99345 For more information, visit http://www.worldbank.org/prospects Overview Table of Contents  Global growth hit a soft patch in 2015Q1, driven by Monthly highlights………………………………2 slowing activity in the United States and China, outright Special focus…………………………………....6 contraction in Russia and weaker growth across major Major data releases…………………………….8 commodity exporters. Economic developments.................................9 Financial markets………............................... 10  Conditions should gradually improve in Q2 as the U.S. economy regains momentum, the Euro Area and Japan continue to recover and headwinds in some large emerging economies diminish. Chart of the Month German and U.S. long-term interest rates Basis points Basis points Germany 10-year government bond yields (LHS)  German 10-year bond yields have risen sharply since U.S. 10-year government bond yields (RHS) mid-April, following historically low levels reached after 2.5 3.5 the start of ECB’s quantitative easing program. 2.0 3.0 1.5 2.5  The rout also contributed to a rebound in U.S. Treasury 1.0 2.0 yields, but spillovers to emerging market currencies and capital flows remained limited as the dollar depreciated 0.5 1.5 and commodity prices recovered over the same period. 0.0 1.0 May-14 Jul-14 Jan-15 Nov-14 Mar-15 Jan-14 Mar-14 Sep-14 Source: World Bank, Haver Analytics. May-15 Special Focus: Recent Oil Price Developments in Perspective  The cumulative drop in oil prices since June 2014 was the third largest since 1972, taking place against a backdrop of rising supply and weakening demand in previous years.  Both the 2014-15 and the 1985-86 oil price drops marked the end of periods of high oil prices during which unconventional oil supplies (from Mexico and the United Kingdom in the 1980s; shale oil, tar sands, and biofuels in the 2000s) steadily expanded.  Following the 1985-86 collapse, Brent oil prices remained below $30/bbl for nearly two decades. Some of the conditions behind the low oil prices during the 1986-2003 period are no longer in place, but underlying factors also point to a prolonged period of lower prices in current circumstances. Prepared by Marc Stocker with contributions from John Baffes, Eung Ju Kim and Ekaterine T. Vashakmadze. Data support from Trang Nguyen and Xinghao Gong. DECPG - May 2015 May 2015 Monthly Highlights  Global growth: a soft patch at the start of 2015. Based on partial data releases available thus far, global growth in the first quarter of the year was about 1.8 percent (quarter-on-quarter annualized rate), down from 2.5 percent in the fourth quarter of 2014 (Figures 1.A and 1.B). If confirmed, the growth slowdown would be comparable to that observed in the first quarter of 2014. The deceleration was broad-based, with slowing activity in the United States and China, outright contraction in Russia and weaker growth across major oil exporters. On the positive side, the recovery in the Euro Area and Japan has gained strength, diminishing some of the downside risks previously identified for these economies.  Global manufacturing: slow in Q1, modest improvement ahead. Evidence of a soft patch in global manufacturing activity manifested itself in weak industrial production and goods trade data up to March, and a further slide in global manufacturing PMI in April (Figure 1.C). This marks the fifth consecutive decline in the global manufacturing PMI, driven by deteriorating conditions in large emerging economies (Figure 1.D). Global export orders remained weak in April as well, but forward-looking indicators, such as the ratio of new orders to inventories, improved. With conditions generally improving in the services sector, and surveys in manufacturing being slightly more upbeat than actual production data, conditions remain in place for a pickup in global growth during Q2.  United States: weakness partly due to one-off factors. The U.S. economy came to a virtual standstill in Q1 (Figure 1.B), growing by 0.2 percent (quarter-on-quarter annualized rate) according to preliminary estimates. While a strong dollar dragged down exports and industrial activity, the weakness was mostly related to off-one effects of bad weather in the East, port disruptions in the West, sharp cutbacks in capital spending in the oil industry and some residual seasonality in GDP data (the U.S. Bureau of Economic Analysis is currently reviewing seasonal adjustment procedures and will likely implement data revisions with the release of second quarter GDP on July 30). Forward-looking indicators remain broadly positive, while labor market conditions continue to tighten. The 223,000 increase in U.S. non-farm payroll employment in April is slightly above an average monthly job creation of 195,000 since the start of the year. The U.S. Federal Reserve is still expected to start hiking policy rates during the second half of 2015, reflecting continued improvements in the labor market and prospects for rising inflation from current low levels (1.44 percent in March for personal consumption expenditures excluding food and energy).  