For more information, visit http://www.worldbank.org/prospects March 23, 2018 Taking Stock U.S. Federal Reserve raised interest rates; durable goods orders rose. The U.S. Federal Reserve raised its benchmark federal fund rate by 25 basis points to a range of 1.5 – 1.75 percent, in line with market expectations. The interest rate hike, the sixth quarter-point increase since December 2015, came amid strong employment numbers and firming inflation. The Federal Reserve noted that the U.S. economy is on track to grow at a 2.7 percent (y/y) pace in 2018Q4 and 2.4 percent (y/y) in 2019Q4, an improvement from previous projections attributed to recent fiscal stimulus measures. Separately, U.S. durable goods orders rose 3.1 percent (m/m) in February, following a 3.5 percent drop in January, surpassing market expectations. The February increase reflected a strong rise in demand for transportation goods. Euro Area consumer confidence stabilized; composite PMI decelerated. The preliminary estimate of Euro Area consumer confidence was stable in March, at 0.1, remaining significantly above 2016-17 averages. Meanwhile, the Euro Area’s flash composite Purchasing Managers’ Index (PMI) for March came in at 55.3 (Figure 1; a reading above 50 indicates expansion). While it is still firmly in expansion territory, it is down from 57.1 in February and below the market expectation of 56.8. The PMI reading points to some softening in private sector activity, as services eased to a five-month low and factory output grew at the slowest pace since July 2017. Japan export growth slowed in February; economic sentiment improved. Japan’s nominal export growth slowed to 1.8 percent (y/y) in February, markedly down from 12.3 percent in January, as Lunar New Year holidays curbed shipments to China. Japan’s exports to China tumbled 9.7 percent (y/y), while exports to the United States and Euro Area rose 4.3 percent and 11.5 percent, respectively. Meanwhile, the Reuter Tankan survey showed improved confidence in March, with service sector’s sentiment reaching a three-year high. Brazil’s central bank cut interest rates again. Brazil’s central bank cut the benchmark interest rate by a quarter-point to a new record low of 6.25 percent amid muted inflation. The bank has lowered the key rate by 775 basis points since October 2016. The central bank also signaled readiness to trim the rate again at its next meeting, as expectations for 2018 inflation remain below the midpoint of the official target rate of 4.5 percent, plus or minus 1.5 percentage points. U.S. yields remain stable; global equity markets fell on possible new U.S. import tariff . Following the anticipated interest rate hike by the Federal Reserve, the 10-year U.S. Treasury yield has remained stable at around 2.85 percent, while global stocks declined, driven by a sharp drop in U.S. and Chinese equity markets following the announcement of new U.S. tariffs on Chinese imports (Figure 2). Figure 1 Euro Area PMI remains solid, despite a decline in Figure 2 Global stock