Académique Documents
Professionnel Documents
Culture Documents
Contents
World............................................................................................................................................... 6
Dollar Exchange Rates................................................................................................................... 7
United States................................................................................................................................... 8
Euro-zone........................................................................................................................................ 9
Germany........................................................................................................................................ 10
France ............................................................................................................................................ 11
Italy ................................................................................................................................................ 12
Japan .............................................................................................................................................. 13
United Kingdom .......................................................................................................................... 14
Canada........................................................................................................................................... 15
Australia........................................................................................................................................ 16
Norway.......................................................................................................................................... 17
Sweden .......................................................................................................................................... 18
Switzerland ................................................................................................................................... 19
Brazil.............................................................................................................................................. 20
China.............................................................................................................................................. 21
India............................................................................................................................................... 22
Mexico ........................................................................................................................................... 23
Poland............................................................................................................................................ 24
Russia............................................................................................................................................. 25
Singapore ...................................................................................................................................... 26
South Africa .................................................................................................................................. 27
South Korea .................................................................................................................................. 28
Taiwan ........................................................................................................................................... 29
Turkey ........................................................................................................................................... 30
Energy Markets ............................................................................................................................ 31
2
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
Executive Summary
Global Economy is in Deepest Recession in Decades
The heady days of 2004-2007, when global GDP growth averaged about 5% per Global economic
annum, seem like a distant memory now. Growth in most countries slowed in the activity went into
first half of 2008 due in part to monetary tightening, the unprecedented rise in energy freefall in the fourth
prices and dislocations in credit markets. However, global economic activity went quarter of 2008.
into freefall in the fourth quarter of last year as credit markets froze up in the wake of
Lehman Brothers’ failure. Industrial production in the OECD countries (i.e., the
thirty most developed economies in the world) plunged 7.6% in November, the
sharpest year-over-year contraction since records began in 1975.
We forecast global GDP will decline 0.3% this year. Although our projection may not Global GDP will
sound “bad,” global GDP has never contracted, at least not since the International probably contract in
Monetary Fund (IMF) began calculating the series in 1970. Every G-7 economy is in 2009, the first year of
deep recession at present, and growth in the developed world likely will remain negative growth since
negative over the next few quarters. The emerging world is hardly immune to the records began in 1970.
sharp reduction in global trade that is underway. Although not every developing
country will experience outright recession, growth in the developing world has
already slowed sharply and further weakening seems very likely. Developing
economies that had over-leveraged financial sectors – many countries in Eastern
Europe would fall into this category – will be especially hard hit. A number of
countries, including Belarus, Hungary, Iceland, Latvia, Pakistan and Ukraine, have
already gone to the IMF with hat in hand. There probably will be more to follow.
What will turn the situation around? For starters, governments have responded to Policy easing should
the crisis by announcing steps to shore up their financial systems. Although the help to stabilize
global financial system is hardly back to “normal”, some segments of the credit economies later this
markets are starting to function again. In addition, governments are attempting to year.
stimulate their economies via expansionary macroeconomic policies. Significantly
lower interest rates and fiscal stimulus should help to stabilize economic activity
later this year. The sharp decline in inflation in most countries over the past few
months should help to shore up consumer spending by supporting real income.
Global growth should be stronger in 2010 than in 2009, but it will probably fall short
of its long-run average (3.7% per annum). Underlying all of our projections is our
assumption that policymakers will take the necessary steps to prevent the global
financial system from locking up again à la last autumn. If that assumption proves to
be overly optimistic, then global economic activity would contract even more than
our already grim outlook projects.
The U.S. economy has been in recession since December 2007, and it likely will The eventual recovery
remain there until this autumn. Unlike the strong recoveries that followed the deep in the United States
recessions of 1973-75 and 1981-82, the upturn that we project will take root later this likely will be very
year probably will be relatively weak, at least initially. Growth in consumer spending sluggish.
probably will be very sluggish over the next few years as consumers repair battered
balance sheets and raise abysmally low saving rates. We project U.S. real GDP will
grow about 1% in 2010, well below the 3% annual growth rate the economy averaged
between 1992 and 2007.