Euro Area and Japan: signs of a broadening recovery. Euro Area growth picked up to 1.6 percent (quarter-on- quarter annualized rate) in Q1 from 1.3 percent in 2014Q4. The gradual improvement was supported by a weakening euro, declining oil prices and more accommodative financing conditions. The recovery has appeared to be increasingly supported by domestic demand and also broadened across countries, with a significant improvement in France and particularly robust growth in Spain. The recovery momentum slowed in Germany, but remains on track for a strong performance this year. Although still somewhat mixed, March data and confidence indicators in April/May point to further improvements during Q2. Growth in Japan accelerated to 2.4 percent in Q1 (quarter-on-quarter annualized rate), helped by a recovery in private consumption and investment, combined with a significant build-up in inventories. Exports accelerated but imports rebounded more strongly, leading to a negative contribution of net trade to growth in Q1. Available indicators point to continued, albeit moderate, growth in Q2.  China: stimulus to buffer the slowdown. Following China’s growth deceleration in Q1 to 5.3 percent (quarter-on- quarter annualized rate), April activity data showed some tentative signs of improvement, with industrial production picking up and retail sales remaining solid. However, investment lost further momentum, credit growth slowed and the manufacturing PMI remained weak in May. Following several consecutive interest rate cuts and reductions in the required reserve ratio, the People’s Bank of China recently announced plan s to accept municipal bonds as collateral for its refinancing and lending operations with commercial banks. This complements earlier announcements of a RMB 1 trillion debt-for-bond swap envisaged in the 2015 budget to reduce local governments’ interest burdens. These measures should help prevent a local government spending squeeze while limiting off-balance-sheet activities.  Emerging market growth: generally weak. Beyond China, growth slowed in East Asia in Q1, including in Indonesia, Malaysia, and Thailand. This follows strong outcomes in the final quarter of last year and, for commodity exporters, reflects continued adjustments to lower commodity prices. In the Latin America and Caribbean region, growth slowed in Chile, Peru and Mexico, and is expected to be negative in Brazil (GDP estimates released on May 29). In Russia, output contracted significantly in Q1, reflecting the adverse effects of the earlier decline in oil prices, but somewhat less than initially expected. Negative growth was also observed on a quarter-on-quarter basis in Nigeria in Q1, while activity slowed more than expected in South Africa. In contrast, Q1 GDP growth surprised on the upside in Central and Southeastern Europe (especially Poland, Hungary, the Czech Republic, Slovakia and Romania), helped by improving conditions in the Euro Area. 2 May 2015  Global inflation: bottoming out. The sharp fall in oil prices since June 2014 continued to weigh on global inflation in Q1 2015, keeping the proportion of countries with low or negative inflation at an unusually high level (Figure 1.E). However, this dampening impact started dissipating in a number of oil-importing countries in April, and the recent rebound in oil prices limits the room for further declines in global inflation in coming months. Coincidently, long-term inflation expectations have recovered from January lows in both the Euro Area and in the United States, moving closer to central bank targets. Receding concerns about deflation reflected a confluence of factors, including the start of quantitative easing in the Euro Area in March, some depreciation of the U.S. dollar and a rebound in oil prices in April and May. The correlation between long-term inflation expectations and oil price developments has been tight since mid-2014 (Figure 1.F), illustrating a broader shift in market sentiment that had also been reflected in a weakening U.S. dollar and upward movements in global bond yields.  