markets dropped amid trade policy February. concerns. Euro Area composite Purchasing Managers’ Index. Stock market indexes. Source: Haver. Source: Bloomberg. Produced by DECPG. Number 382 | March 23, 2018 Major Data Releases (Percent change y-o-y) (Percent change y-o-y) Recent releases: Friday, 16 March - Thursday, 22 March 2018 Upcoming releases: Friday, 23 March - Thursday, 29 March 2018 Country Date Indicator Period Actual Forecast Previous Country Date Indicator Period Previous Euro Area 3/16/18 CPI FEB 1.1 % 1.2 % 1.3 % Netherland 3/26/18 GDP Q4 3.2 % South Africa 3/20/18 CPI FEB 4.0 % 4.4 % France 3/26/18 GDP Q4 2.0 % United Kingdom 3/20/18 CPI JAN 2.7 % 2.9% 3.0 % United States 3/28/18 GDP Q4 2.3 % Malaysia 3/21/18 CPI FEB 1.4 % 2.6 % 2.7 % Turkey 3/29/18 GDP Q4 11.1 % Japan 3/22/18 CPI FEB 1.5 % 1.5 % 1.4 % United Kingdom 3/29/18 GDP Q1 1.5 % Singapore 3/23/18 CPI FEB 0.5 % 0.4 % 0.0 % Germany 3/29/18 CPI MAR 1.4 % Activity and Inflation (Percent change y-o-y, except quarterly data on industrial production, which are percent change q-o-q, annualized) 2017 2017 2018 2015 2016 Q1 Q2 Q3 Q4 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 1 Industrial Production, sa World 1.8 2.1 3.6 5.2 3.5 5.8 3.3 4.0 3.8 4.4 4.1 4.2 4.4 4.4 4.4 4.4 4.7 4.6 Advanced Economies 0.2 0.3 1.7 4.6 2.4 5.9 2.2 2.4 2.6 3.4 3.2 3.1 3.3 3.2 3.6 3.4 3.9 2.8 Emerging Market and Developing Economies 3.6 4.1 5.6 5.8 4.6 5.7 4.4 5.6 5.1 5.5 5.1 5.4 5.5 5.7 5.2 5.4 5.6 6.4 Commodity-exporting EMDE -1.1 0.1 1.9 4.9 2.8 0.0 1.0 1.6 2.3 3.8 1.0 2.2 3.3 3.0 3.1 2.0 2.1 1.9 Other EMDE 5.2 5.2 6.6 6.0 5.2 7.2 5.4 6.8 5.8 6.0 6.2 6.3 6.2 6.4 5.8 6.4 6.5 7.6 East Asia and Pacific 5.8 5.9 7.2 6.0 4.7 4.8 6.2 7.3 6.2 6.3 6.5 5.9 5.9 6.4 5.8 5.7 5.6 6.7 East Asia excl. China 3.6 4.6 5.2 1.2 7.1 -2.7 4.9 6.0 4.3 5.0 0.6 3.2 4.8 5.7 3.2 3.4 1.4 4.1 Europe and Central Asia 2.2 2.7 3.3 10.4 3.9 6.0 1.5 4.5 4.7 6.6 5.3 6.8 6.8 6.9 6.0 5.1 6.6 7.9 Latin America and Caribbean -2.6 -2.3 0.6 0.3 3.0 3.4 0.3 -0.6 -0.4 0.8 0.0 0.7 1.5 0.3 1.7 1.2 2.5 1.3 Middle East and North Africa -3.3 -7.0 25.3 21.9 18.9 11.1 17.2 4.8 21.1 20.4 23.3 30.7 15.4 19.4 18.8 23.0 16.1 8.3 South Asia 3.5 5.3 4.4 2.2 6.8 13.8 2.1 5.5 4.6 4.0 0.1 3.9 6.5 4.7 3.7 9.0 7.5 8.3 Sub-Saharan Africa -0.2 1.0 -4.1 3.1 3.7 7.5 -2.5 -2.1 -0.5 -1.7 -2.8 -0.7 1.2 -0.9 1.8 2.5 3.2 2.0 Inflation, sa 2 World 1.3 1.5 2.6 2.1 2.2 2.3 2.6 2.7 2.3 2.1 1.9 2.2 2.2 2.2 2.3 2.2 2.1 2.1 Advanced Economies 0.1 0.3 1.6 1.4 1.4 1.4 1.8 1.6 1.9 1.4 1.2 1.4 1.4 1.5 1.4 1.5 1.5 1.5 Emerging Market and Developing Economies 2.4 2.7 3.4 3.2 3.0 2.9 3.4 3.5 3.5 3.1 2.7 2.7 3.2 3.2 3.0 2.9 2.9 2.9 Commodity-exporting EMDE 3.7 3.5 3.5 3.5 3.3 2.8 3.8 3.6 3.8 3.5 3.0 3.0 3.3 3.2 3.0 2.7 2.8 2.9 Other EMDE 0.9 1.1 3.0 2.9 2.9 3.1 3.2 3.3 3.2 2.9 2.3 2.5 2.8 3.2 3.1 3.2 3.0 3.7 East Asia and Pacific 1.0 2.1 3.0 2.8 2.2 2.7 3.8 3.6 3.2 2.6 2.3 2.3 2.6 2.5 2.8 2.6 2.6 2.6 Europe and Central Asia 1.9 0.4 2.4 2.3 2.7 2.8 2.5 2.7 2.6 2.3 2.2 2.5 2.7 2.8 2.6 2.8 2.8 2.7 Latin America and Caribbean 2.7 2.4 2.9 2.4 3.2 3.9 3.0 2.8 2.9 2.9 1.8 2.8 3.2 3.7 3.5 4.1 3.5 3.3 Middle East and North Africa 1.7 2.1 2.6 1.5 1.1 2.2 2.3 2.9 1.7 1.9 1.0 1.1 1.1 1.6 2.1 1.7 2.3 2.9 South Asia 4.5 4.4 4.3 4.5 3.6 3.8 4.1 4.9 4.7 5.0 4.0 3.6 3.7 3.5 3.7 4.0 5.2 4.7 Sub-Saharan Africa 3.6 5.3 6.3 5.3 4.8 4.4 6.4 6.0 5.3 5.4 5.4 5.4 4.8 5.1 4.9 3.3 3.2 3.1 Sources: World Bank, Haver Analytics, and IMF International Financial Statistics. 