Deep recessions are underway as well in Canada, the Euro-zone and the United
Kingdom. On a peak-to-trough basis, real GDP in these economies will probably
contract 2 to 4%, which are deep recessions by any measure. Some observers use the
3
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
4
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
5
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
-3% -3%
The recessions that are underway in every G-7 economy
will probably be at least as painful as the downturns of the
-6% -6%
mid-1970s and the early 1980s. However, the major
governments of the world have averted a catastrophe by OECD Industrial Production: Nov @ -7.6%
taking bold steps to support the global financial system. -9% -9%
96 97 98 99 00 01 02 03 04 05 06 07 08
Many major economies have also announced fiscal
stimulus measures that will help backstop economic
activity. Central Bank Policy Rates
9.0% 9.0%
The developing world will also experience significantly US Federal Reserve: Feb @ 0.25%
8.0% Bank of England: Feb @ 1.00% 8.0%
slower economic growth this year. Developing countries ECB: Feb @ 2.00%
Reserve Bank of Australia: Feb @ 3.25%
where economic fundamentals are not sound will 7.0% 7.0%
probably experience deep recessions as capital flows
6.0% 6.0%
reverse. Indeed, some developing countries have already
come to the IMF seeking adjustment assistance. 5.0% 5.0%
,o
4.0% 4.0%
The remarkable run-up in commodity prices between 2003
and the first half of 2008 led to generalized inflation fears. 3.0% 3.0%
CRB Index
Monthly Average Level
450 450
Global CPI
Year-over-Year Percent Change
16% 16% 400 400
14% 14%
350 350
12% 12%
300 300
10% 10%
8% 8% 250 250
Forecast
6% 6%
200 200
4% 4%
CRB Index: Feb @ 219.3
150 150
2% 2%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
0% 0%
Source: Bloomberg L.P., Federal Reserve Board, Global Insight,
1995 1998 2001 2004 2007 2010
International Monetary Fund and Wachovia
6
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
110 110
The trade-weighted value of the U.S. dollar fell nearly 40%
between February 2002 and March 2008. A major factor 105 105
depressing the value of the dollar was the sharp increase 100 100
in the U.S. current account deficit. In addition, dislocations 95 95
in credit markets have caused foreign investors to buy
90 90
fewer U.S. securities.
85 85
135 135
Looking a few quarters out, however, we do not believe
the dollar’s strength will be sustained. The recovery that
will eventually take hold in the United States likely will 130 130
not be very robust, at least not initially. The dollar did not
strengthen during the recoveries that followed the last two 125 125
recessions because the initial sluggish nature of those
Fed's "Other Important Trading Partners" Index: Feb @ 140.91
upturns prevented the Fed from tightening policy. 120 120
Likewise, we believe the Fed will be on hold for the 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
foreseeable future.
Current Account Deficit
Quarterly in Billions of Dollars, Seasonally Adjusted
$40 $40
The Dollar and Economic Cycles
Trade Weighted Dollar, Trough Indexed to 100 $0 $0
130 130
-$40 -$40
120 120
-$80 -$80
110 110
-$120 -$120
100 100
-$160 -$160
90 90
-$200 -$200
Trough @ Mar-1975
80 Trough @ Nov-1982 80 Balance on Current Account: Q3 @ $-174.1 B
Trough @ Mar-1991 -$240 -$240
Trough @ Nov-2001 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
70 70
-12 -9 -6 -3 0 3 6 9 12 15 18 21 24 27 30 33 36 Source: Bloomberg L.P., Federal Reserve Board, Global Insight,
Months from Trough
International Monetary Fund and Wachovia
7
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
U.S. real GDP dropped at an annualized rate of 3.8% in the 6.0% 6.0%
The collapse in energy prices has caused the overall rate of 15% 15%
CPI inflation to drop sharply over the past few months.