European bond market rout: mostly a technical correction. Since reaching a historical low at 0.07 percent on April 20, German 10-year yields rose by 50 basis points (bps), their largest monthly surge since June 1994. The sharp adjustment followed a rally that pushed German yields to unsustainably low levels after the announcement of ECB’s quantitative easing program earlier this year. The rebound was not immediately connected to changes in economic fundamentals, as inflation expectations increased only marginally since mid-April and economic data releases have been relatively mixed over the same period (Figure 2.A). A deterioration in liquidity conditions in core-European bond markets, captured by declining trading volumes behind given price changes, appears to have exacerbated the market rout. Rates in periphery countries increased as well, but less than in core countries. Long-term interest rates are unlikely to rise significantly further, as accelerated bond buying by the ECB should exert downward pressure in the months ahead.  Global interest rates: yields rising in the U.S., broadly stable in emerging markets. The benchmark 10-year U.S. Treasury yield has increased by 30 basis points since mid-April, mirroring the increase in German yields (Figure 2.B). With markets perceiving setbacks in the U.S. recovery, long-term inflation prospects stabilizing since mid-April (according to 10-year breakeven rates) and the likelihood of a liftoff in U.S. policy rates in June vanishing, external factors appear to have played a crucial role in the recent uptick in U.S. long-term yields. So far, these adjustments have had limited repercussions for emerging market borrowing conditions, with long-term interest rates generally increasing less than in the United States and Euro Area (Figure 2.C). Since April 17, emerging market bond spreads (as measured by the EMBIG) have actually narrowed and equity markets remain buoyant (Figure 2.D). This resilience partly reflects the coincident depreciation in the U.S. dollar and a partial recovery in commodity prices.  Capital flows to developing countries: still robust in April. After a rebound in March, gross capital flows to developing countries maintained their robust momentum at the start of the second quarter. At $58 billion, April gross capital inflows were modestly higher than March, and significantly stronger than the monthly average of $47 billion in the first quarter of 2015 (Figure 2.E). The bulk of April inflows came in the form of international bond issuance, with Chinese borrowers dominating issuance activity. Equity flows were up significantly as well, with China accounting for 50 percent of total flows. In contrast, bank lending plummeted in April on the back of a sharp drop in loans to East Asia. Weekly portfolio inflows to emerging-market bond and equity funds have been steady late April, but displayed some slowdown in May.  Oil prices: some rebound and volatility. Global oil prices strengthened in May, with Brent trading around $63 per barrel and the West Texas Intermediate at $58 per barrel, more than $15 above their end-January troughs, but well below their mid-2014 levels of $105. Oil price volatility, which increased following OPEC’s decision not to engage in supply controls last November, has moderated from a peak in mid-February and has been significantly lower than during previous episodes of sustained oil price declines (Special Focus section below). Prices have recently been supported by expectations of lower stocks in the United States and increasing demand by some emerging economies, especially India. Expectations of material adjustments in U.S. oil production have not materialized yet, despite a more than 50 percent decline in the rig count since November last year (Figure 2.F). OPEC production also rose, with Saudi Arabia averaging 10 mb/d in March and April.  Greece: negotiations continue. After borrowing from its IMF holding account to make its scheduled debt repayments to the institution of nearly €1 billion in May, Greece faces another €1.6 billion of IMF payments in June and owes €6.7 billion to the ECB in July and August. The government is expected to run out of funds in June unless agreement on a list of structural reforms and revised fiscal targets can be reached with ECB, EU, and IMF. While a default on a debt payment would not necessarily trigger exit from the Euro Area, it could cause banking sector stress requiring the imposition of capital controls and a severe recession. Thus far, there have been no measurable spillovers to other periphery countries, but confidence could be impacted if conditions continue to deteriorate. Some Eastern European countries could be impacted by a default through sizeable subsidiaries of Greek banks. 