1 Industrial production is total production (may exclude construction). When data are unavailable, "industrial production, manufacturing" is used as a proxy. 2 Median inflation rate for each grouping. Trade and Finance (Percent change y-o-y, except quarterly trade data, which are percent change q-o-q, annualized, and international reserves data, which are percent change over the previous period) 2017 2017 2018 2015 2016 Q1 Q2 Q3 Q4 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Exports, Nominal, US$, sa World -11.6 -3.0 17.2 3.7 13.0 16.2 7.5 12.9 3.8 11.1 7.5 10.2 10.9 10.9 12.4 13.1 11.7 17.1 Advanced Economies -11.4 -0.8 17.0 1.9 17.5 13.4 8.0 10.7 1.2 10.3 6.5 9.9 10.7 10.8 12.1 13.1 11.7 17.8 Emerging Market and Developing Economies -11.9 -6.5 17.6 7.1 5.3 21.5 6.6 17.0 8.5 12.8 9.5 10.8 11.2 11.1 13.0 13.2 11.8 15.9 Commodity-exporting EMDE -24.2 -9.0 34.0 -8.8 16.7 25.1 18.8 23.1 13.2 19.5 10.0 17.1 16.6 16.2 20.3 13.8 13.1 20.3 Other EMDE -3.7 -4.6 11.4 14.4 1.0 20.0 2.0 14.7 6.8 10.2 9.3 8.5 9.0 9.1 10.2 12.9 11.2 14.3 East Asia and Pacific -3.5 -6.1 11.4 16.2 0.0 18.3 1.9 15.4 8.7 11.1 8.9 10.3 8.0 9.7 10.0 12.8 10.9 14.6 Europe and Central Asia -20.7 -6.0 32.5 -1.7 16.3 33.1 12.1 21.2 5.3 19.7 11.0 11.2 20.2 16.4 22.1 19.2 16.4 25.5 Latin America and Caribbean -11.8 -2.3 23.8 -0.4 6.2 15.0 12.0 17.4 9.8 11.6 12.6 10.4 11.3 10.3 15.6 9.1 8.2 11.6 Middle East and North Africa -27.1 - - - - - - - - - - - - - - - - - South Asia -3.8 0.6 12.4 -8.5 9.0 22.0 -1.3 11.1 6.3 -1.9 -3.4 11.7 9.9 4.8 4.2 12.2 7.9 3.0 Sub-Saharan Africa -26.5 -14.6 45.6 -12.1 8.0 - 25.0 18.1 6.7 12.8 13.5 14.9 17.6 10.6 - - - - Imports, Nominal, US$, sa World -6.9 -5.2 21.6 15.4 0.3 32.2 5.5 10.4 -6.1 25.4 7.2 21.4 16.1 5.9 17.9 13.1 19.6 16.6 Advanced Economies -12.7 -3.2 18.8 4.2 14.3 19.6 3.4 9.2 2.0 10.4 5.1 10.7 9.2 9.3 14.1 14.0 13.9 19.1 Emerging Market and Developing Economies -3.3 -6.4 23.4 22.4 -6.9 40.1 6.7 11.0 -10.3 34.6 8.4 28.0 20.4 3.8 20.1 12.7 23.0 15.2 Commodity-exporting EMDE -0.9 -7.3 19.1 31.2 -11.8 46.4 2.1 8.8 -15.4 39.6 7.2 31.5 22.4 -0.4 21.2 11.3 25.9 - Other EMDE -11.4 -3.0 38.9 -3.1 11.4 20.2 23.3 18.9 11.0 17.4 12.6 16.0 14.3 17.6 16.5 17.7 13.5 32.7 East Asia and Pacific -13.1 -3.6 50.2 -11.7 12.6 18.2 34.0 20.6 12.4 17.6 13.4 15.8 13.9 19.0 17.8 18.6 9.7 37.7 Europe and Central Asia -20.8 -1.2 38.5 14.0 20.9 17.2 9.9 14.8 8.0 22.9 13.7 26.8 17.0 20.0 21.3 23.3 22.3 28.8 Latin America and Caribbean -9.9 -7.4 23.7 -7.6 10.0 17.5 4.9 13.1 -1.3 12.1 6.2 7.5 9.3 4.8 15.9 8.7 6.6 13.6 Middle East and North Africa 1.5 - - - - - - - - - - - - - - - - - South