For more information, visit http://www.worldbank.org/prospects May 26, 2017 Taking Stock U.S. Q1 GDP growth was revised up; FOMC minutes reinforced expectations of a June rate hike. The second reading of U.S. Q1 GDP growth came in at 1.2 percent (q/q, saar), up from the initial estimate of 0.7 percent. The upward revision reflected stronger-than-previously estimated household spending and business investment. Meanwhile, the minutes of the Federal Open Market Committee (FOMC) meeting of May 2-3 showed a rising consensus for raising rates again if economic data came in broadly in line with expectations. The minutes also suggested a plan to gradually shrink the Federal Reserve’s $4.5 trillion balance sheet later this year is moving forward. The plan involves gradually phasing out reinvestment of maturing asset holdings. Euro Area composite PMI held steady in May. The Euro Area’s flash composite purchasing managers’ index (PMI) for May came in at 56.8, unchanged from April’s six -year high (Figure 1), suggesting continued solid economic recovery in the Euro Area (a reading above 50 signals expansion). The PMI pointed to broad-based growth. Output growth in the manufacturing sector accelerated to its fastest rate in six years. Growth in the service sector remained robust. In both sectors, employment continued to expand, with the manufacturing sector adding jobs at the fastest pace in 20 years. Japan’s manufacturing PMI dipped in May; core consumer prices continued to rise in April. Japan’s flash manufacturing PMI fell to 52.0 in May from 52.7 in April, signaling a slowdown in manufacturing output growth. Most sub- indexes—including new orders, new export orders, and employment —increased at a slower pace than in April, underscoring the broad-based nature of the manufacturing growth slowdown. Separately, Japan’s core consumer price index (CPI)—which excludes the cost of fresh food—rose 0.3 percent in April (y/y), the fastest pace since April 2015, owing to rising energy prices. The headline CPI rose 0.4 percent (y/y). The inflation readings remain far below the central bank’s 2 percent target. Moody’s downgraded China’s sovereign debt rating. Moody’s Investor Service cut China’s sovereign credit rating by one notch, from “Aa3” to ‘A1’, citing expectations of slower economic growth and continuing rise in government debt. Moody’s rating cut, the first since 1989, came as China is intensifying its efforts to reflate the economy while containing leverage. OPEC extended output cuts, but crude oil