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Challenging global economic outlookRecent developments
Global growth is projected at 2.6 percent in 2019, down from 3.0 percent in 2018 (World Bank’s Global Economic Prospects, published June 4, 2019).
The deceleration reflects: weakness in international trade; investment slowdown; and trade tensions.
Growth in EMDEs, which is expected to gain momentum in 2020 (albeit, less than we thought in June 2019), reflects reversal of growth prospects in stressed economies rather than broad-based recovery (next Global Economic Prospects to be published January 7, 2020).Source: World Bank, Global Economic Prospects (June 2019 edition).
Note: EMDE stands for Emerging Markets and Developing Economies.
1.3
2.02.3
1.7
2.32.1
1.71.5 1.5
5.0
4.5
3.84.1
4.54.3
4.0
4.6 4.6
0
1
2
3
4
5
6
2013 2014 2015 2016 2017 2018 2019E 2020F 2021F
Advanced Economies EMDEs World
Percent
4
3.6
4.0
4.4
4.8
5.2
1.6
2.0
2.4
2.8
3.2
Apr-18 Aug-18 Dec-18 Apr-19 Aug-19
World [left] Advanced economies [left] EMDEs [right]
Percent change, annual
Weakening growth and industrial production for 2019Global GDP growth
Sources: Consensus Economics and World Bank.Note: Average GDP growth in 2019 based on 59 economies (including 32 advanced economies and 27 EMDEs) for which data of consensus forecasts are available, weighted by GDP in constant 2010 U.S. dollars for 2018. Last observation is October 28, 2019.
-5
0
5
10
15
Jan Feb Mar Apr May Jun Jul Aug Sep
World Advanced economies EMDEs
Percent, 3-month moving average, annualized
Global industrial production growth
5
49
50
51
52
53
54
55
Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19
ManufacturingServicesAverage
Weak global manufacturing and trade data
Index, 50+ = expansionGlobal Purchasing Managers Index New export orders
Percent, y/y
47
49
51
53
55
-3
0
3
6
9
Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19
Container shipping [left] New export orders [right]
Sources: Haver Analytics, Institute of Shipping Economics and Logistics, World Bank.Notes: PMI readings above (below) 50 indicate expansion (contraction) in economic activity. Last observation is October 2019. 6
-0.20
0.00
0.20
0.40
0.60
0.80
1.00
1.20
110
115
120
125
130
135
Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19
Strong dollar and low interest rate environment
Source: Bloomberg, Federal Reserve Bank of St. Louis.Note: The US dollar index is a broad trade weighted index for goods (DTWEXB). The U.S. T-bill represents the 10-Year Treasury inflation-indexed security, constant maturity, not seasonally adjusted (DFII10). Last observation is October 1 (DTWEXB) and October 7 (DFII10), 2019.
US$ index
U.S. dollar [left] U.S. T-bill [right]
Percent
7
Commodity price indexes stabilized
30
60
90
120
150
Mar-11 Nov-11 Jul-12 Mar-13 Nov-13 Jul-14 Mar-15 Nov-15 Jul-16 Mar-17 Nov-17 Jul-18 Mar-19
Index, nominal terms, 2010 = 100
Source: World BankNote: Last observation is October 2019.
Energy
Agriculture
Metals
8
Outline
9
The “equilibrium” price of oil has changed
20
40
60
80
100
120
Jan-11 Sep-11 May-12 Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16 Jan-17 Sep-17 May-18 Jan-19 Sep-19
$ US/bbl, nominal
Source: World BankNote: Last observation is October 2019. 10
$104/bbl
$55/bbl
Real oil prices swing around their half-century average
Source: World Bank.Note: Price represents the average Brent, Dubai, and WTI. Last observation is October 2019.
0
30
60
90
120
150
1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020
US$/bbl, deflated by U.S. CPI (Jan 2017=100)
1972-2019 average: $56/bbl
Two boom/bust price periods after WWII1972 to 1986: Supply driven-cycle associated with oil supply disruption
and major downturn in the global economy. High prices induced production from “unconventional” sources, including Alaska, Gulf of Mexico, and North Sea.
2003 to 2014: Demand-driven cycle with no disruption in the global economy (during the spike) or boost to the global economy (during the collapse). High prices induced production from “unconventional” sources, including US shale, Canadian oil sands, and biofuels.
11
OPEC cuts are non-OPEC gains
12
Source: Energy Information Administration and World Bank.Notes: Change in crude oil production since October 2016, the date of the first OPEC production cut agreement. OPEC excludes Qatar. Last observation is September 2019.
-5.0
-2.5
0.0
2.5
5.0
Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19
Non-OPEC OPEC Total
Mb/d
Oil production: A tale of two extremes
Source: International Energy Agency, US Energy Information Administration, and World Bank.Notes: Last observation is October 2019.