10% 10%
The core rate of inflation is receding, but not as quickly as
the overall CPI inflation rate. 5% 5%
0% 0%
The direct lending programs that have been put in place
by the U.S. Treasury and the Fed have helped to stabilize -5% -5%
the financial system and, thereby, have reduced a large -10% -10%
downside risk to U.S. economic prospects. However, the
-15% -15%
financial system is not out of the woods yet, and lending
likely will remain very constrained until banks begin to -20% -20%
rebuild their capital bases. Therefore, the recovery that 1996 1998 2000 2002 2004 2006 2008
should begin in the second half of 2009 likely will be
muted. Nonfarm Employment Change
Change in Employment, In Thousands
500 500
CPI vs. Core CPI
Year-over-Year Percent Change
6% 6% 300 300
5% 5% 100 100
4% 4% -100 -100
3% 3% -300 -300
2% 2% -500 -500
8
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
1.40 1.40
1.20 1.20
2.00% 2.00%
1.10 1.10
Euro-zone 2 Year Govt Bond: Feb @ 1.39%
1.00 1.00 ECB Policy Rate: Feb @ 2.00%
1.00% 1.00%
0.90 0.90
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Euro-Dollar: Feb @ 1.294
0.80 0.80
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Sources: Global Insight, Bloomberg LP and Wachovia
9
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
second quarter, real GDP in Germany declined 2.1% in the 5.0% 5.0%
third quarter, the largest quarterly decline in twelve years. 4.0% 4.0%
In short, the German economy is definitively in recession.
3.0% 3.0%
2.0% 2.0%
The downturn appears to be worsening. The Ifo index of
German business sentiment, which is highly correlated 1.0% 1.0%
ahead. 100
0.0%
95
Germany is an important supplier of capital goods to
-2.5%
central and eastern Europe. Unfortunately, most emerging 90
European economies have also slipped into deep -5.0%
85
recessions. Indeed, the value of German exports dropped Ifo Index: Jan @ 83.0 (Left Axis)
IP Year-over-Year % Chg 3-M MA: Nov @ -4.0% (Right Axis)
almost 8% in December relative to the same month 80 -7.5%
in 2007. 1996 1998 2000 2002 2004 2006 2008
11.0% 11.0%
20% 20%
10.0% 10.0%
10% 10%
9.0% 9.0%
0% 0%
8.0% 8.0%
10
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
11
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
With real GDP growth in Italy negative in three out of the 4.0% 4.0%
last four quarters, the country has fallen into recession,
3.0% 3.0%
and available indicators suggest that the pace of
contraction accelerated at the end of last year. A widely 2.0% 2.0%
followed index of Italian business confidence has slumped
1.0% 1.0%
sharply over the past few months, which is consistent with
the 14% drop in industrial production in December 0.0% 0.0%
relative to the same month in 2007.
-1.0% -1.0%
Not only are the credit crunch and associated global -2.0% -2.0%
Compound Annual Growth: Q3 @ -2.1%
downturn weighing on Italian GDP growth, but Italy also Year-over-Year Percent Change: Q3 @ -0.9%
faces a number of structural impediments. Like their -3.0% -3.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008
counterparts in France, Italian businesses have generally
not restructured aggressively over the past few years. This
has led to rising unit labor costs which have reduced the Italian and French Business Confidence
relative price competitiveness of Italian goods. If not for Index
140 140
sluggish growth in domestic demand which has helped to Italian Business Confidence: Jan @ 65.5
keep import growth constrained, the trade deficit would 130 French Business Sentiment: Jan @ 73.0 130
have widened even further than it did.
