From The World Bank Group
Global Development Finance Reports:
- 1998 Vol. I
External finance for developing countries
It was a rollercoaster year for emerging markets in
1997. During the first three quarters external finance from private sources
rose strongly, as low international interest rates and high stock market
valuations in some countries encouraged creditors to seek out higher yields (and
accept higher risks) in emerging market debt instruments. Stock market booms in
Latin America and Eastern Europe were accompanied by substantial portfolio
equity flows. But the onset of the East Asian financial crisis in July and its
effects on other regions later in the year led to a general retreat from new
investments in emerging markets. Bond issues and loan commitments fell (on a
year-over-year basis) in the third quarter to East Asia and in the fourth
quarter to most major borrowers. At the same time stock markets fell sharply in
many countries and loan spreads widened, though they remained well below the
levels that followed the Mexican peso crisis in early 1995. The same forces that
led to pronounced swings in flows induced large changes in secondary market
spreads. Spreads fell sharply from early 1995 to mid-1997 and then shot up in
late 1997 in response to the turmoil in financial and currency
markets.
- 1999 Vol. I
More Difficult International Economic Environment for Developing Countries
The report consists of two volumes: a) Analysis and Summary
Tables contains analysis and commentary on recent developments in international
finance for developing countries, with particular focus on the global financial
crisis. Summary statistical tables are included for 150 countries. b) Country
Tables contains statistical tables on the external debt of the 138 countries
that report public and public guaranteed debt under the Debtor Reporting System
(DRS). Also included are tables of selected debt and resource flow statistics
for individual reporting countries as well as summary tables for regional and
income groups. This year's report includes the external debt obligations of the
Republic of Korea, a high-income country. Charts on pages xx to xxii summarize
graphically the relation between debt stock and its components; the computation
of net flows, aggregate net resource flow, and aggregate net transfers; and the
relation between net resource flow and the balance of payments. Exact
definitions of these and other terms are found in the Sources and Definitions
section.
- 1999 Country Tables
- 2000 Vol. I
Prospects and Risks
Developing Countries
An improved outlook
GROWTH IN DEVELOPING COUNTRIES
continues to recover from the global financial
crisis, underpinned by stronger and
more broadly based growth in industrial country
output and in world trade, both of which have significantly
exceeded earlier expectations in recent
months. The main drivers of the recovery have included
stimulative policy measures in the industrial
countries (widespread interest rate cuts in late
1998 and, in Japan, fiscal stimulus), the return of
confidence in East Asia, and a gradual easing of financial
conditions throughout virtually the entire
developing world.
The renewed confidence in East
Asia was prompted by an unprecedented current
account adjustment, strengthening currencies,
lower domestic interest rates, and expansionary
fiscal policy. While primary commodity prices have
firmed, overall inflationary pressures in the world
economy remain contained, reflecting cautious
monetary policies, significant potential output
gaps in many parts of the world, and unexpectedly
rapid increases in productivity in the United States.
This report revises upward the estimate for
developing country growth in 1999 by 0.6 percentage
points to 3.3 percent, from the forecast in
last fall’s Global Economic Prospects.1 Given the
strengthening momentum of the world recovery,
it revises upward developing country forecast
growth in 2000 by 0.4 percentage point to 4.6 percent,
and in 2001–02 by 0.1 percentage point to
4.8 percent.
Nevertheless, adjustment to the effects
of the recent financial crisis is still far from complete
in the developing world. Growth in 2000–02
is projected to remain somewhat below precrisis
trends, as underlying fragilities exposed and exacerbated
by the crisis will take time to address.
- 2000 Country Tables
- 2001 Vol. 1
Building Coalitions for Effective Development Finance
These are some of the conclusions reached by Global
Development Finance 2001, Analysis and Summary Tables, a report which
also highlights current international initiatives to leverage the extensive
potential of international financial flows. These include the global reform of
the international financial architecture and the World Bank's Comprehensive
Development Framework at the country level, which advocates a holistic approach
to development.