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Feb-11 Jun-12 Oct-13 Feb-15 Jun-16 Oct-17 Feb-19
Mb/d
Venezuela
Iran
Iran and Venezuela
13
3.0
5.0
7.0
9.0
11.0
13.0
Jan-71 Jan-79 Jan-87 Jan-95 Jan-03 Jan-11 Jan-19
Mb/d United StatesShaleboom
0
2
4
6
8
10
12
14
Imports Exports Imports Exports
Crude oilNatural gas liquidsPetroleum products
U.S. on track to be net oil exporter by 2020 or 2021
Source: U.S. Energy Information Administration and World Bank.
2008
Mb/d
2018
14
0.8
1.0
1.2
1.4
1.6
1.8
Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19
Substantial downward revisions to 2019 oil demand growth
US Energy Information Administration
OPECInternational Energy Agency
Source: EIA, IEA, and OPEC.Notes: Last observation is October 2019.
Mb/d
15
Outline
16
Metal prices driven by different fundamentals
30
75
120
165
210
60
70
80
90
100
110
120
130
Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20
Index, 2010=100 $/mt
Source: World BankNote: Last observation is October 2019. 17
Base metals index [left]
Iron ore [right]
China dominates metal consumption
Source: World Bank and World Bureau of Metal StatisticsNotes: Last observation is 2018Q4.
0
4
8
12
16
1995Q1 1997Q1 1999Q1 2001Q1 2003Q1 2005Q1 2007Q1 2009Q1 2011Q1 2013Q1 2015Q1 2017Q1
Million metric tons
Rest of the world
China
18
Outline
19
Agricultural prices have enjoyed 5 years of stability
60
80
100
120
140
Jan-11 Sep-11 May-12 Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16 Jan-17 Sep-17 May-18 Jan-19 Sep-19
Index, nominal terms, 2010 = 100
Source: World Bank.Note: Last observation is October 2019.
Agricultural commodity prices have been remarkably stable since 2015
Food
Raw materials
Beverages
20
Stock-to-use ratios indicate ample supplies
0.10
0.15
0.20
0.25
0.30
0.35
0.40
2000 2003 2006 2009 2012 2015 2018
Maize Rice Wheat
Source: U.S. Department of Agriculture (October 2019 update). Notes: The aggregate stocks-to-use ratio, which comprises of 12 grains and edible oils, has been aggregated according to calorific content. Year refers to crop season (i.e. 2019 is for the 2019-20 crop season).
Ratio
21
0.31
0.17
0.30
0.28
0.10
0.15
0.20
0.25
0.30
0.35
0.40
2000 2003 2006 2009 2012 2015 2018
Ratio
Grains Aggregate for 12 commodities
Outline
22
Trade frictions: So far, a U.S.-China story
Feb – Oct 2011
23
Source: Bown (2019), World Bank.Notes: Tariffs represent trade-weighted averages. Updated September 2019.
Average G20 tariffs
0
5
10
15
20
25
30
Jan-
2018
Feb-
2018
Mar
-201
8
Apr-
2018
May
-18
Jul-1
8
Jul-1
8
Aug-
18
Sep-
18
Nov
-18
Jan-
19
Feb-
19
May
-19
Sep-
19
Oct
-19
Dec-
19
China's tariff on US exports
US tariff on Chinese exports
US-China bilateral tariffs
0
2
4
6
8
10
12
Braz
il
Indi
a
Chin
a
Russ
ia EU U.S
.
Japa
n
Mex
ico
2017 20182019 ConsideredG20 average
Percent Percent
African Swine Fever: A black swan in global agricultural markets
24
-4.5
-5.6
-4.1
-4.3
-2.3
-1.5
-0.9
-1.2
-5.7
-6.0 -5.0 -4.0 -3.0 -2.0 -1.0 0.0
Arab oil embargo (Oct 1973 - Mar 1974)
Iranian revolution (Nov 1978 - Apr 1979)
Iran-Iraq war (Oct 1980 - Jan 1981)
Kuwait invasion (Aug 1990 - Jan 1991)
Iraq war (Mar - Dec 2003)
Libyan civil war (Feb - Oct 2011)
Sanctions on Iran, first (Nov 2011 - Oct 2012)
Sanctions on Iran, second (Jul 2018 - )
Saudi attacks (Sep 2019 )
Mar – Dec 2003
Conflict-driven oil supply reductions
mb/dSource: International Energy Agency and World Bank
Feb – Oct 2011
25
55
58
61
64
67
70
Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 Jun-24 Dec-24
Sep 13, 2019 Sep 16, 2019 Oct 15, 2019
The Brent curve reclaimed its pre-attack shape quicklyUS $/bbl
Source: Bloomberg, Intercontinental Exchange, and World Bank.Note: Closing futures prices. 26
Outline
27
Where are commodity prices heading in the short term?
Where are commodity prices heading in the long term?
0
40
80
120
160
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030Source: World Bank.Note: The period 2019-30 refers to forecasts
Agriculture
Metals
Energy
Index, constant (2010 = 100)
Forecasts as of October 29, 2019
29
30
www.worldbank.org/commodities