IMF/World Bank 2007: Growth potential

The prolonged struggle to oust Paul Wolfowitz from his role as president of the World Bank dispirited and distracted its staff, while also solidifying opposition within the institution to the policies of the Bush administration. The World Bank is based in Washington, the US is its biggest shareholder and it is by tradition run by an American. But it has a polyglot staff and the Wolfowitz administration saw internal dissatisfaction with perceived American domination spread from the junior ranks up to executive directors. Wolfowitz was best known...

Emerging market borrowers have come through the summer storms battered but unbowed. This description could also apply to staff at the World Bank after the turmoil surrounding the forced departure of former president Paul Wolfowitz. Incoming World Bank head Robert Zoellick faces a difficult task in restoring morale among staff at the supranational agency, while not giving ground on the need to tackle corruption in its client countries. Zoellick also has to continue the work of reshaping the way the World Bank pursues its goal of alleviating...

Despite a subdued performance by the US economy, GDP growth in the emerging markets as a whole should be close to 7% in 2007, well above expectations at the start of the year. This represents the fourth consecutive year of very robust expansion. Out of 21 key emerging economies, growth estimates have risen in 14 (with substantial upgrades in China, India and Russia), remained broadly unchanged in five, and downgraded in only two – Thailand (affected by 2006’s military coup and frequent policy changes) and Mexico (the country most obviously...

The Inter-American Development Bank (IDB) has changed. Since new president Luis Alberto Moreno announced that the multilateral would become more "nimble and flexible" in a meeting with members in Brazil in 2005, the bank has moved with giant steps toward its stated goal. The IDB was especially serious in the execution of its promise to streamline its lending policies to meet the needs of its member countries in a fast-paced complex financial environment. It stepped up its securitisation activities and increased its lending to corporations...

Calls for change at the Asian Development Bank are nothing new. They have been repeated by external critics of the bank and senior ADB members frequently over the past decade. But a report released in April by an independent panel of experts tasked with advising the bank’s president Haruhiko Kuroda suggested that the institution needs to change or risk withering away. The Eminent Persons Group (EPG) report made the point in no uncertain terms: change now or risk becoming irrelevant. The group, which was chaired by Supachai Panitchpakdi,...

Weather risk management consulting now has a formal role in World Bank activity, but the complexity of the initiative makes its future as unpredictable as the weather itself. Interest in finding a role for weather risk management in global social protection and climate change projects continues to grow, however. The idea that weather risk management can be used as part of aid organisation-led initiatives in developing countries dates back to the 1980s. It was not until 1999, when Rodney Lester led the first World Bank feasibility study on...

South Africa's economy dwarfs that of every other country in Africa, representing one quarter of the continent's GDP. However, apartheid shackled it, barring the majority of the population from productive jobs and it has taken South Africa nearly fifteen years to start to turn around. "The South African economy has pretty much transformed itself in recent years, with interest rates at their lowest for 30 years and growth close to 5%, with 6% feasible," says Razia Khan, regional head of economics, Africa at Standard Chartered. This economic...

Over the past decade, China has increased its presence in Africa. In order to secure oil, uranium, diamonds and other natural resources, the Chinese government has enticed African counterparts with investment, loans and trade deals. Trade between the continents – dominated by oil, metals and minerals and arms sales from China – increased from US$10bn in 2000 to US$50bn in 2006. Chinese President Hu Jintau says China intends to double direct investment on the continent to US$20bn over the next three years. The People’s Republic has become Africa...

The securitisation markets in EEMEA and Latin America are growing in leaps and bounds. Despite the recent spike in risk aversion toward the asset class, strong local demand and the unique characteristics of structures emerging from these regions have helped maintain momentum. So far US jitters have had little, if any, impact on risk perception, with participants forecasting more deals on the horizon. "Fitch has not changed the rating on any of its emerging market deals," said Michael Hoelter, director in emerging markets at Fitch. "The larger...

In an ironic reversal of fortunes, the fault lines in the most recent market upset came from the United States, while the old troublemakers in emerging market countries essentially watched from the sidelines and waited to see if they would be hit by the fallout. EM assets largely held their own, or at least saw investors distinguishing between credit risk, with Venezuela and Argentina taking a pounding on the back of weak economic policies and perhaps heavier positioning by more volatile hedge funds, while stronger credits like Brazil...

The Venezuelan president has dismissed the notion that he wishes to fill the boots of the IMF. But many observers think otherwise as Chavez routinely tours the region and other parts of the globe, offering various types of aid. In that sense, Venezuela is pushing historical precedents in Latin America. "I can't remember any Latin American government spreading influence and wealth around the region like this one," said Arturo Porzecanski, professor of international finance at American University in Washington DC, and a Wall Street veteran....

While the EM pipeline was firmly closed during the global credit crunch, the longer term outlook for the asset class is relatively healthy, supported by a growing army of cross-over investors – led by US pension funds – who will continue to expand their presence in the EM space. In the absence of new government paper, Russian quasi-sovereign supply has enjoyed particularly broad demand of late with Gazprom's second deal of the 2007 emphasising the upturn in interest from outside the traditional EM world. The A3/BBB rated gas giant attracted...