prices dropped. At their meeting in Vienna on Thursday, the Organization of the Petroleum Exporting Countries (OPEC) renewed the agreement with non-OPEC states—to cut oil production by 1.8 million barrels a day—to March 2018. Following the agreement, crude oil prices fell by about 4 percent, as investors had expected deeper cuts. Brent, the global benchmark fell to $51.92 per barrel, and West Texas Intermediate (WTI), the U.S. marker, declined to $49.17 per barrel (Figure 2). Figure 1 Euro Area composite PMI held steady in May. Figure 2 Oil prices tumbled despite extension of the agreement between OPEC and non-OPEC states to cut supply. Markit Euro Area Composite PMI Crude oil prices Index, >50=expansion, seasonally-adjusted US$/bbl 58 60 57 56 55 55 54 53 50 52 51 Brent 45 50 WTI 49 48 40 May-17 Jan-17 Jan-17 Nov-16 Nov-16 Dec-16 May-14 May-15 May-16 May-17 Nov-14 Nov-15 Nov-16 Aug-14 Aug-15 Aug-16 Apr-17 Feb-17 Mar-17 Mar-17 Feb-15 Feb-16 Feb-17 Source: Markit and Bloomberg. Source: Bloomberg. Produced by DECPG. Number 348 | May 26, 2017 Major Data Releases (Percent change y-o-y) (Percent change y-o-y) Recent releases: Fri, 19 May - Thu, 25 May 2017 Upcoming releases: Fri, 26 May - Thu, 1 June 2017 Country Date Indicator Period Actual Forecast Previous Country Date Indicator Period Previous Germany 5/23/17 GDP Q1 1.7 % 1.7 % 1.7 % France 5/30/17 GDP Q1 1.1 % Hong Kong 5/23/17 CPI APR 2.0 % 0.5 % Poland 5/31/17 GDP Q1 4.0 % South Africa 5/24/17 CPI APR 5.3 % 6.1 % India 5/31/17 GDP Q4 7.0 % Spain 5/25/17 GDP Q1 3.0 % 3.0 % 3.0 % Belgium 5/31/17 GDP Q1 1.2 % UK 5/25/17 GDP Q1 2.0 % 2.1 % 2.1 % Finland 6/1/17 GDP Q1 1.3 % Japan 5/25/17 CPI APR 0.4 % 0.3 % 0.2 % Brazil 6/1/17 GDP Q1 -2.5 % Activity and Inflation (Percent change y-o-y, except quarterly data on industrial production, which are percent change q-o-q, annualized) 2016 2016 2017 2015 2016 Q1 Q2 Q3 Q4 Apr May June July Aug Sep Oct Nov Dec Jan Feb Mar 1 Industrial Production, sa World 1.8 2.2 1.9 2.2 2.9 5.3 1.7 1.9 2.1 1.8 2.4 2.1 2.2 3.3 3.7 3.1 3.5 4.0 Advanced Economies 0.2 0.2 0.3 0.3 1.7 3.9 -0.2 -0.3 -0.2 -0.4 0.6 0.3 0.2 1.9 2.5 1.1 2.2 2.2 Emerging Market and Developing Economies 3.5 4.2 3.6 4.1 4.0 6.8 3.7 4.1 4.4 4.1 4.3 3.9 4.2 4.7 4.9 5.1 4.8 5.8 Commodity-exporting EMDE 0.2 1.2 0.6 1.5 2.4 4.4 -0.8 0.5 1.7 2.0 1.3 1.0 1.3 2.2 3.2 2.8 2.2 - Other EMDE 5.0 5.4 4.7 5.1 4.6 7.8 5.6 5.7 5.5 4.9 5.5 5.0 5.3 5.7 5.6 6.0 5.7 6.7 East Asia and Pacific 5.8 5.9 5.1 6.7 5.7 6.0 5.6 6.0 6.2 6.1 6.3 5.6 5.6 5.9 6.0 6.0 6.2 7.2 