120 120
4.0% 4.0%
1.0 € 1.0 €
3.5% 3.5%
0.0 € 0.0 €
3.0% 3.0%
-1.0 € -1.0 €
2.5% 2.5%
-2.0 € -2.0 €
2.0% 2.0%
Merchandise Trade Balance: Nov @ -1.7 €
1.5% 1.5% -3.0 € -3.0 €
1997 1999 2001 2003 2005 2007
CPI: Dec @ 2.4%
1.0% 1.0%
1997 1999 2001 2003 2005 2007 2009
Source: Global Insight, Bloomberg L.P. and Wachovia
12
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
The sources of the downturn are numerous. The volume -5.0% -5.0%
Compound Annual Growth: Q3 @ -1.8%
of exports has weakened sharply due to deep recessions in Year-over-Year Percent Change: Q3 @ -0.3%
many of Japan’s most important trading partners. Recent -7.5% -7.5%
data on “core” machinery orders indicate that capital 2000 2001 2002 2003 2004 2005 2006 2007 2008
Japan appears headed for another bout of mild deflation. 5.0% 5.0%
The year-over-year rate of CPI inflation, which rose as
high as 2.3% in July when oil prices surged, receded to 0.0% 0.0%
only 0.40% in December. Inflation probably will turn
negative at some point during the next few months. -5.0% -5.0%
-10.0% -10.0%
The Japanese yen generally continues to be strong as risk
aversion remains acute. We project the greenback will
-15.0% -15.0%
appreciate versus the yen over the next few quarters as
investors anticipate a U.S. economic recovery. However, -20.0% -20.0%
IPI: Dec @ -21.7%
the yen could strengthen anew, probably in late 2009 or
3-Month Moving Average: Dec @ -13.9%
early 2010, as the muted nature of the U.S. economic -25.0% -25.0%
recovery becomes evident. 1997 1999 2001 2003 2005 2007 2009
10.0 10.0
140 140
5.0 5.0
130 130 0.0 0.0
-5.0 -5.0
120 120
-10.0 -10.0
110 110 -15.0 -15.0
-20.0 -20.0
100 100
-25.0 -25.0
Volume of Japanese Exports: Dec @ -24.4
90 90 -30.0 -30.0
JPY per USD: Feb @ 91.9 1996 1998 2000 2002 2004 2006 2008
80 80
1995 1997 1999 2001 2003 2005 2007 2009
Source: Global Insight, Bloomberg L.P. and Wachovia
13
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
We look for the peak-to-trough decline in U.K. real GDP to -4.0% -4.0%
exceed 3%, which would make the current downturn
more severe than the recession in the early 1990s. The -6.0% -6.0%
Compound Annual Growth: Q4 @ -5.9%
sharp rise in house prices over the past decade has led to a Year-over-Year Percent Change: Q4 @ -1.8%
significant build-up in consumer debt, and these -8.0% -8.0%
imbalances will need to be worked off over the next few 2000 2002 2004 2006 2008
40 40
Sterling has tumbled vis-à-vis the greenback over the past
few months as the British economic outlook has 35 35
deteriorated. Looking ahead to the next few quarters, we UK Services: Jan @ 42.5
30 30
project that sterling will weaken a bit further against the UK Construction: Jan @ 34.5
UK Manufacturing: Jan @ 35.8
greenback as the BoE continues to cut rates. Further out, 25 25
however, sterling could stage a comeback against the 2000 2002 2004 2006 2008
dollar as sluggish economic growth in the United States
keeps U.S. interest rates very low for an extended period. U.K. Consumer Price Index
Year-over-Year Percent Change
6.0% 6.0%
U.K. Exchange Rates
USD per GBP
2.200 2.200 5.0% 5.0%
4.0% 4.0%
2.000 2.000
3.0% 3.0%
1.800 1.800
2.0% 2.0%
1.600 1.600
1.0% 1.0%
14
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
1.500 1.500
6.0% 6.0%
1.400 1.400
4.0% 4.0%
1.300 1.300
2.0% 2.0%
1.200 1.200
0.0% 0.0%
1.100 1.100
15
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
350.0
3.0% 3.0%
0.700
300.0 2.0% 2.0%
0.600
250.0 1.0% 1.0%
0.400 150.0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Source: Global Insight, Bloomberg L.P. and Wachovia
16
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
4% 4%
9.000 9.000
8.000 8.000 2% 2%
7.000 7.000
0% 0%
6.000 6.000
17
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
1.0% 1.0%
Not only have exports taken a hit, but consumer spending
is weakening as well. The value of retail sales fell 1.5% 0.0% 0.0%
(not annualized) in the fourth quarter relative to the
-1.0% -1.0%
previous quarter. Employment growth, which exceeded
2000 2001 2002 2003 2004 2005 2006 2007 2008
2% per annum back in the heydays of 2006-07, has slipped
into negative territory.
