The Róbinson Rojas Archive.- From The World Bank Group: Global Development Finance 2008: the role of international banking.- RRojas Databank: Analysis and Information on economics, development, research methods, globalization, poverty, sustainability, env

Complete Report as one file (7.5m pdf)
Table of Contents & Foreword (285k pdf)
Overview in: English (1.5mb pdf), Arabic (66k doc), Chinese (135k pdf), French (45k pdf), & Spanish (56k pdf)
THE WORLD ECONOMY HAS endured a period of financial turmoil and slowing growth since mid-2007. As these events have unfolded, financing conditions facing developing countries have shifted from the benign environment of 2002–06 to the current state of heightened market volatility and tight credit conditions. With these tensions setting the stage, 2008 is shaping up to be a challenging year for development finance.
Strong fundamentals underpinned most developing countries’ initial resilience to deteriorating economic and financial conditions. As of mid- 2007, total developing-country foreign exchange reserves amounted to $3.2 trillion (23.6 percent of their combined GDP, with the top five countries accounting for 68 percent of the total figure), many countries were posting strong economic growth, emerging equity markets were rallying (outperforming mature markets by a wide margin for the fourth consecutive year), and spreads on emerging-market sovereign bonds had reached record low levels.
The balance of risks, however, has now plainly tilted to the downside. Various indicators signal that economic growth in the United States and Europe is slowing more than previously expected. Across the developing world, inflationary pressures, stemming from dramatic increases in energy and food prices in many cases, complicate the role that monetary and fiscal policy can play in maintaining macroeconomic stability over the medium term. Meanwhile, as financial services have become increasingly globalized, the reconciliation of national autonomy with the demands of international banking has become more difficult.
Ch. 1 Prospects for Developing Countries (2.2mb pdf)
TURMOIL IN FINANCIAL MARKETS, slower growth in high-income countries, and rising inflation have all adversely affected growth prospects for developing countries over the near term. Most countries have shown impressive resilience in this turbulent environment, and growth for developing countries as a group is expected to moderate from 7.8 percent in 2007 to a still strong 6.5 percent in 2008 (table 1.1). However, vulnerable countries that depend on foreign capital flows are likely to experience a sharper slowdown. Moreover, despite strong production growth at the aggregate level, higher food and energy prices have caused real incomes to decline, significantly increasing the hardships faced by the very poor, particularly in urban centers.
Not all of the news is gloomy. In some respects, the slowing of the global economy is welcome, coming as it does on the heels of several years of very fast growth and increasing signs of overheating, as illustrated by a dramatic increase in international commodity prices and by excessive inflationary pressures in a number of countries. And the slowdown in U.S. domestic demand, along with the depreciation of the dollar, is helping to resolve long-standing global imbalances. The U.S. current account deficit narrowed from 6.2 percent of GDP in 2006 to 4.9 percent during the final quarter of 2007. These factors bode well for longer-term prospects, once the current cyclical adjustment—heightened by continuing financial turbulence—comes to closure.
Ch. 2 Financial Flows to Developing Countries: Recent Trends and Prospects (3.5mb pdf)
NET CAPITAL INFLOWS TO developing countries surged to another record level in 2007, marking the fifth consecutive year of strong gains. Economic expansion in developing countries and ample liquidity in the first half of the year supported a $269 billion increase in net private flows, mainly reflecting continued rapid expansion in equity inflows and net bank lending, which both reached record levels.
But developing countries’ easy access to global capital markets deteriorated in late 2007 and into 2008 in the wake of the U.S. subprime mortgage crisis. Uncertainty both about the identity of financial institutions with large exposures and about the potential magnitude of losses gave rise to a volatile financial environment, sparking a selloff across the entire spectrum of risky assets in mature and emerging markets. At the same time, major financial institutions that have taken sizable write-downs have curbed their lending to restore balance sheets, and further losses are expected over the balance of 2008. Besides reducing capital flows to developing countries, the turmoil has increased borrowing costs, although less so than in previous episodes, when emerging markets themselves were the primary source of difficulty.
This chapter reviews financial flows to developing countries, analyzing recent developments and assessing short-term prospects. The key messages are highlighted below...
Ch. 3 The Changing Role of International Banking in Development Finance (1.8mb pdf)
THE RELATION BETWEEN THE international banking industry and the developing world is changing, with implications for the growth and financial health of both sides. Significant transformation in the structure of the industry, coupled with rapid economic growth and financial liberalization in the developing world, has created a new locus of mutual interest and new dynamics of engagement extending well beyond the traditional realm of provision of trade credit and financing sovereigns in distress. With over 2,027 local offices established in 127 developing countries, the international banking industry now has the operating infrastructure and technology platforms to book overseas transactions from a large network of local agencies, subsidiaries, and branches located in developing countries. Aided by growing cross-border lending activity, international banks play an increasingly important—in some countries, even dominant—role in the financing structure and growth prospects of developing countries.
In many developing countries, international banks now provide the primary gateway through which corporations, sovereigns, and banks transfer funds abroad, borrow in short and medium terms, and conduct foreign exchange and derivatives operations. Foreign claims on developing-country residents held by major international banks reporting to the Bank for International Settlements (BIS) currently stand at $3.1 trillion and account for 9.5 percent of global foreign claims, up from $1.1 trillion in 2002. As of end-June 2007, developing-country residents’ deposits with international banks amounted to $917 billion, a threefold increase since the end of 2002.
Regional Outlooks