East Asia excl. China 3.5 4.9 6.3 4.9 4.0 3.1 2.9 6.0 7.0 6.9 6.1 2.4 2.8 4.6 6.3 3.9 5.1 5.0 Europe and Central Asia 1.4 2.1 1.6 1.5 -3.2 9.8 2.6 2.9 2.2 0.2 1.8 0.5 1.6 2.8 2.6 4.2 1.1 4.1 Latin America and Caribbean -3.1 -2.9 -3.5 0.5 0.4 -1.2 -4.7 -3.9 -2.3 -2.2 -2.9 -2.0 -2.8 -1.0 0.9 0.0 0.6 -1.2 Middle East and North Africa 2.8 - 2.7 -3.2 8.8 - 2.0 2.4 2.9 3.7 3.1 4.3 6.5 - - - - - South Asia 3.5 5.7 7.0 4.3 2.5 4.6 6.4 7.3 6.8 6.0 5.4 4.5 5.1 5.7 3.0 4.2 2.4 3.5 Sub-Saharan Africa 0.1 0.9 1.6 7.1 -6.4 -3.5 2.6 4.1 4.3 1.4 0.1 -0.1 -1.1 0.6 -0.9 0.1 -2.7 -2.3 2 Inflation, sa World 1.4 1.3 1.4 1.7 1.4 1.6 1.8 1.7 1.6 1.7 1.4 1.5 1.5 1.6 1.8 2.3 2.4 2.4 Advanced Economies 0.1 0.4 0.3 0.2 0.4 0.8 0.2 0.1 0.4 0.4 0.4 0.5 0.6 0.7 1.1 1.5 1.8 1.6 Emerging Market and Developing Economies 2.5 2.3 2.6 3.0 2.9 2.5 3.2 2.8 2.6 2.9 2.8 2.9 2.5 2.4 2.5 2.9 3.4 3.5 Commodity-exporting EMDE 3.9 3.5 3.9 3.6 3.4 3.3 4.0 3.5 3.8 3.7 3.3 3.1 2.9 3.0 3.1 3.4 3.6 3.6 Other EMDE 1.0 1.1 1.1 2.0 1.7 1.7 1.9 1.7 1.8 1.8 1.5 1.6 1.5 1.6 1.8 2.6 3.2 3.5 East Asia and Pacific 1.2 1.4 1.1 1.9 2.4 2.4 1.9 1.9 1.9 2.0 1.9 2.3 2.3 2.4 2.1 2.7 3.2 3.5 Europe and Central Asia 1.9 0.4 0.7 0.3 0.5 1.0 0.2 0.3 0.4 1.2 0.5 0.5 0.9 0.9 1.5 2.3 2.5 2.7 Latin America and Caribbean 2.7 2.4 2.7 3.5 3.0 3.1 3.6 3.4 3.3 2.9 3.2 3.1 2.9 3.2 3.2 3.1 3.4 3.3 Middle East and North Africa 1.9 2.2 2.5 2.4 2.3 1.9 2.5 2.2 2.4 2.3 2.1 2.5 1.9 2.0 1.8 2.2 2.5 2.9 South Asia 4.5 4.9 3.8 5.3 5.3 3.9 4.6 5.2 5.7 5.7 5.2 5.0 4.2 3.7 3.7 3.7 4.2 5.0 Sub-Saharan Africa 3.7 5.3 5.2 5.2 5.7 5.9 5.3 4.8 5.6 5.5 5.9 5.9 5.7 6.2 6.5 6.7 6.7 6.8 1 Industrial production is total production (may exclude construction). When data are unavailable, "industral production, manufacturing" and "industrial production, manufacturing, non-durable manufacturing, petroleum and coal products, crude petrolem products" are used as proxies 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) 2016 2016 2017 2015 2016 Q1 Q2 Q3 Q4 Apr May June Jul Aug Sep Oct Nov Dec Jan Feb Mar Exports, Nominal, US$, sa World -11.5 -3.0 -12.7 14.6 0.2 7.4 -2.7 -3.2 -4.2 -6.8 2.8 -0.7 -3.3 4.9 4.0 10.4 7.1 12.3 Advanced Economies -11.3 -0.8 -5.1 15.6 0.2 3.7 -0.1 -0.5 -2.4 -5.3 5.6 1.5 -1.8 6.2 5.6 9.1 7.2 9.4 Emerging Market and Developing Economies -12.0 -6.6 -24.0 12.7 0.1 14.9 -7.1 -7.7 -7.2 -9.2 -1.7 -4.4 -5.7 2.9 1.7 12.8 7.0 17.9 Commodity-exporting EMDE -24.1 -9.3 -27.5 15.5 5.7 28.4 -14.3 -12.7 -13.7 -15.2 -1.9 -1.7 -5.8 7.6 8.1 27.3 19.9 25.5 Other EMDE -3.8 -4.6 -21.3 