Swedish Industrial Production Index
The Swedish Riksbank, the country’s central bank, has Year-over-Year Percent Change
10% 10%
slashed rates by 375 bps since mid-October. Although the
policy rate currently stands at only 1.00%, rates will
probably be cut further in the months ahead due to the 5% 5%
11.00 11.00
6% 6%
10.00 10.00
4% 4%
9.00 9.00
2% 2%
8.00 8.00
0% 0%
7.00 7.00
18
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
Exports have fallen sharply over the past few months, but -2.0% -2.0%
it appears that consumer spending is holding up fairly Compound Annual Growth: Q3 @ 0.1%
well, at least at this point. However, the unemployment Year-over-Year Percent Change: Q3 @ 1.7%
-4.0% -4.0%
rate rose from a 6-year low of 2.5% last summer to 2.8% in
2000 2001 2002 2003 2004 2005 2006 2007 2008
December. With labor market conditions deteriorating, it
seems only a matter of time before consumer spending
weakens as well. Swiss Unemployment Rate
Seasonally Adjusted
4.0% 4.0%
CPI inflation in Switzerland has receded sharply over the
past few months, giving the Swiss National Bank (SNB)
scope to cut rates by 225 bps since early October. Indeed, 3.5% 3.5%
the SNB’s target for the 3-month LIBOR rate stands at only
0.50% at present.
3.0% 3.0%
1.200 1.200
0.0% 0.0%
1.100 1.100 CPI: Jan @ 0.2%
-0.5% -0.5%
1.000 1.000
1997 1999 2001 2003 2005 2007 2009
CHF per USD: Feb @ 1.163
0.900 0.900
2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Global Insight, Bloomberg L.P. and Wachovia
19
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
December.
0% 0%
-5% -5%
The Brazilian real has depreciated more than 30% since it
rose to a nine-year high versus the dollar in August. -10% -10%
Looking to the foreseeable future, we project that the real
will weaken somewhat further vis-à-vis the greenback as -15% -15%
the outlook for the Brazilian economy remains clouded. IPI: Dec @ -15.5%
3-Month Moving Average: Dec @ -6.1%
However, the real could strengthen anew later this year as -20% -20%
the Brazilian economy recovers at a faster rate than the 1997 1999 2001 2003 2005 2007 2009
U.S. economy.
Brazilian Policy Rate
30% 30%
Brazilian Exchange Rate
BRL per USD
4.00 4.00
25% 25%
3.50 3.50
2.50 2.50
15% 15%
2.00 2.00
20
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
The Chinese economy has slowed noticeably over the past 12.0% 12.0%
six quarters. From a 13-year high of 12.8% in the second
quarter of 2007, the year-over-year growth rate slowed to 10.0% 10.0%
only 6.8% in the fourth quarter of 2008, the slowest rate in
nine years. 8.0% 8.0%
6.0% 6.0%
The downturn in the rest of the world is having a
deleterious effect on the Chinese economy. Export s 4.0% 4.0%
tumbled more than 17% (year-over-year) in January, in
line with declines posted during the painful Asian 2.0% 2.0%
economic crisis of the late 1990s. Growth in consumer Year-over-Year Percent Change: Q4 @ 6.8%
spending has held up better, but it too is starting to show 0.0% 0.0%
signs of deceleration as well. 2000 2002 2004 2006 2008
The Chinese economy will likely expand in 2009 at its Chinese Trade
slowest pace in almost 20 years. However, policymakers 60.0%
Year-over-Year Percentage Change, 3-Month Moving Average
60.0%
have been quick to respond to the obvious slowdown in Exports: Dec @ 4.7%
the economy. The central bank has cut its benchmark Imports: Dec @ -8.0%
50.0% 50.0%
lending rate by more than 200 bps since mid-September,
and the central government has announced plans to 40.0% 40.0%
accelerate infrastructure spending. Expansionary
macroeconomic policy should help to support economic 30.0% 30.0%
activity.
