farewell 2017; Hello to More and Better Infrastructure in 2018

Jordan Z. Schwartz's picture


Photo: auphoto / Shutterstock.com

As Washington, D.C.’s infrastructure braces for its first winter freeze and 2017 draws to a close, this feels like the right moment for a recap on what the year has brought us in terms of closing the infrastructure gap across emerging markets and developing economies; policy directions within and outside of the World Bank Group; new instruments, tools, and resources; and—the proof in the pudding—actual investment levels.

There may not be one blog that can capture all of those themes in detail, but here is a brief overview of what 2017 has meant and what is on the docket for 2018 and beyond.

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)

Declining private investment in infrastructure – a trend or an outlier?

Clive Harris's picture



We’ve just released the 2016 update for the World Bank’s Private Participation in Infrastructure (PPI) Database and it makes for some gloomy reading. Investment commitments (investments) in infrastructure with private participation in Emerging Markets and Developing Economies (EMDEs) fell by a whopping 37% compared to 2015. 

Foreign exchange risk: How a liquidity facility could help

Joaquim Levy's picture

© Yang Aijun/World Bank

In a guest post for Infrastructure Investor, World Bank Group CFO Joaquim Levy says multilaterals’ provision of hard-currency liquidity facilities could do much to catalyze private investment into emerging market infrastructure.

The World Bank Group is playing a leading role in thinking through better approaches to infrastructure financing in emerging markets and developing economies (EMDEs). Part of this work entails understanding the key barriers that might impede private capital from participating more actively in EMDE projects. This is why we focus so much on developing local capital markets and other means to unlock the power of local institutional investors. It is also why we’ve been working to facilitate cross-border investment, in a time when returns in advanced economies remain low.

Follow the money: How to cut through infrastructure’s worst red tape

David Nason's picture


(Photo: Getty Images)

There is a huge need for new and upgraded infrastructure around the world, particularly in emerging markets. Policy makers like to talk about raising trillions of dollars to fund infrastructure, but the truth is that capital for good projects exists. Regulation and lack of policy clarity are inhibitors.
 
What lacks is a strong pipeline of projects that meet societal needs and are financeable. If we can increase the quality of projects, and encourage smart and efficient regulations, the money to fund them will follow.
 
As an investor and infrastructure technology provider in 180 markets, GE surveyed its global investment, sales and policy teams for their insights on what is holding up progress.
 
We identified several areas that should be prioritized by the international community and local governments.

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).

Rising debt and deficits in Emerging Market and Developing Economies (EMDEs) in 5 charts

Ayhan Kose's picture
Debt and budget deficits have risen among emerging market and developing economies since the 2007-2009 financial crisis, rendering these economies more vulnerable to a sharp rise in borrowing costs. Government debt has climbed to 47 percent of GDP in 2016 from 35 percent of GDP in 2007 among emerging market and developing economies, while fiscal deficits have widened to about 5 percent of GDP from roughly 1 percent of GDP over the same period.

Connecting pension funds with emerging market infrastructure

Joaquim Levy's picture

It might sound improbable to hear a CFO say this, but I consider one of my roles since joining the World Bank Group to be that of matchmaker. Let me explain.

As I have noted in other blogs over recent months, the world’s emerging market and developing economies—EMDEs for short—face an enormous gap in infrastructure investment. Certainly it is not the only big financing challenge that countries face as they work to reduce poverty and extend prosperity to more of their citizens. But infrastructure underpins many aspects of economic growth, getting people to jobs and schools, connecting goods to markets, reducing the isolation of the poorest areas in many countries.  And by some estimates, the sector’s funding gap is as high as a trillion dollars. 


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