11.6 -1.8 10.1 -2.7 -4.6 -3.1 -5.7 -1.0 -5.0 -5.1 1.8 -0.5 7.9 2.5 15.3 East Asia and Pacific -3.5 -6.1 -25.3 12.8 -2.1 11.0 -4.2 -6.2 -5.5 -6.9 -1.7 -6.9 -6.0 1.7 -2.2 9.3 2.6 16.3 Europe and Central Asia -20.7 -6.1 -19.0 18.4 -0.5 20.2 -8.0 -10.6 -4.2 -8.8 0.5 -1.1 -3.6 6.5 7.7 22.2 12.7 20.9 Latin America and Caribbean -11.9 -2.4 -7.1 8.8 7.0 14.4 -5.1 -1.9 -8.0 -7.6 2.6 2.9 -4.4 10.3 11.0 14.7 12.4 16.9 Middle East and North Africa -27.1 - - - - - - - - - - - - - - - - - South Asia -4.8 1.6 6.9 3.8 -17.8 31.7 0.8 -0.3 5.1 -4.0 5.8 -3.2 10.7 3.4 0.2 2.8 -1.1 8.3 Sub-Saharan Africa -26.8 -14.8 -40.5 21.9 -5.4 33.4 -16.0 -17.8 -18.6 -22.5 -12.9 -2.9 -11.4 0.0 5.3 - - - Imports, Nominal, US$, sa World -6.8 -5.3 -24.4 19.1 -17.6 20.9 4.4 -4.2 -4.4 -10.9 -6.9 -5.6 -9.7 3.6 -1.7 11.6 5.4 10.3 Advanced Economies -12.5 -3.4 -9.6 9.3 -2.8 2.2 -3.9 -2.0 -4.6 -8.2 1.7 -1.9 -5.0 2.4 1.2 9.4 3.0 8.6 Emerging Market and Developing Economies -3.3 -6.3 -31.7 25.3 -25.4 33.9 9.4 -5.5 -4.3 -12.4 -11.7 -7.8 -12.2 4.3 -3.3 12.8 6.8 11.4 Commodity-exporting EMDE -0.9 -7.1 -34.1 27.9 -31.8 38.6 14.3 -6.7 -3.9 -12.7 -15.5 -9.8 -14.9 4.2 -5.2 12.0 2.3 8.9 Other EMDE -11.5 -3.7 -21.8 16.3 2.4 19.1 -8.0 -1.0 -5.8 -11.4 3.2 -0.3 -0.6 5.0 3.6 15.7 23.9 20.1 East Asia and Pacific -13.1 -3.7 -24.6 19.0 5.2 21.9 -8.0 0.4 -6.8 -11.0 5.6 -0.1 -0.9 6.0 5.5 17.1 33.7 21.0 Europe and Central Asia -21.4 -1.9 0.9 12.1 -2.3 6.6 -4.9 -1.8 0.1 -10.1 8.4 1.1 0.7 5.3 6.6 22.2 8.8 14.3 Latin America and Caribbean -9.8 -7.4 -17.0 7.2 2.3 5.6 -9.3 -6.2 -8.8 -15.5 1.5 -3.3 -8.3 1.7 3.9 11.3 5.3 13.9 Middle East and North Africa 1.5 - - - - - - - - - - - - - - - - - South Asia -13.2 -5.5 -26.0 3.3 12.0 50.8 -19.0 -8.6 -5.9 -13.9 -9.1 1.1 7.8 10.1 2.1 14.8 21.9 40.6 Sub-Saharan Africa -7.6 - - - - - - - - - - - - - - - - - 1 International Reserves, US$ World -5.9 -1.1 0.7 0.8 0.4 -3.3 0.7 -0.7 0.8 0.3 -0.1 0.2 -1.1 -1.7 -0.6 0.7 0.3 0.7 Advanced Economies 0.6 4.4 3.7 1.7 1.4 -2.5 1.0 -0.6 1.4 0.5 0.1 0.9 -0.7 -1.5 -0.2 1.5 0.4 1.5 Emerging Market and Developing Economies -9.9 -4.8 -1.2 0.2 -0.2 -3.9 0.5 -0.8 0.5 0.2 -0.2 -0.2 -1.4 -1.8 -0.9 0.1 0.2 0.1 Commodity-exporting EMDE -11.1 - -1.0 -0.7 -0.2 - 0.3 -0.9 0.0 0.4 -0.5 -0.1 -1.7 -1.1 - - - - Other EMDE -9.1 -5.7 -1.2 0.7 -0.3 -4.5 0.7 -0.8 0.7 0.1 -0.1 -0.2 -1.2 -2.1 -1.2 0.0 0.2 0.3 East Asia and Pacific -11.3 -7.3 -1.8 0.3 -0.7 -4.9 0.5 -1.0 0.9 0.0 -0.3 -0.4 -1.3 -2.4 -1.2 -0.1 0.4 0.1 Europe and Central Asia -6.3 4.4 4.1 2.7 1.2 -3.8 1.5 -0.2 1.4 0.5 0.5 0.3 -0.8 -1.7 -1.4 