20.0% 20.0%
8.25 8.25
20.0% 20.0%
8.00 8.00
15.0% 15.0%
7.75 7.75
7.25 7.25
5.0% 5.0%
7.00 7.00 Retail Sales: Nov @ 20.8%
6-Month Moving Average: Nov @ 22.6%
0.0% 0.0%
6.75 6.75
1997 1999 2001 2003 2005 2007
CNY per USD: Feb @ 6.83
6.50 6.50
2005 2006 2007 2008 2009
Source: Global Insight, Bloomberg L.P. and Wachovia
21
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
2.5% 2.5%
The Indian rupee fell to an all-time low versus the dollar
late last year as the global credit crunch intensified. In the 0.0% 0.0%
near term, the rupee could weaken a bit more as prospects
3-Month Moving Average: Dec @ 0.0%
for the Indian economy, and more broadly the global -2.5% -2.5%
economy, remain clouded. However, the rupee could 1997 1999 2001 2003 2005 2007
begin to claw its way back later this year as economic
growth in India begins to strengthen. Indian Consumer Price Index
Year-over-Year Percent Change
20% 20%
Indian Exchange Rate CPI: Dec @ 9.7%
INR per USD
51.00 51.00
15% 15%
49.00 49.00
47.00 47.00
10% 10%
45.00 45.00
43.00 43.00
5% 5%
41.00 41.00
39.00 39.00 0% 0%
INR per USD: Feb @ 48.616 1997 1999 2001 2003 2005 2007
37.00 37.00
2000 2002 2004 2006 2008
Source: Global Insight, Bloomberg L.P. and Wachovia
22
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
14.00 14.00
8% 8%
13.00 13.00
12.00 12.00 6% 6%
11.00 11.00
4% 4%
10.00 10.00
23
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
3.0% 3.0%
As in most countries, the overall rate of CPI inflation shot
higher this year, which led the National Bank of Poland
(NBP) to tighten monetary policy. However, CPI inflation
has receded over the past few months, and further
declines seem likely due to the sharp drop in energy prices 0.0% 0.0%
and economic weakness. In response, the NBP has cut its 1995 1997 1999 2001 2003 2005 2007
-$7,000 -$7,000
The Polish zloty has lost about 40% of its value against the
-$8,000 -$8,000
dollar since mid-July as the Polish economic outlook has
deteriorated and as investors have questioned the -$9,000 -$9,000
depreciate further in the near term. However, the zloty -$11,000 -$11,000
could rebound versus the greenback later this year as 1997 1999 2001 2003 2005 2007
Polish economic prospects begin to improve.
Polish Consumer Price Index
Year-over-Year Percent Change
12.0% 12.0%
Polish Exchange Rate CPI: Dec @ 3.3%
PLN per USD
5.000 5.000 10.0% 10.0%
4.500 4.500
8.0% 8.0%
4.000 4.000
6.0% 6.0%
3.500 3.500
4.0% 4.0%
3.000 3.000
2.0% 2.0%
2.500 2.500
24
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
inflows from abroad. However, the global credit crunch Year-over-Year Percent Change: Q3 @ 6.2%
3% 3%
has led to significant strains in the Russian banking
2001 2002 2003 2004 2005 2006 2007 2008
system that has led to the sharp downturn in the Russian
economy.
Russian Merchandise Trade Balance
CPI inflation, which shot up to a six-year high last $20
Billions of USD, Seasonally Adjusted
$20
summer, is starting to recede due in part to the marked Merchandise Trade Balance: Dec @ $4.6
$18 $18
decline in oil prices. However, lower oil revenues have
caused Russian trade surplus to shrink rapidly. The $16 $16
central bank still has ample foreign exchange reserves $14 $14
(almost $400 billion), but the level of reserves has dropped
$12 $12
more than $200 billion since late July.