3 May 2015 Figure 1: A. Global GDP growth B. GDP growth for selected countries Percent Percent, quarter-over-quarter annualized Global, Q-O-Q annualized 8 2015Q1 4 Available countries, Q-O-Q annualized 6 2014Q4 4 2 0 3 -2 -4 -6 United Kingdom Hungary Russia Euro Area Malaysia China Indonesia Japan Mexico South Africa United States Nigeria 2 1 14Q4 15Q1 14Q1 14Q2 14Q3 Source: World Bank, Haver Analytics. Source: World Bank, Haver Analytics. C. Global manufacturing PMI, industrial C. Manufacturing and composite PMI for production and trade selected countries Index Year-over-year, percent Index Composite - Apr. 15 Manufacturing PMI (LHS) Manufacturing - Apr. 15 54 6 60 Composite - Dec. 14 Industrial production (RHS) Global trade (RHS) Manufacturing - Dec. 14 5 55 52 4 50 50 3 45 2 48 40 1 Euro Area World China Russia Brazil United States India South Africa United Kingdom 46 0 Jan-12 Oct-13 Aug-12 Mar-13 May-14 Dec-14 Source: World Bank, CPB, Haver Analytics. Source: World Bank, Haver Analytics. Note: Last observation is April 2015. E. Share of countries with low or negative F. Euro Area inflation expectations and U.S. inflation breakeven inflation and oil price Share of countries Percent US$ per barrel 50 Euro 5yr/5yr forward inflation expectation (LHS) Below 1 percent US 10-year breakeven inflation (LHS) Below zero Brent oil price (RHS) 40 2.4 120 2.2 100 30 2.0 80 20 1.8 1.6 60 10 1.4 40 Jan-14 Jun-14 Jan-15 Feb-15 Feb-14 Mar-14 Apr-14 May-14 Jul-14 Oct-14 Aug-14 Sep-14 Mar-15 Nov-14 Dec-14 Apr-15 0 2000 03 06 09 12 15 Source: World Bank, Haver Analytics. Source: World Bank, Bloomberg, Federal Reserve Bank of St. Louis. Note: Data for 172 countries. Last observation is April 2015. Note: Last observation is May 26, 2015. 4 May 2015 Figure 2: A. German long-term bond yields, Euro Area B. Germany and U.S. long-term bond yields inflation expectations and economic surprise Basis points and percent Percent Basis points Basis points Germany 10-year government bond yields (LHS) Germany 10-year government bond yields (LHS) Euro 5yr/5yr forward inflation expectation (LHS) U.S. 10-year government bond yields (RHS) Euro-based Economic Surprise Index (RHS) 2.5 3.5 2.5 80 2.0 3.0 2.0 40 1.5 2.5 1.5 0 1.0 -40 1.0 2.0 0.5 -80 0.5 1.5 0.0 -120 0.0 1.0 Jan-14 Jan-15 Mar-15 May-15 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Jan-15 Mar-15 May-15 Nov-14 Source: World Bank, Bloomberg, Haver Analytics. Source: World Bank, Haver Analytics. Note: Last observation is May 26, 2015. Note: Last observation is May 26, 2015. C. Change in 10-year government bond yields D. Financial market reaction to global bond for selected countries, May 24, 2015 sell-off Change since April 17, 2015, basis points Percent Europe equity 0.55 EM equity World equity 0.40 EM bond - $ Corp 0.25 US bond - High yield EM bond - $ Sov. 0.10 US equity EM bond - local sovereign -0.05 Eurozone bond - sovereign Germany Thailand Hungary Vietnam Peru Spain United States Romania Philippines Singapore Turkey Japan India Italy Colombia Chile Brazil Czech Republic South Africa U.S. Treasury EM currency -4 1 6 11 16 Since April 17 YTD Source: World Bank, Haver Analytics. Source: World Bank, Bloomberg. E. Gross capital flows to developing countries F. U.S. oil rig count, and U.S. and Saudi Arabia oil production Billion US$ Bank Bond Equity Count Million barrels per day 80 US oil rig count 1800 Saudi Arabia oil production 11 70 US oil production 60 1600 10 50 1400 9 40 1200 8 30 1000 800 7 20 10 600 6 0 400 5 Jan-10 Jun-10 Jul-12 Oct-13 Jan-15 Apr-11 Sep-11 Feb-12 May-13 Mar-14 Aug-14 Nov-10 Dec-12 Oct-13 Apr-14 Jun-14 Oct-14 Apr-15 Dec-13 Feb-14 Aug-14 Dec-14 Feb-15 Source: World Bank, Dealogic. Source: World Bank, Baker Hughes, International Energy Agency. Note: Last observation is April 2015. Note: Last observation is May 2015. 5 May 2015 Special Focus: Recent Oil Price Developments in Perspective  The 2014-15 oil price decline: adjusting to a new equilibrium. Despite a recent rebound, the drop in oil prices since June 2014 remains the third largest over the last three decades (Figure 3.A). The decline took place against the backdrop of rising supply growth in previous years—especially from unconventional sources in the United States —and a shift in OPEC policy. It also coincided with weakening demand and a sharp appreciation of the U.S. dollar, which tends to be negatively correlated with oil and other commodity prices. Both the realized and implied volatilities of oil prices increased more than three-fold since OPEC’s decision to abandon price target ing last November. However, volatility remains well below spikes observed during previous crashes in 1985-86, 1990-91, and 2008-09 (Figure 3.B).  