2.1 0.4 0.2 Latin America and Caribbean -5.3 1.1 0.1 0.7 1.6 -0.9 0.8 -0.2 0.1 1.6 0.0 -0.1 -0.6 -0.6 0.1 0.5 0.4 -0.1 Middle East and North Africa -17.1 - -3.6 -2.6 -2.0 - -0.5 -0.8 -1.3 -0.7 -0.8 -0.5 -2.6 - - - - - South Asia 11.6 3.5 1.0 2.0 3.3 -2.8 1.9 -0.8 0.8 1.4 0.6 1.4 -1.0 -0.9 -0.9 -0.1 0.5 1.5 Sub-Saharan Africa -12.0 - -2.0 -1.9 - - 0.4 -1.7 - - - - - - - - - - 1 Total reserves excluding gold are used as proxies when total reserves data are unavailable. Produced by DECPG. Number 348 | May 26, 2017 Financial Markets 2016 2017 2016 2017 MRV 1 2015 2016 Q2 Q3 Q4 Q1 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Interest rates and LIBOR (percent) U.S. Fed Funds Effective 0.13 0.40 0.37 0.39 0.45 0.70 0.36 0.38 0.39 0.40 0.40 0.41 0.41 0.55 0.66 0.66 0.79 0.91 0.91 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 0.64 0.79 0.92 1.07 0.65 0.65 0.70 0.81 0.85 0.88 0.91 0.98 1.03 1.04 1.13 1.16 1.20 EURIBOR 3-months -0.02 -0.26 -0.26 -0.30 -0.31 -0.33 -0.26 -0.27 -0.29 -0.30 -0.30 -0.31 -0.31 -0.32 -0.33 -0.33 -0.33 -0.33 -0.33 US 10-yr Treasury yield 2.12 1.84 1.75 1.56 2.12 2.44 1.80 1.64 1.48 1.56 1.63 1.74 2.12 2.50 2.44 2.42 2.47 2.29 2.24 German Bund, 10 yr 0.54 0.14 0.12 -0.07 0.18 0.35 0.16 0.01 -0.09 -0.07 -0.05 0.03 0.22 0.30 0.34 0.32 0.39 0.25 0.40 Spreads (basis points) JP Morgan Emerging Markets 415 410 419 372 369 340 418 418 387 367 361 357 380 370 354 338 329 331 320 Asia 224 221 227 197 197 175 223 233 210 190 191 192 201 198 185 173 166 173 167 Europe 348 302 305 282 283 261 305 303 290 282 273 274 294 282 272 258 253 250 236 Latin America & Caribbean 540 537 551 477 475 445 552 541 496 473 463 453 491 481 463 442 431 431 421 Middle East 456 517 538 508 467 396 530 545 540 492 493 487 475 438 416 396 377 350 357 Africa 415 518 548 461 436 389 552 546 494 448 440 441 444 422 401 387 380 400 372 Stock Indices (end of period) Global (MSCI) 399 424 399 418 424 449 403 399 414 417 418 413 413 424 433 445 449 455 465 Advanced Economies ($ Index) 1663 1761 1653 1726 1761 1854 1675 1653 1713 1720 1726 1697 1712 1761 1792 1839 1854 1878 1915 United States (S&P 500) 2044 2258 2099 2168 2258 2363 2097 2099 2170 2171 2168 2139 2199 2258 2279 2364 2363 2384 2415 Europe (S&P Euro 350) 1474 1475 1339 1388 1475 1547 1399 1339 1376 1390 1388 1377 1388 1475 1463 1501 1547 1564 1585 Japan (Nikkei 225) 18817 19302 15576 16450 19302 18909 17235 15576 16556 16887 16450 17050 18604 19302 19035 19342 18909 19197 19770 Emerging Market and Developing Economies (MSCI) 794 861 834 