Asia -13.2 -5.4 35.8 12.7 -9.6 32.2 24.2 40.6 42.2 31.4 13.5 22.6 21.0 18.5 10.9 18.8 18.9 23.2 Sub-Saharan Africa -7.8 -13.7 - - - - - - - - - - - - - - - - 1 International Reserves, US$ World -5.7 -2.0 1.7 2.1 1.7 1.1 0.3 0.7 0.7 0.8 0.5 0.8 0.6 0.3 0.0 0.5 0.7 1.3 Advanced Economies 2.2 3.2 3.4 2.9 1.7 1.1 0.4 1.5 1.2 1.1 0.5 0.9 0.5 0.3 -0.3 0.7 0.8 1.2 Emerging Market and Developing Economies -10.7 -5.2 0.5 1.5 1.7 1.2 0.3 0.2 0.4 0.7 0.4 0.7 0.6 0.4 0.2 0.4 0.6 1.3 Commodity-exporting EMDE -11.1 -4.5 0.5 0.5 0.8 - 0.3 0.1 0.1 0.2 0.2 0.3 0.2 0.1 0.5 - - - Other EMDE -10.3 -5.7 0.5 2.0 2.2 1.1 0.3 0.2 0.5 0.9 0.6 0.9 0.8 0.5 0.1 0.4 0.7 1.4 East Asia and Pacific -12.4 -7.3 0.5 1.7 2.1 1.1 0.4 0.1 0.8 0.8 0.1 1.0 0.6 0.5 0.0 0.4 0.7 1.0 Europe and Central Asia -6.8 3.4 2.9 3.2 3.1 0.9 0.6 0.3 -0.2 1.3 2.0 1.1 1.6 0.3 0.2 1.0 -0.3 3.6 Latin America and Caribbean -5.3 1.4 0.5 1.7 1.0 -1.0 0.2 -0.3 0.8 0.2 0.8 0.6 0.3 -0.1 0.5 -0.4 -0.7 0.8 Middle East and North Africa -17.7 -10.7 -2.0 -1.7 - - -0.6 0.2 -1.2 -0.2 -0.3 -1.0 -0.2 - - - - - South Asia 10.9 3.6 2.1 4.5 2.5 2.2 0.5 1.0 0.7 2.0 1.7 1.1 1.3 0.1 -0.1 0.2 2.1 2.4 Sub-Saharan Africa -12.7 -4.7 3.2 0.7 0.4 - 2.4 -0.5 3.5 -1.2 -1.6 2.4 -1.7 0.0 0.5 - - - Sources: World Bank, Haver Analytics, and IMF International Financial Statistics. 1 Total reserves excluding gold are used as proxies when total reserves data are unavailable. Produced by DECPG. Number 382 | March 23, 2018 Financial Markets 2017 2017 2018 MRV 1 2015 2016 Q1 Q2 Q3 Q4 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Interest rates and LIBOR (percent) U.S. Fed Funds Effective 0.13 0.39 0.67 0.92 1.13 1.17 0.76 0.88 0.88 1.01 1.13 1.13 1.13 1.13 1.13 1.27 1.38 1.38 1.63 ECB repo 0.05 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 US$ LIBOR 3-months 0.32 0.74 1.07 1.20 1.32 1.47 1.13 1.16 1.19 1.26 1.31 1.31 1.32 1.36 1.43 1.61 1.73 1.87 2.27 EURIBOR 3-months -0.02 -0.26 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 US 10-yr Treasury yield 2.14 1.84 2.44 2.26 2.24 2.37 2.48 2.30 2.30 2.19 2.32 2.21 2.20 2.36 2.35 2.41 2.58 2.86 2.89 German Bund, 10 yr 0.54 0.11 0.35 0.31 0.46 0.38 0.40 0.26 0.37 0.29 0.54 0.42 0.41 0.43 0.37 0.36 0.50 0.67 0.51 Spreads (basis points) JP Morgan Emerging Markets 415 410 340 325 322 313 329 331 320 325 327 325 314 306 320 312 299 309 324 Asia 224 221 175 169 161 151 166 173 167 166 163 163 157 148 153 151 146 156 170 Europe 348 302 261 242 234 233 253 250 237 240 243 234 224 226 244 229 212 217 239 Latin America & Caribbean 540 537 445 427 428 416 431 431 420 430 435 435 416 407 422 419 410 420 428 Middle East 456 517 396 362 383 400 377 350 353 382 382 382 384 381 421 398 359 366 382 Africa 415 518 389 386 380 350 380 400 376 383 394 378 367 360 359 332 305 317 345 Stock Indices (end of period) Global (MSCI) 399 424 449 465 487 508 449 455 464 465 478 478 487 497 505 508 502 517 517 Advanced Economies ($ Index) 1663 1761 1854 1916 2001 2086 1854 1878 1912 1916 1961 1960 2001 2037 2077 2086 2053 2113 2109 United States (S&P 500) 2044 2258 2363 2423 2519 2668 2363 2384 2421 2423 2470 2472 2519 2575 2648 2668 2631 2711 2712 Europe (S&P Euro 350) 1474 1475 1547 1534 1571 1558 1547 1564 1576 1534 1526 1512 1571 1600 1563 1558 1518 1522 1511 Japan (Nikkei 225) 18817 19302 18909 20033 20356 22530 18909 19197 19836 20033 19974 19720 20356 22198 22730 22530 21650 21794 21381 Emerging Market and Developing Economies (MSCI) 794 861 958 1011 1082 1139 958 978 1005 1011 1066 1088 1082 1119 1121 1139 1158 1202 1210 EM Asia 404 419 474 512 543 577 474 484 505 512 538 544 543 571 572 577 584 603 611 EM Europe 244 295 301 304 331 341 301 313 308 304 315 336 331 330 330 341 354 370 363 EM Europe & Middle East 211 248 252 251 268 275 252 259 255 251 261 274 268 268 265 275 285 295 290 EM Latin America & Caribbean 1830 2341 2611 2544 2917 2811 2611 2601 2532 2544 2752 2873 2917 2809 2719 2811 2945 3095 3048 Exchange Rates (LCU / USD) Advanced Economies Euro Area 0.90 0.90 0.94 0.91 0.85 0.85 0.94 0.93 0.91 0.89 0.87 0.85 0.84 0.85 0.85 0.84 0.82 0.81 0.81 Japan 121.00 108.80 113.63 111.10 110.96 112.75 112.91 110.02 112.36 110.91 112.31 109.78 110.80 112.93 112.81 112.51 109.83 107.96 105.90 Emerging and Developing Economies Brazil 3.33 3.49 3.14 3.21 3.16 3.24 3.13 3.14 3.20 3.30 3.20 3.15 3.13 3.19 3.26 3.28 3.19 3.25 3.27 China 6.29 6.65 6.89 6.86 6.67 6.61 6.90 6.89 6.88 6.81 6.77 6.67 6.57 6.62 6.62 6.59 6.41 6.32 6.32 Egypt 7.70 10.12 17.82 18.10 17.77 17.71 17.76 18.09 18.10 18.11 17.92 17.75 17.65 17.64 17.68 17.81 17.74 17.67 17.63 India 64.14 67.19 66.97 64.48 64.29 64.71 65.83 64.52 64.46 64.45 64.44 63.97 64.46 65.07 64.85 64.20 63.72 64.44 65.21 Russia 61.34 67.06 58.67 57.17 58.93 58.47 57.83 56.53 56.88 58.10 59.72 59.42 57.66 57.76 58.97 58.70 56.93 56.81 56.88 South Africa 12.77 14.71 13.24 13.21 13.19 13.62 12.95 13.46 13.25 12.91 13.15 13.25 13.17 13.71 14.06 13.11 12.15 11.82 11.82 Memo: U.S. nominal effective rate (index) 114.6 119.7 123.5 120.7 116.6 117.5 122.5 121.7 121.0 119.4 117.9 116.5 115.5 117.5 117.7 117.4 114.7 113.7 114.4 Sources: World Bank, Bloomberg, Haver Analytics, and J.P. Morgan. 1 MRV = Most Recent Value. Commodity Prices 2017 2017 2018 MRV 1 2015 2016 Q1 Q2 Q3 Q4 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Energy 2 65 55 68 64 65 75 65 67 64 60 62 65 68 71 76 78 85 80 80 Non-energy 2 82 79 85 82 84 85 84 82 82 82 83 84 85 85 85 84 87 88 88 Agriculture 2 88 88 89 87 86 86 88 87 88 87 88 85 86 86 86 85 88 89 89 Metals and minerals 2 68 64 78 74 81 84 79 75 73 72 76 83 84 84 84 85 89 89 82 Memo items: Crude oil, average ($/bbl) 51 43 53 50 50 59 51 52 50 46 48 50 53 55 60 61 66 63 66 Gold ($/toz) 1161 1249 1219 1258 1278 1275 1231 1267 1246 1260 1237 1283 1314 1280 1282 1264 1331 1331 1331 Baltic Dry Index 711 676 938 1023 1138 1509 1142 1229 979 861 906 1144 1363 1484 1455 1589 1234 1130 1122 Sources: World Bank, World Bank Commodities Price Data (The Pink Sheet), and Bloomberg. 1 MRV = Most Recent Value. 2 Indexes, 2010 = 100. Produced by DECPG. Number 382 | March 23, 2018