Historical perspective: significant parallels with 1985-86. Of the four largest oil price declines since 1972, there are important similarities between the current episode and that of 1985-86. Both occurred after a period of high prices, which were supported by OPEC’s policies. In both cases, high prices encouraged rising non -OPEC oil supplies: from Alaska, North Sea, and Mexico in 1985-86 and from U.S. shale, Canadian oil sands, and biofuels in 2014-15. And, in both episodes, OPEC abandoned price targeting. In 2014-15, OPEC acted very quickly— within 2 months after prices began declining— while it took several years in 1985-86. There is also a similarity between the two other episodes (1990-91 and 2008-09) in that both were precipitated by events largely outside the energy sector: the First Gulf War (the former) and the global financial crisis (the latter). The 2008-09 price drop had specific characteristics: it was much more correlated with equity and exchange rate movements than were other episodes. Similarly, co-movement across most commodity prices was high during 2008—twice as high compared to the historical average (and other crashes). Although volatility spiked during all four episodes, the increase was much smaller (and began much later) during the last crash, a result consistent across several measures of volatility (Figure 3.C).  1985-86 drop: followed by two decades of weak prices. Following the 1985-86 collapse, Brent prices averaged $20/bbl until December 2003, beginning and ending the period at about $30/bbl. Prices remained low for mainly for supply- related reasons as well as a shift in OPEC policy. On the supply side, OPEC’s spare capacity stood at record high 12 mb/d in 1985 (Figure 3.D). A surplus also developed in the former Soviet Union (FSU) during the transition of the 1990s. Although FSU oil production fell by 5.5 mb/d initially, most was brought back on line. These supply cushions kept oil prices low for several years.  Medium-term prospects: persistently low oil prices. Conditions are in place for continued low oil prices in the short term and only a slow recovery over the medium term, assuming OPEC does not re-engage in supply management. o On the demand side, high prices and new efficiency standards have reduced OECD countries’ oil consumption since 2005 by nearly 5 mb/d. Most forecasts show little or no growth in OECD consumption going forward, and some show declines due to anticipated increases in fuel efficiency and environmental constraints. The catch-up potential in developing countries (from significantly lower per capita consumption) is expected to materialize only gradually. o On the supply side, U.S. shale oil production provided much of the supply growth during the past five years. Although shale oil costs vary widely (some well below $50/bbl and others above $70/bbl), the industry’s production costs are falling due to greater operational knowledge, improved technologies, and lower input prices. Lower fixed costs compared with conventional oil supplies and short project life-spans make shale oil a highly flexible source of supply. Thus, shale oil production may continue to contain oil prices well below 2014 levels. Conversely, scope for further oil price declines may be limited by OPEC’s modest spare capacity (2.5 mb/d excluding Iraq, Iran, Libya and Nigeria) and reduced incentives from high prices for technological breakthroughs, either through improvement in battery technology or increased use of natural gas in transportation. 6 May 2015 Figure 3: A. Crude oil prices (real, 2014 terms) B. Oil price volatility, 60-day window US$/bbl First Gulf war: 2008 financial crisis: Percent OPEC abandons 150 OPEC abandons Price drops 48% Price drops 77% in 113 days price targeting price targeting: in 71 days 7 Price drops 66% in 82 days 6 2008 120 First Gulf war financial 5 crisis 90 4 3 60 1965-2015 average 2 price: $48.31/barrel 1 30 OPEC abandons price targeting: 0 Jan-88 Jan-91 Jan-94 Jan-97 Jan-00 Jan-03 Jan-06 Jan-09 Jan-12 Jan-15 Jan-85 Price drops 51% in 83 days 0 1965 1975 1985 1995 2005 2015 Source: World Bank. Source: World Bank. Note: Oil prices have been deflated by the U.S. CPI (2014 constant terms). C. Oil price volatility during the four largest D. OPEC oil production and capacity price declines of past three decades Standard deviation of returns mb/d Interquartile range 40 GARCH (full sample) Capacity GARCH (250-day window) Production 6 35 5 4 30 3 25 2 20 1 0 15 1985-86 1990-91 2008-09 2014-15 1980 1985 1990 1995 2000 2005 2010 2015 Source: World Bank. Source: International Energy Agency and KBC Energy Economics. 