$10 $10
The Russian ruble has lost about 35% of its value against $8 $8
36.000 36.000
15.0% 15.0%
34.000 34.000
32.000 32.000
28.000 28.000
26.000 26.000
CPI: Jan @ 13.4%
24.000 24.000 5.0% 5.0%
RUB per USD: Feb @ 36.222 2002 2003 2004 2005 2006 2007 2008 2009
22.000 22.000
2001 2002 2003 2004 2005 2006 2007 2008
Source: Global Insight, Bloomberg L.P. and Wachovia
25
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
30.0% 30.0%
CPI inflation shot up earlier this year due to the
combination of an increase in the goods and service tax
and higher food and energy prices. However, the year-
over-year rate of CPI inflation is now starting to recede. 10.0% 10.0%
5.0% 5.0%
1.800 1.800
4.0% 4.0%
2.0% 2.0%
1.600 1.600
1.0% 1.0%
0.0% 0.0%
1.500 1.500
-1.0% -1.0%
CPI: Dec @ 4.3%
1.400 1.400 -2.0% -2.0%
1997 1999 2001 2003 2005 2007 2009
SGD per USD: Feb @ 1.495
1.300 1.300
1997 1999 2001 2003 2005 2007 2009
Source: Global Insight, Bloomberg L.P. and Wachovia
26
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
CPI inflation rose into double-digit territory last year, but South African Industrial Production Index
it is starting to recede rapidly. The South African Reserve Manufacturing, Year-over-Year Percent Change
15.0% 15.0%
Bank, which had been raising rates, has cut rates by
150 bps since December on the expectation that inflation
will decline further. 10.0% 10.0%
The South African rand weakened sharply last autumn as IPI: Dec @ -8.2%
3-Month Moving Average: Dec @ -5.5%
the global credit crunch intensified. We believe that the -10.0% -10.0%
rand will remain weak in the near term, but project that it 1999 2001 2003 2005 2007
will regain its footing later this year or early next year as
global growth prospects begin to improve. South African Consumer Price Index
Year-over-Year Percent Change
15.0% 15.0%
South Africa Exchange Rate CPI: Dec @ 9.5%
Rand per USD
13.000 13.000
12.0% 12.0%
12.000 12.000
10.000 10.000
6.0% 6.0%
9.000 9.000
7.000 7.000
0.0% 0.0%
6.000 6.000
1997 1999 2001 2003 2005 2007 2009
RND per USD: Feb @ 9.566
5.000 5.000
2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: Global Insight, Bloomberg L.P. and Wachovia
27
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
-5.0% -5.0%
The country’s trade surplus has disappeared as export
-10.0% -10.0%
growth has tumbled. Indeed, the value of Korea’s exports
plunged more than 30% in January relative to the same -15.0% -15.0%
month in 2008. However, growth in domestic demand has
-20.0% -20.0%
also turned negative with retail spending trade down
nearly 6% in December. Like their American counterparts, -25.0% -25.0%
consumers in Korea are rather leveraged and consumption 2000 2002 2004 2006 2008
-$1.0 -$1.0
The won tumbled to a 10-year low versus the dollar last
autumn as the global credit crunch intensified. The won -$2.0 -$2.0
has stabilized recently, albeit at low levels against the -$3.0 -$3.0
dollar. The won likely will remain weak in the near term
-$4.0 -$4.0
as the Korean economy continues to contract. However,
Merchandise Trade Balance: Jan @ $-3.0
the won could regain its footing and begin to strengthen -$5.0 -$5.0
later this year or early next year as Korean growth 1997 1999 2001 2003 2005 2007 2009
prospects begin to improve somewhat.
South Korean Retail Sales
Year-over-Year Percent Change
17.5% 17.5%
South Korean Exchange Rate 15.0%
Retail Sales: Dec @ -5.6%
15.0%
KRW per USD 6-Month Moving Average: Dec @ -1.9%
1,500 1,500
12.5% 12.5%
10.0% 10.0%
1,400 1,400
7.5% 7.5%
2.5% 2.5%
1,200 1,200
0.0% 0.0%
-2.5% -2.5%
1,100 1,100
-5.0% -5.0%
28
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
Real GDP data for the last quarter of 2008 have not been
7.5% 7.5%
released yet, but the 24% decline (year-over-year rate) in
industrial production in the fourth quarter does not bode
5.0% 5.0%
well for overall GDP growth. Indeed, the 4% decline in
GDP that occurred in the third quarter of 2001 in the wake
2.5% 2.5%
of the “tech” crash could easily be surpassed.