903 861 958 807 834 879 894 903 908 863 861 909 936 958 978 1015 EM Asia 404 419 407 448 419 474 400 407 431 442 448 444 426 419 443 459 474 484 508 EM Europe 244 295 265 273 295 301 268 265 264 269 273 274 273 295 302 296 301 313 316 EM Europe & Middle East 211 248 225 233 248 252 225 225 227 232 233 232 230 248 253 249 252 259 261 EM Latin America & Caribbean 1830 2341 2269 2381 2341 2611 2038 2269 2359 2402 2381 2608 2330 2341 2516 2600 2611 2601 2551 Exchange Rates (LCU / USD) Advanced Economies Euro Area 0.90 0.90 0.89 0.90 0.93 0.94 0.89 0.89 0.90 0.89 0.89 0.91 0.93 0.95 0.94 0.94 0.94 0.93 0.89 Japan 121.00 108.80 107.96 102.36 109.63 113.63 108.97 105.34 104.09 101.31 101.69 103.72 108.90 116.28 115.03 112.96 112.91 110.02 111.63 Emerging and Developing Economies Brazil 3.33 3.49 3.51 3.25 3.28 3.14 3.54 3.42 3.28 3.21 3.25 3.18 3.33 3.35 3.20 3.10 3.13 3.14 3.28 China 6.29 6.65 6.53 6.67 6.84 6.89 6.53 6.59 6.68 6.65 6.67 6.74 6.85 6.92 6.89 6.87 6.90 6.89 6.89 Egypt 7.70 10.12 8.87 8.87 14.71 17.82 8.86 8.87 8.87 8.87 8.88 9.25 16.34 18.56 18.68 17.01 17.76 18.09 18.07 India 64.14 67.19 66.91 66.94 67.39 66.97 66.93 67.29 67.18 66.91 66.74 66.73 67.60 67.86 68.06 67.01 65.83 64.52 64.73 Russia 61.34 67.06 65.84 64.61 62.95 58.67 65.96 65.01 64.43 64.93 64.48 62.57 64.25 62.03 59.76 58.42 57.83 56.53 56.34 South Africa 12.77 14.71 15.01 14.07 13.92 13.24 15.36 15.05 14.40 13.79 14.01 13.92 13.96 13.88 13.60 13.17 12.95 13.46 12.90 Memo: U.S. nominal effective rate (index) 114.7 119.7 117.5 118.4 122.5 123.4 117.8 118.2 118.9 117.8 118.6 119.7 122.9 124.9 124.8 123.0 122.5 121.6 120.4 1 MRV = Most Recent Value. Commodity Prices 2016 2017 2016 2017 MRV 1 2015 2016 Q2 Q3 Q4 Q1 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Energy 2 65 55 56 57 64 68 57 59 57 58 58 64 59 68 69 69 65 67 67 Non-energy 2 82 80 81 82 83 86 81 83 82 82 81 81 83 84 85 87 85 83 83 2 Agriculture 89 89 91 91 90 91 91 94 92 91 90 90 90 89 91 91 89 88 88 2 Metals and minerals 68 64 62 64 71 78 61 61 64 65 64 65 73 75 76 79 79 75 73 Memo items: Crude oil, average ($/bbl) 51 43 45 45 49 53 46 48 44 45 45 49 45 53 54 54 51 52 53 Gold ($/toz) 1161 1249 1260 1334 1221 1219 1261 1276 1337 1340 1327 1267 1238 1157 1192 1234 1231 1267 1267 Baltic Dry Index 711 676 613 736 994 938 623 608 707 675 826 870 1080 1031 913 760 1142 1229 934 Source: World Bank, World Bank Commodities Price Data (The Pink Sheet), Bloomberg 1 MRV = Most Recent Value. 2 Indexes, 2010 = 100. Produced by DECPG. Number 348 | May 26, 2017