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Florian Fichtl, Country Manager World Bank October 19, 2009

Florian Fichtl, Country Manager World Bank October 19, 2009

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Recovery underway Interest rates are lower Emerging-market bond spreads have fallen but remain higher than pre-crisis levels Source: World Bank, DEC Prospects Group

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Page 1: Florian Fichtl, Country Manager World Bank October 19, 2009

Florian Fichtl, Country Manager

World BankOctober 19, 2009

Page 2: Florian Fichtl, Country Manager World Bank October 19, 2009

Recovery underway

Middle-East & North AfricaEast Asia & Pacific

South Asia

Europe & Central AsiaEurope & Central Asia

Industry has stopped shrinking

Page 3: Florian Fichtl, Country Manager World Bank October 19, 2009

Recovery underwayInterest rates are lowerEmerging-market bond spreads have fallen but remain higher than pre-crisis levels

Source: World Bank, DEC Prospects Group

Page 4: Florian Fichtl, Country Manager World Bank October 19, 2009

Syndicated bank loans by borrower type (2009 q3 as of Aug. 25)Syndicated bank loans by borrower type (2009 q3 as of Aug. 25)

…but private sector funding depressed

44

Page 5: Florian Fichtl, Country Manager World Bank October 19, 2009

NMS affected severely by the crisis

Source: Eurostat

Page 6: Florian Fichtl, Country Manager World Bank October 19, 2009

Tough times ahead for governmentsRapidly falling revenuesRising social expenditures and pension debt

Source: IMF World Economic Outlook

Page 7: Florian Fichtl, Country Manager World Bank October 19, 2009

Tough times for households and businessesUnemployment will recover slowlyDifficulties in repaying bank creditNumber of vulnerable household increaseRising insolvencies Difficult access to credit

Page 8: Florian Fichtl, Country Manager World Bank October 19, 2009

Tough times for banksCan no longer rely on large capital flows from abroadNon-performing loans are risingProfits declineDomestic credit (percentage change, year-on-year)

Page 9: Florian Fichtl, Country Manager World Bank October 19, 2009

The way aheadReturn to growth might take longer in the region than in

the rest of the EUThis means smaller budgets for governments—need to

restructure spending to support the vulnerable and growth enhancing activities

Continued attention to financial sector stability—lower access to credit and rising NPLs

Structural transformation of economy will depend on further improvements in product and labor markets.