Outline

2

Outline

3

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