Global Development Finance 2001, Analysis and Summary
Tables,
Predicts a quick
rebound in the global economy in 2001 despite the cyclical slowdown of
2000
Finds that capital
flows to developing countries grew smartly in 2000 following the steep declines
of the crisis-laden late 1990s but still lagged behind output and trade since
the crises
That aid flows and the
pace of debt relief picked up in 2000, but would need constant watching to
sustain the gains to make the case for greater aid
Concludes that
international financial institutions need to take a more flexible and pragmatic
approach to coalition building to achieve the maximum dividends from
international resource transfers intended for public
goods
- 2002
Financing the Poorest Countries
The integration of developing countries into
the global economy increased sharply in
the 1990s with improvements in their economic
policies; the massive expansion of global
trade and finance driven by technological innovations
in communications, transport, and data
management; and the lowering of barriers to trade
and financial transactions. Many of the poorest
developing countries1 participated strongly in this
process despite their limited access to capital markets.
This report analyzes the interaction between
the global expansion of finance and improvements
in domestic policies in the poor countries over
the 1990s, and the implications for growth and
poverty reduction. Three main messages are developed:
(a) a strong investment climate is critical to
attracting foreign capital and using it productively;
(b) poor countries’ increasing integration in the
global economy means that they face similar policy
challenges as middle-income countries, including
how to deal with capital mobility; and (c) achieving
the Millennium Development Goals will require a
substantial rise in aid flows, an increased allocation
of aid to countries with good policies, and improvements
in policies by both developing countries
and donors.
- 2003
Striving for Stability in Development Finance
ALTHOUGH 2002 WAS A YEAR OF HESITANT
global recovery, financial conditions facing
many developing countries were once again
challenging, especially for those countries (mainly
middle-income countries) dependent on international
financial markets. Conditions have improved
a little in the early months of 2003, although
the uncertainties surrounding Iraq have cast
a shadow over both the global economy and financial
markets.
Concern over the recent pattern of financial
flows for global development that has prevailed in
recent years is widespread—and understandably so.
Since 1998, developing countries have repaid
external debt to private creditors in developed
countries. In some cases these net repayments of
debt have been required by timorous capital markets
grown wary of overexposure to developingcountry
debt. In others they reflect reduced demand
for debt by countries that have either found
alternative forms of external finance or have reduced
their overall demand for external investment
funds. Combined with developing countries’
steady accumulation of financial assets in highincome
economies, however, these debt repayments
mean that the developing world has become a net
capital exporter to the developed world.
On a net basis, therefore, capital is no longer
flowing from high-income countries to economies
that need it to sustain their progress toward the
Millennium Development Goals. The shortage is
compounded in the poorest countries by a significant
drop in official development assistance from
bilateral donors.
What can or should be done to promote access
by developing countries to external capital? What
can be done to prevent growing economies from
the disruptive effects of sharp reversals in financing?
These are the central concerns of this year’s
Global Development Finance.
- 2004
Harnessing Cyclical Gains for Development
A STRONG CYCLICAL RECOVERY IN
global capital flows to developing countries
is underway. Net private flows increased
sharply in 2003, reaching $200 billion—their highest
level since 1998. The rapid turnaround in
private flows from the subdued levels of the two
previous years occurred in all regions, except
the Middle East and North Africa. Flows to
Europe and Central Asia were particularly strong,
as eight transition countries approached accession
to the European Union in May 2004. Total net
capital inflows, including official flows, reached
$228 billion (3.6 percent of developing-country
gross domestic product [GDP]), up from $191 billion
in 2002 (3.2 percent of GDP) (figure 1; table 1).
At the same time, the credit quality of developing
countries improved markedly, and investor confidence
is returning.
The recovery in capital flows is heavily influenced
by cyclical factors—in particular the boost to
liquidity arising from stimulative monetary policy
in many advanced economies—but it also reflects
structural improvements both in developing countries
and internationally. The net external liability
position of developing countries has strengthened,
and the large-scale buildup in developing countries’
official reserves—much of which is invested in the
financial markets of advanced economies—has
introduced a new dimension to the relationship
between the developed and developing worlds.
More than ever, global capital flows, trade, and
exchange-rate policies are intricately linked.