7 May 2015 Major Data Releases 5 May, 2015- 27 May 2015 Upcoming releases: 28 May, 2015-25 Jun 2015 Country Date Indicator Period Actual Forecast Previous Country Date Indicator Period Actual Forecast Previous Brazil 5/5/2015 PPI (Y/Y) MAR 1.0% 1.5% 2.8% Philippines 5/28/2015 GDP (Q/Q) Q1 2.5% United Kingdom 5/5/2015 PMI Services APR 59.5 58.24 58.9 Sweden 5/29/2015 GDP (Q/Q) Q1 1.1% United States 5/5/2015 PMI Composite APR 57.0 - 59.2 Czech Republic 5/29/2015 GDP (Q/Q) Q1 0.4% Euro Area 5/6/2015 PMI Composite APR 53.9 53.67 54.0 Greece 5/29/2015 GDP (Q/Q) Q1 -0.4% France 5/7/2015 Industrial Production (Y/Y) MAR 1.3 % 1.1 % 1.2% Italy 6/1/2015 GDP (Q/Q) Q1 0.0% Czech Republic 5/7/2015 Industrial Production (Y/Y) MAR 3.5 % 5% 4.5 % Euro Area 6/1/2015 PMI Manufacturing MAY 52 Malaysia 5/7/2015 Interest Rate Decision APR 3.3% 3.3% 3.3% South Africa 6/3/2015 PMI Manufacturing MAY 51.5 Mexico 5/8/2015 PPI (Y/Y) APR 2.76 % - 2.64 % Brazil 6/3/2015 PMI Composite MAY 44.2 Turkey 5/8/2015 Industrial Production (Y/Y) MAR 4.7% -0.5% 1.0% United States 6/3/2015 PMI Composite MAY 57 United States 5/8/2015 Participation Rate APR 62.8% 62.8% 62.7% Philippines 6/4/2015 CPI (Y/Y) MAY 2.2% Canada 5/8/2015 Unemployment Rate APR 6.8 % 6.9 % 6.8 % Germany 6/8/2015 Industrial Production (Y/Y) APR -0.1% Malaysia 5/11/2015 Industrial Production (Y/Y) MAR 6.9% 4.5% 5.2% China 6/8/2015 CPI (Y/Y) MAY 1.5% Denmark 5/11/2015 CPI (Y/Y) APR 0.5 % 0.6 % 0.6 % Mexico 6/9/2015 CPI (Y/Y) MAY 3.1% Greece 5/11/2015 Industrial Production (Y/Y) MAR 5.0 % - 1.9 % Philippines 6/9/2015 Unemployment Rate Q1 6.6% United Kingdom 5/12/2015 Industrial Production (Y/Y) MAR 0.7 % 0.18 % 0.1 % Estonia 6/9/2015 GDP (Q/Q) Q1 1.2% South Africa 5/12/2015 Manufacturing Production (Y/Y) MAR 3.2 % - -0.3% France 6/10/2015 Industrial Production (Y/Y) APR 1.3% Germany 5/13/2015 GDP (Q/Q) Q1 0.3 % 0.53 % 0.7 % Turkey 6/10/2015 GDP (Q/Q) Q1 0.7% Eurozone 5/13/2015 GDP (Q/Q) Q1 0.4 % 0.46 % 0.3 % Malaysia 6/11/2015 Industrial Production (Y/Y) APR 6.9% Greece 5/13/2015 GDP (Q/Q) Q1 -0.2 % -0.5 % -0.4 % France 6/11/2015 CPI (Y/Y) MAY 0.1% Poland 5/14/2015 CPI (Y/Y) APR -1.1 % -1.3 % -1.5 % China 6/11/2015 Retail Sales (Y/Y) APR 10.0% Brazil 5/14/2015 Retail Sales (Y/Y) MAR 0.4 % 1.4 % -3.3% Japan 6/12/2015 Industrial Production (Y/Y) APR -1.7% Japan 5/15/2015 Consumer Confidence Index APR 41.5 42.15 41.7 Euro Area 6/12/2015 Industrial Production (Y/Y) APR 1.8% Poland 5/15/2015 GDP (Q/Q) Q1 1.0 % - 0.7 % Netherland 6/15/2015 Retail Sales (Y/Y) APR 0.4% Hongkong 5/15/2015 GDP (Q/Q) Q1 0.4 % 0.2 % 0.4 % Turkey 6/15/2015 Unemployment Rate MAR 10.2% Thailand 5/17/2015 GDP(Q/Q) Q1 0.3 % -0.95 % 1.1% United States 6/15/2015 Industrial Production (Y/Y) MAY 1.9% Japan 5/18/2015 Industrial Production (Y/Y) MAR -1.7 % - -2.0% Euro Area 6/16/2015 Employment (Y/Y) Q1 0.9% Japan 5/20/2015 GDP (Q/Q) Q1 2.4% - 1.1% New Zealand 6/17/2015 GDP (Q/Q) Q1 0.8% Eurozone 5/21/2015 PMI Composite MAY 53.4 53.7 53.9 South Africa 6/18/2015 Wholesale Sales (Y/Y) APR 1.8 % Eurozone 5/21/2015 PMI Services MAY 53.3 53.32 54.1 Hong Kong 6/18/2015 Unemployment Rate MAY 3.2 % Eurozone 5/21/2015 PMI Manufacturing MAY 52.3 51.85 52.0 UK 6/18/2015 Retail Sales (Y/Y) MAY 4.7 % South Africa 5/21/2015 Wholesale Sales (Y/Y) MAR 1.8% - -2.0% United States 6/18/2015 CPI (Y/Y) MAY -0.2 % UK 5/21/2015 Retail Sales (Y/Y) APR 4.7% 3.8% 4.0% Canada 6/19/2015 Retail Sales (Y/Y) APR 3.1 % Mexico 5/21/2015 GDP (Q/Q) Q1 2.5% 2.5% 2.6% Hong Kong 6/22/2015 GDP (Q/Q) Q1 0.4 % United States 5/21/2015 PMI Manufacturing MAY 53.8 53.8 54.1 Mexico 6/22/2015 Retail Sales (Y/Y) APR 5.5 % Germany 5/22/2015 GDP (Q/Q) Q1 0.3% 0.3 % 0.7% Poland 6/23/2015 Unemployment Rate MAY 11.2 % Italy 5/22/2015 Retail Sales (Y/Y) MAR -0.5% 0.4 % -0.4% Italy 6/23/2015 Retail Sales (Y/Y) APR -0.5 % United States 5/22/2015 CPI (Y/Y) APR -0.2% -0.15 % -0.1% France 6/24/2015 GDP (Q/Q) Q1 F 0.1 % Canada 5/22/2015 Retail Sales (Y/Y) MAR 3.1% 3.4% 2.5% Malaysia 6/25/2015 Unemployment Rate APR 3.0 % South Africa 5/26/2015 GDP (Q/Q) Q1 1.3% 1.7% 4.1% Argentina 6/25/2015 Industrial Production (Y/Y) MAY -1.5 % 8 May 2015 Economic Developments indicators expressed as %ch y/y, except Industrial Production quarterly figures are %ch q/q, annualized 2014 2014 2015 2010 2011 2012 2013 Q1 Q2 Q3 Q4 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Industrial Production, S.A. World 8.8 4.7 3.1 2.5 3.7 2.4 2.5 3.9 3.7 3.6 3.5 3.5 3.4 2.7 3.4 3.1 2.9 3.3 2.7 2.5 2.4 High Income Countries 7.7 2.9 1.1 0.6 2.9 0.4 0.6 3.1 2.9 2.8 2.2 2.3 2.4 1.2 1.8 1.8 1.4 2.0 1.7 1.4 1.3 Developing Countries 10.9 7.8 6.3 5.5 5.0 5.5 5.3 5.1 4.9 4.8 5.5 5.4 5.0 4.8 6.0 5.1 5.1 5.4 4.1 4.2 4.0 East Asia and Pacific 14.2 11.3 9.0 8.9 5.1 8.1 6.5 8.6 7.5 7.9 8.2 8.6 7.8 6.6 7.6 7.1 6.6 7.4 6.5 6.2 5.7 East Asia x. China 8.9 0.7 4.1 4.7 -0.6 8.2 4.0 6.5 0.6 2.7 4.0 4.8 1.1 4.6 5.7 4.4 4.0 5.0 4.5 2.9 6.0 Europe and Central Asia 11.0 13.1 8.9 2.2 4.9 2.0 1.7 -0.5 4.1 4.2 6.6 3.6 4.0 2.4 2.8 2.6 2.1 1.4 0.1 2.0 3.0 Latin America and Caribbean 5.9 2.5 -0.1 0.9 1.3 -2.6 -0.3 -2.8 1.7 -2.2 -1.1 -2.7 -1.5 -1.0 -1.4 -0.8 -1.5 -1.1 -2.3 -2.8 -3.0 Middle East and N. Africa 2.0 -8.5 5.6 -6.7 17.9 3.0 24.2 -2.4 -9.1 -9.4 -7.4 -4.8 -1.7 9.7 17.0 10.6 12.6 7.2 -0.4 -0.7 3.9 South Asia 9.3 5.5 1.1 1.7 7.0 5.8 2.2 -2.4 0.1 4.2 5.3 4.5 1.9 2.5 3.9 -1.0 5.8 4.3 3.5 5.3 3.3 Sub-Saharan Africa 4.7 3.5 3.2 1.1 -3.1 -0.9 -4.4 10.6 -0.2 0.3 -1.6 0.6 -7.3 -0.7 6.3 1.5 -0.8 0.5 -1.2 -0.1 3.3 Inflation, S.A. 1 High Income Countries 1.7 2.8 2.0 1.5 1.4 2.0 1.7 1.4 1.5 2.0 2.0 2.0 1.8 1.7 1.7 1.7 1.5 1.2 0.9 1.0 1.1 Developing Countries 5.8 7.5 6.5 7.4 7.5 7.7 7.9 7.9 7.5 7.5 7.9 7.7 7.9 8.0 7.8 7.7 7.7 8.2 7.7 7.9 7.8 East Asia and Pacific 3.4 5.6 2.8 3.0 2.9 2.9 2.5 2.2 2.9 2.5 3.1 3.0 2.8 2.5 2.2 2.1 2.2 2.3 1.5 2.0 2.0 Europe and Central Asia 7.3 8.2 8.7 6.2 5.8 7.4 7.9 8.1 6.2 7.0 7.6 7.5 7.7 8.0 8.1 8.2 8.4 7.8 7.6 8.2 9.2 Latin America and Caribbean 6.4 7.5 6.7 9.8 12.5 13.9 15.5 16.9 12.9 13.6 13.9 14.2 14.9 15.5 16.0 16.3 16.6 17.6 17.2 17.0 16.5 Middle East and N. Africa 7.0 12.0 13.8 19.2 13.2 9.7 10.1 10.8 11.3 10.1 9.9 9.2 9.9 10.2 10.1 10.6 10.6 11.3 10.4 10.9 11.1 South Asia 10.3 9.8 9.4 10.1 8.1 7.8 6.7 4.2 8.1 8.4 8.1 6.8 7.3 6.9 5.8 4.8 3.5 4.4 5.1 5.1 4.9 Sub-Saharan Africa 7.5 10.1 11.1 8.1 8.6 9.2 9.8 8.4 8.5 8.7 9.2 9.7 9.9 10.1 9.3 8.3 8.4 8.5 7.6 7.5 7.5 1 Inflation is calculated as the GDP-weighted average for all groups. Trade and Finance indicators expressed as %ch y/y, except International Reserves are %ch p/p and trade quarterly figures are %ch q/q, annualized 2014 2015 2010 2011 2012 2013 Q1 Q2 Q3 Q4 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Exports, Nominal, US$, S.A. World 22.0 19.2 0.3 1.8 -2.3 3.2 2.7 -16.1 2.7 2.4 3.8 3.2 5.6 0.6 2.6 -1.8 -4.6 -4.0 -11.3 -6.9 -13.7 High Income Countries 19.5 18.5 -1.1 1.3 0.7 0.9 -1.4 -19.4 5.2 3.2 4.1 2.5 5.0 -0.4 0.9 -3.5 -6.3 -5.8 -12.7 -12.9 -13.5 Developing Countries 28.3 20.8 3.5 3.1 -8.8 8.5 12.5 -8.6 -2.8 0.6 3.3 4.8 7.2 2.9 6.5 2.1 -0.7 -0.1 -8.1 7.5 -14.1 East Asia and Pacific 30.8 19.7 6.3 6.5 -12.2 15.9 19.9 2.9 -3.6 2.2 5.5 7.7 11.2 8.2 12.7 8.3 3.5 5.8 -3.3 29.4 -11.7 Europe and Central Asia 15.5 20.3 -0.1 -0.2 8.1 -5.0 -6.8 -28.9 9.0 3.0 6.2 5.1 5.5 -4.1 -1.0 -6.3 -9.4 -11.8 -13.2 -16.3 -17.8 Latin America and Caribbean 28.1 23.2 1.7 0.6 -9.2 8.8 3.2 -25.2 -2.8 -0.3 1.3 1.8 5.8 -0.6 0.0 -4.3 -8.7 -6.6 -8.2 -12.7 -4.9 Middle East and N. Africa 24.0 15.6 5.2 -11.0 -4.1 -12.5 28.1 -32.3 -13.2 -13.1 -8.8 -9.3 -4.4 -8.5 -1.8 -5.1 -7.3 -10.6 -29.0 -- South Asia 34.3 31.6 -1.8 6.2 -7.5 4.5 6.0 -0.7 1.5 4.5 10.1 8.3 -0.5 1.1 -0.8 -5.7 8.3 -1.0 -7.7 -11.7 -18.5 Sub-Saharan Africa 32.6 19.9 -2.6 -0.6 -6.1 -7.7 -1.6 -17.7 -6.8 -4.8 -8.6 -2.7 -1.4 -10.2 -2.2 -8.5 -8.4 -8.4 -27.6 - - Imports, Nominal, US$, S.A. World 21.0 19.6 0.7 1.3 4.4 -1.9 1.6 -15.9 3.9 1.9 1.9 5.4 3.3 0.6 3.9 -1.9 -4.2 -3.7 -13.9 -13.6 -11.6 High Income Countries 17.9 17.7 -1.0 0.3 5.1 0.6 -2.8 -18.7 7.6 4.4 4.1 6.4 5.4 0.4 2.2 -3.2 -5.4 -4.6 -13.8 -13.7 -13.0 Developing Countries 29.7 24.5 4.6 3.6 2.9 -7.4 12.4 -9.3 -3.8 -3.2 -2.8 3.3 -1.2 1.0 7.7 0.9 -1.4 -1.7 -14.0 -13.3 -8.3 East Asia and Pacific 37.3 24.1 5.7 6.2 4.9 -15.1 14.3 -9.0 -9.9 -2.3 -3.6 3.8 -2.4 -0.7 7.2 2.9 -5.2 -3.4 -17.6 -17.4 -9.8 Europe and Central Asia 20.6 27.1 -0.4 2.9 -10.5 -5.7 -1.5 -9.9 -0.4 -5.1 -3.0 0.0 -6.5 -2.3 -3.1 -6.0 -6.9 -8.0 -15.4 -14.0 -12.9 Latin America and Caribbean 29.0 22.3 3.8 2.9 4.0 -3.1 5.8 -7.3 2.9 -4.5 -2.2 2.8 -0.5 -1.7 7.7 -4.2 0.2 3.4 -7.7 -8.0 -0.3 Middle East and N. Africa 14.8 17.4 10.4 1.2 2.5 -1.3 19.2 -21.3 3.7 2.3 3.5 -1.5 2.9 11.4 8.8 0.1 -3.2 -0.7 -12.6 -- South Asia 33.9 31.4 4.0 -4.0 10.4 7.8 36.5 -13.0 1.6 -9.9 -10.0 8.8 4.1 7.0 23.6 7.2 21.5 -1.2 -12.1 -12.8 -11.4 Sub-Saharan Africa 13.0 24.8 4.3 2.8 1.4 14.7 1.4 6.7 4.7 1.3 6.0 3.8 3.5 6.2 9.6 5.4 3.1 9.2 -1.6 - - International Reserves, US$ High Income Countries 10.2 11.3 9.2 3.6 0.8 0.7 -1.8 -1.4 0.3 0.3 0.0 0.5 -0.4 0.0 -1.3 -0.6 0.0 -0.9 0.2 -0.1 -0.6 Developing Countries 15.6 10.5 5.2 8.2 1.8 1.5 -1.9 -1.7 0.7 1.0 0.1 0.4 -0.2 -0.1 -1.7 -0.7 -0.3 -0.7 -0.7 -0.2 -1.6 East Asia and Pacific 19.3 11.9 4.5 12.2 3.0 1.2 -2.5 -1.4 0.8 0.9 0.1 0.3 -0.5 0.1 -2.1 -0.8 -0.3 -0.4 -0.8 -0.2 -1.9 Europe and Central Asia 9.3 5.5 7.8 3.6 -2.9 3.4 -1.7 -7.2 0.6 1.6 0.7 1.0 -1.1 1.1 -1.7 -2.0 -1.1 -4.2 -0.9 -3.2 -2.1 Latin America and Caribbean 16.2 16.3 8.4 -1.1 0.2 3.4 1.2 -1.2 0.1 1.5 0.6 1.2 1.1 0.0 0.1 -0.1 0.7 -1.8 0.5 -0.3 -0.4 Middle East and N. Africa 6.1 3.0 5.9 3.0 -1.9 -2.2 -3.8 -3.2 -0.8 -0.8 -0.9 -0.6 -0.4 -1.1 -2.3 -0.2 -1.0 -2.1 -3.7 -0.8 - South Asia 6.1 -0.9 0.4 -0.2 3.8 5.6 -0.6 2.1 3.3 2.9 1.1 1.5 1.3 -0.4 -1.4 0.5 -0.3 1.9 1.9 3.3 1.0 9 May 2015 Financial Markets 1 2013 2014 2014 2015 MRV Chg since 2010 2011 2012 2013 Q4 Q1 Q2 Q3 Q4 Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Sep-12 '08 3 Interest rates and LIBOR (%) U.S. Fed Funds Effective 0.18 0.10 0.14 0.11 0.09 0.07 0.09 0.09 0.10 0.10 0.09 0.09 0.09 0.09 0.09 0.12 0.12 0.11 0.11 0.12 0.13 -1.97 ECB repo 1.00 1.25 0.88 0.55 0.35 0.25 0.22 0.12 0.05 0.16 0.15 0.15 0.06 0.05 0.05 0.05 0.05 0.05 0.05 0.00 0.05 -4.20 US$ LIBOR 3-months 0.34 0.34 0.43 0.27 0.24 0.24 0.23 0.23 