0.0% 0.0%
Growth in Taiwan has been driven by exports over the
past few years, and the sharp downturn in the global
economy has imparted a nasty shock to the Taiwanese -2.5% -2.5%
economy. In addition, growth in domestic demand, which Year-over-Year Percent Change: Q3 @ -1.0%
already had been rather lackluster, has weakened further -5.0% -5.0%
recently. Indeed, real retail spending fell nearly 7% in the 2000 2001 2002 2003 2004 2005 2006 2007 2008
The Taiwanese dollar has lost more than 10% of its value -20.0% -20.0%
30.00 30.00
1999 2001 2003 2005 2007 2009
Source: Global Insight, Bloomberg L.P. and Wachovia
29
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
10.0% 10.0%
• Real GDP growth in Turkey barely expanded in the third
quarter, rising only 0.5% relative to the same period in 2007. 7.5% 7.5%
Overall GDP growth probably slipped into negative 5.0% 5.0%
territory in the fourth quarter judging by the 13% decline in
2.5% 2.5%
industrial production that was registered during the
quarter. Not only has export growth turned negative 0.0% 0.0%
recently, but consumer spending and investment spending -2.5% -2.5%
have both turned down in the past few quarters.
-5.0% -5.0%
• Inflation was the big issue throughout most of 2008, but the -7.5% -7.5%
year-over-year rate has receded somewhat in recent months -10.0% -10.0%
due to economic weakness and the collapse in energy Year-over-Year Percent Change: Q3 @ 0.5%
-12.5% -12.5%
prices. The central bank, which had been tightening policy
2000 2001 2002 2003 2004 2005 2006 2007 2008
earlier in 2008, has cut rates by 375 bps since mid-
November. More easing likely will occur in the months
ahead. Turkish Industrial Production Index
Year-over-Year Percent Change
25.0% 25.0%
• Turkey’s external accounts have deteriorated over the past IPI: Dec @ -17.6%
few years. The country’s current account deficit currently 3-Month Moving Average: Dec @ -12.5%
20.0% 20.0%
stands around 5% of GDP, the highest ratio in decades.
Large current account deficits, which must be financed by 15.0% 15.0%
-$5,000 -$5,000
1.200 1.200
-$6,000 -$6,000
1.000 1.000
-$7,000 -$7,000
0.800 0.800
-$8,000 -$8,000
Merchandise Trade Balance: Dec @ -3,585.6 USD
0.600 0.600 -$9,000 -$9,000
1997 1999 2001 2003 2005 2007
TRY per USD: Feb @ 1.618
0.400 0.400
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Global Insight, Bloomberg L.P. and Wachovia
30
Global Chartbook: February 2009
February 12, 2009 SPECIAL COMMENTARY
Crude oil prices fell sharply last year as the global $140 $140
$20 $20
Gasoline prices have followed crude prices lower. Crude Oil: Feb @ $40.17
However, prices of the former have not come down as $0 $0
much as the latter because stocks of gasoline aren’t as 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Natural gas has not been immune to the same forces that 15.0% 15.0%
have driven oil prices over the past year. Indeed, the price
10.0% 10.0%
of natural gas in the United States is down more than 65%
from its peak last July. Gas in storage is up 5% over the 5.0% 5.0%
past year which has helped to put downward pressure on
natural gas prices. 0.0% 0.0%
-5.0% -5.0%
Until global economic activity starts to strengthen, it is
hard to envision a significant increase in energy prices. We -10.0% -10.0%
project that crude prices will remain roughly flat for the
-15.0% -15.0%
remainder of the year before rising somewhat next year as
Oil Inventory: Jan @ 15.3%
modest growth returns to the global economy. -20.0% -20.0%
2005 2006 2007 2008 2009
Gasoline Inventory
Year-over-Year Percent Change
15.0% 15.0%
Natural Gas
Henry Hub Spot, Dollars per MMBTU
$16 $16 10.0% 10.0%
$14 $14
5.0% 5.0%
$12 $12
0.0% 0.0%
$10 $10
$8 $8 -5.0% -5.0%
$6 $6
-10.0% -10.0%
$4 $4
Gasoline Inventories: Feb @ -5.1%
-15.0% -15.0%
$2 $2
2005 2006 2007 2008 2009
Natural Gas: Feb @ $4.75
$0 $0
2005 2006 2007 2008 2009
Source: Moody’s Economy.com and Wachovia
31
Wachovia Economics Group