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Geneva, 23th – 25th November 2015
Exogenous Shocks and Debt
by
Mr. John Panzer Director
Global Practice for Macroeconomics & Fiscal Management The World Bank Group
The views expressed are those of the author and do not necessarily reflect the views of UNCTAD
Exogenous Shocks and Debt In Developing Countries
John Panzer
Director Global Practice for Macroeconomics
& Fiscal Management
Outline
3
• Development and Poverty Reduction
• Debt in Developing Countries (LICs)
• Outlook and Vulnerabilities
• Policy Options
4
Era of unprecedented growth
Source: World Bank Global Monitoring Report
0
1
2
3
4
5
6
7
World Emerging Markets andDeveloping Countries
Sub-Saharan Africa Low Income DevelopingCountries
Ave
rage
Re
al G
DP
Gro
wth
(%
)
2001-2008 2009-2012 2013
Real GDP Growth by Country Group
Positive but Uneven Outcomes in Twin
Goals Economic developments leading to IDA17
World
IDA
IDA FCS
IDA [SERIES NAME]
0%
10%
20%
30%
40%
50%
60%
70%
198
1
198
4
198
7
199
0
199
3
199
6
199
9
200
2
200
5
200
8
201
0
201
1
201
2
Povert
y R
ate
Average
-6
-4
-2
0
2
4
6
8
10
12
14
Bo
livia
Ta
nzan
ia
Cam
bo
dia
Con
go
, R
ep.
Nep
al
Bh
uta
n
Vie
tna
m
Ta
jikis
tan
Kyrg
yz R
ep
ub
lic
Mo
ldova
Nic
ara
gu
a
Rw
an
da
Hon
du
ras
Mo
zam
biq
ue
Uga
nd
a
Pa
kis
tan
Sri
La
nka
Ma
li
Ba
ng
lade
sh
Lao
PD
R
Se
ne
ga
l
Nig
eri
a
Eth
iop
ia
Ma
law
i
To
go
Ma
da
ga
sca
r
In p
erc
ent*
Income growth of bottom 40% Income growth of total population
Source: World Development Indicators.
* Average annual growth in mean income/consumption per
capita during a 5-year period between 2002-2012.
Source: PovCal Net, The World Bank.
Strong (but uneven) progress against twin goals
Convergence in poverty reduction Growth inclusive in IDA countries
Benign external environment
Source: World Development Indicators, DSAs
LIC commodity exporters
80
90
100
110
120
130
140
150
0
50
100
150
200
250
300
350
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Exp
ort
s
Index (
100=
2001)
Co
mm
od
ity P
rice
s a
nd
FD
I In
de
x (
10
0=
20
01
)
Commodity Price index FDI Exports
7
LICs able to diversify financing
Debt disbursements to Low Income Countries by type
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Multilateral Bilaterals Other Private Commercial Banks Bonds
8
Broader access to global bond markets
Global Bond Issuances – Sub-Saharan Africa (Excl. SA)
0
1
2
3
4
5
6
7
2009 2010 2011 2012 2013 2014 2015
Bill
ions (
US
D)
Angola Cote d'Iviore Ethiopia Gabon Ghana
Kenya Mozambique Namibia Nigeria Rwanda
Senegal Seychelles Tanzania Zambia
Source: World Development Indicators
9
HIPC gains sustained A
vera
ge E
xte
rnal D
ebt to
GD
P
DP = HIPC Decision Point
Change in External Debt After HIPC
0
20
40
60
80
100
120
140
160
180
Average 25 Percentile 75 Percentile
10
15 16 17 19 22 23 24 23 22 20
18 18 19 22
22 22 24 29
30 34
26 26 26 24 22 23 20
16 19 19
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Low Moderate High/In Debt Distress
Until very recently, reduced risks of debt distress
Number of Countries by Risk Rating and Year
Changing Context
Source: World Economic Outlook, April 2014 and October 2015, IMF.
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
2016 2017 2018 2019
CA
B in p
erc
ent
of G
DP
Higher Current Account Deficits
0.0
10.0
20.0
30.0
40.0
50.0
60.0
2016 2017 2018 2019
Gro
ss p
ublic
debt
in p
erc
ent
of
GD
P
Larger and Increasing Projected Debt
0
20
40
60
80
100
120
140
160
180
2016 2017 2018 2019
Index (
2005=
100)*
Lower Projected Commodity Prices
*Commodity Price Index includes both Fuel and Non-Fuel Price Indices
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
2016 2017 2018 2019Annual perc
enta
ge c
hange
Lower Projected Growth
Outlook in April 2014 Outlook in October 2015
A more challenging global outlook
Transitioning into headwinds
12
• Country specific
• Oil and commodity exporters vs. diversified economies
• Buffers and vulnerabilities
13
Oil Exporters
1) Fiscal
2) External
Commodity Exporters
1) External
2) Fiscal
Diversified
1) Fiscal
Transitioning into headwinds - vulnerabilities
14
Transitioning into headwinds – external sector and
erosion of buffers Change in FX Reserves and Depreciation Since 2014
Source: World Bank Survey of Commodity Exporters
-80%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
-30%
-25%
-20%
-15%
-10%
-5%
0%
Ch
an
ge
in
LC
U v
alu
e a
ga
inst U
SD
Ch
an
ge
in
Re
se
rve
s
Change in FX Reserves (%) Change in FX vs. USD
15
• Speed of adjustment a function of policy space • Market debt
• Reserves
• IFIs
• If possible, support domestic demand
• In the longer run: • Debt risk management
• Diversification (RER, structural reforms)
Policy options in an era of headwinds
Policy options in an Era of “Headwinds”
• Efficiency in Public Finance
o Domestic Resource Mobilization and its cross-cutting effects
o Public Investment and debt management to sustain
infrastructure development
o Human capital
But external financing is critical
• Relentless focus on productivity/transformation
o Ambition in policy reforms in agriculture, resource
management and infrastructure
• Importance of Equity and Measurement
o Constantly checking and measuring progress
How we are helping countries transition and increase gains
Policy options in an era of “headwinds”
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