0.24 0.23 0.23 0.23 0.23 0.23 0.23 0.25 0.25 0.26 0.27 0.28 0.29 -2.53 EURIBOR 3-months 0.75 1.34 0.49 0.15 0.20 0.27 0.27 0.13 0.00 0.21 0.17 0.16 0.06 0.06 0.06 0.00 0.00 0.00 0.00 0.00 0.06 -4.89 US 10-yr Treasury yield 3.20 2.77 1.79 2.33 2.73 2.75 2.61 2.49 2.27 2.59 2.53 2.41 2.52 2.29 2.32 2.20 1.88 1.98 2.04 1.92 2.15 -1.57 German Bund, 10 yr 2.78 2.65 1.57 1.63 1.79 1.68 1.43 1.07 0.77 1.35 1.19 1.01 1.00 0.87 0.79 0.64 0.45 0.35 0.26 0.16 0.55 -3.64 Spreads (basis points) JP Morgan Emerging Markets 301 341 342 319 342 352 300 301 367 282 282 310 312 349 350 402 443 420 411 388 374 17 Asia 206 218 216 219 237 231 197 195 202 189 195 202 187 207 193 206 233 215 208 206 197 -99 Europe 247 301 320 267 290 301 265 262 319 236 244 274 270 295 293 368 417 396 384 350 326 13 Latin America & Caribbean 360 404 393 379 409 429 360 366 471 343 336 373 390 443 455 516 560 531 521 488 482 94 Middle East 342 366 449 435 428 408 376 369 398 360 372 379 358 395 388 411 452 452 443 441 412 -86 Africa 274 364 337 322 338 332 287 280 319 278 278 292 270 307 306 343 385 364 371 361 348 348 Stock Indices (end of period) 2 Global (MSCI) 331 300 340 409 409 411 429 417 417 429 423 432 417 419 426 417 410 432 425 436 436 36.2 High-Income ($ Index) 1280 1183 1339 1661 1661 1674 1743 1698 1710 1743 1714 1749 1698 1708 1740 1710 1678 1773 1741 1778 1781 38.8 United States (S&P-500) 1258 1258 1426 1848 1848 1872 1960 1972 2059 1960 1931 2003 1972 2018 2068 2059 1995 2105 2068 2086 2104 68.1 Euro Area (S&P-350$) 1124 1005 1143 1339 1339 1361 1401 1411 1401 1401 1380 1404 1411 1382 1425 1401 1502 1603 1624 1618 1648 42.6 Japan (Nikkei-225) 10229 8455 10395 16291 16291 14828 15162 16174 0 15162 15621 15425 16174 16414 17460 0 17674 18798 19207 19520 20437 67.3 Developing Markets (MSCI) 1151 916 1055 1003 1003 995 1051 1005 956 1051 1066 1088 1005 1016 1005 956 962 990 975 1048 1026 20.0 EM Asia 468 379 447 446 446 444 472 460 457 472 485 489 460 467 467 457 468 479 481 514 510 55.6 EM Europe 529 395 473 438 438 409 435 374 297 435 403 399 374 369 353 297 286 313 302 338 329 -35.3 EM Europe & Middle East 450 336 402 372 372 348 360 321 257 360 340 337 321 314 303 257 247 269 258 286 280 -31.7 EM Latin America & Caribbean 4614 3602 3798 3201 3201 3194 3370 3171 2728 3370 3399 3664 3171 3158 3008 2728 2555 2654 2451 2693 2540 -28.2 Exchange Rates (LCU / USD) High Income Euro Area 0.76 0.72 0.78 0.75 0.73 0.73 0.73 0.76 0.80 0.74 0.74 0.75 0.78 0.79 0.80 0.81 0.86 0.88 0.92 0.92 0.92 30.7 Japan 87.76 79.74 79.85 97.61 100.51 102.78 102.14 104.04 114.62 102.07 101.75 102.98 107.39 108.02 116.40 119.44 118.33 118.78 120.37 119.53 123.09 14.0 Developing Brazil 1.76 1.67 1.95 2.16 2.28 2.36 2.23 2.28 2.55 2.23 2.22 2.27 2.34 2.45 2.55 2.65 2.64 2.82 3.15 3.04 3.15 77.1 China 6.77 6.46 6.31 6.15 6.09 6.10 6.23 6.16 6.15 6.23 6.20 6.15 6.14 6.13 6.13 6.19 6.22 6.25 6.24 6.20 6.20 -9.4 Egypt 5.63 5.94 6.07 6.87 6.89 6.96 7.07 7.15 7.15 7.15 7.15 7.15 7.15 7.15 7.15 7.15 7.27 7.59 7.60 7.60 7.63 40.7 India 45.73 46.67 53.41 58.55 62.00 61.75 59.82 60.59 61.96 59.76 60.06 60.83 60.87 61.40 61.70 62.77 62.20 62.06 62.48 62.69 63.98 40.0 Russia 30.37 29.41 31.06 31.86 32.56 35.07 34.96 36.31 47.98 34.37 34.75 36.17 38.01 40.96 46.30 56.67 64.33 64.16 60.13 52.82 50.91 99.4 South Africa 7.32 7.26 8.21 9.65 10.16 10.86 10.54 10.77 11.22 10.68 10.66 10.66 10.99 11.06 11.09 11.51 11.56 11.58 12.08 11.99 12.07 51.1 Memo: USA nominal effective rate 100.19 98.53 102.00 104.76 106.30 108.31 108.66 110.57 114.05 109.31 109.43 110.61 111.67 112.66 113.83 115.67 117.82 119.65 121.73 121.39 122.15 27.5 1 MRV = Most Recent Value. 2 MSCI Indices for Asia, Africa, and Europe and C. Asia, for 2008 are calculated from February-December, due to data availability. 3 Change expressed in levels for interest rates and spreads; percent change for stock market and exchange rates. Commodity Prices 2013 2014 2014 MRV Chg since 2010 2011 2012 2013 Q4 Q1 Q2 Q3 Q4 Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Sep-12 '08 3 1 Oil price, $/b, nominal 79 104 105 104 105 104 106 100 75 108 105 100 96 86 77 61 47 55 53 57 61 -37.4 Non - Oil Index 2 .. 97 87 80 76 76 78 74 71 77 76 75 72 71 72 70 67 66 64 64 64 .. 3 Metals and Minerals Index 103 117 99 94 92 88 87 89 83 87 90 90 87 84 84 80 75 74 73 73 74 -29.2 Baltic Dry Index 4 2755 1545 916 1215 1876 1375 980 954 1105 912 796 944 1123 1101 1332 881 727 539 576 591 584 -87.8 1 Simple average of Brent, Dubai and WTI. 2 Base Date = Jan 3, 2011 due to data availability. The Index component combination in the Weekly tables differs from that of the Pink Sheet. 3 Base Date = Jan 4, 2010 due to data availability. The Index component combination in the Weekly tables differs from that of the Pink Sheet. 4 Base Date = May 1, 1985 10