The challenge for international financial policymakers
will be to ensure that the cyclical recovery
in flows can be sustained over the medium term,
and that it can be channeled into areas, such as
infrastructure, where it can lay the foundations for
sustained growth and poverty reduction, thereby
helping to meet the Millennium Development
Goals. It will be important to maintain investor
confidence, while avoiding the excesses—and increased
vulnerability—that have accompanied
surges in lending to developing countries in the
past. At the same time, aid flows have to increase.
These are the central themes of this year’s Global
Development Finance.
- 2005
Mobilizing Finance and Managing
Vulnerability
2004 WAS A ROBUST YEAR FOR THE
global economy, especially for developing
countries, which recorded their fastest growth
in more than three decades. The global recovery
strengthened, with much of the momentum coming
from the United States and Asia (notably China),
and broadened, with a pickup in Latin America,
acceleration in Japan, and modest recovery in the
European Union (EU). Driven by favorable global
conditions and strong domestic performance at
home, developing countries continued to attract
capital in 2004, although more slowly than in 2003.
Favorable global economic and financial conditions
over the past few years, along with domestic
policy initiatives, have improved economic
fundamentals in most developing countries,
strengthening their external positions and making
them less susceptible to external pressures. But significant
global financial imbalances suggest the
need for adjustment.
History has shown time and
again that financial crises often take markets and
policymakers by surprise. The Asian crisis that
erupted in mid-1997 offers a striking example—
large exchange-rate exposures on balance sheets in
the corporate, financial, and public sectors were
not widely recognized until after the fact.
Valuable lessons can be learned from these
past episodes. One is that there is a tendency for
financial markets and policymakers to miss the
warning signs and overshoot, making the necessary
adjustment larger when it does occur. Overshooting
has contributed to “boom-bust” cycles
in global financial markets, which have impeded
economic development in many regions.
- 2006
The Development Potential of Surging Capital
Flows
"....This relatively benign soft-landing
scenario for developing countries faces both internal and external risks. First,
the high growth of the past several years is generating tensions within
individual countries. In several East European countries this has taken the form
of rising inflation, currency appreciation, and high current-account deficits,
while in others it has expressed itself in rising asset prices, inflationary
pressure, and growing domestic tensions between fast and slower growing regions
and sectors. Second, many of the buffers that permitted countries to absorb
higher oil prices with a minimum of disruption have been exhausted, and
countries have yet to fully adjust to higher oil prices. As a result, developing
countries are much more vulnerable to potential external shocks, such as a
disruptive resolution of global imbalances, a decline in nonoil commodity
prices, or a hike in oil prices following a supply shock." (GDF 2006, p.
13)
- 2007
The globalization of corporate finance in developing countries
Growth in the developing countries came in at
7.3 percent in 2006, the fourth year that their
economies expanded by more than 5.5 percent.
Very fast-growing countries, such as China
(10.7 percent) and India (9.2 percent), contributed
strongly to this overall result. But even excluding
these countries, low- and middle-income countries
grew 5.9 percent and gross domestic product
(GDP) in every developing region expanded by
more than 5 percent. This robust developingcountry
demand was reflected in stronger highincome
country export growth, which was the
main factor behind the acceleration of GDP in
those countries to 3.1 percent. Overall, global output
increased by 4 percent (5.3 percent using
purchasing power parity [PPP] weights).
Despite these strong figures, 2006 was likely a
cyclical peak, as both GDP and industrial production
began slowing in mid-2006 and into 2007.
This moderation of growth among developing
countries is welcome, however, because it should
help reduce the chance that the current growth
boom could be followed by a bust.
The past few years of very strong growth have
generated a number of tensions in the global economy,
including increased commodity and asset
prices (notably those of oil, metals, and housing)
and a buildup of inflationary pressures.
- 2008
The role of international banking
This report predicts a slowdown
in world GDP growth from 3.7 percent in 2007 to 2.7 percent in 2008, while
growth in developing countries is expected to slow from an extraordinary 7.8% in
2007 to 6.5 % in 2008.
Strong growth in the developing world is certainly helping to offset
the sharp slowdown in the U.S....But at the same time, rising global
inflationary pressures, especially high food and energy prices, are hurting large segments of the poor around the
world.ť
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.
2009
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