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The Philippine economy recovered strongly from the global recession owing to a combination of transitory and permanent, as well as global and idiosyncratic factors. Similar to its regional peers, the recovery was partly driven by the rebound in global trade and domestic consumption linked to sharp increases in consumer confidence. In the Philippines, growth was also spurred by two domestic and temporary factors-continued fiscal policy easing and election-related spending-and a structural one, namely the acceleration in global outsourcing which benefited the country's business process outsourcing sector and associated sectors such as construction. The economy is projected to grow by 6.2 percent in 2010 and by 5 percent in 2011, with large but broadly balanced risks. While inflation expectations are under control, the prospects of large short-term capital inflows partly linked to renewed quantitative easing by key G7 central banks are complicating monetary policy at a time when the economy no longer needs accommodative monetary policy. The first budget of the Aquino government could be a turning point for the Philippines in the public finance area. The 2011 budget changes current dynamics in two critical areas: the (structural and cyclical) fiscal policy stance and the quality of public finances. This "reform budget" renews the fiscal consolidation effort-albeit modestly and contains significant reform measures aimed at improving spending efficiency, transparency and accountability of the budget. For the 2011 budget to indeed turn the country away from a weak fiscal position, inconsistent spending efficiency, and significant gaps in public expenditure and financial accountability, efforts initiated in this budget will have to both be sustained over time and expanded. Strengthening revenue mobilization-through a modern tax system with efficiency and equity at its core-would enable future budgets to scale up spending needed to generate inclusive growth.

Growth has slowed down since the second quarter, but exceeded expectations. Considering the 1) political turmoil; 2) robust growth during the rebound; and 3) slowdown in advanced economies, the Thai economy was expected to contract by more than it did in the second and third quarters. The output of the manufacturing sector expanded in the second quarter, led by still-growing exports and robust private consumption. Demand indeed appears to have been higher than production, as some orders had to be filled by drawing down on inventories. However, a sharp contraction in tourism led Gross Domestic product (GDP) overall to contract in the quarter. The FY10 fiscal deficit was much smaller than initially feared when the budget was proposed. The budget for FY10 was prepared at the trough of the global financial crisis in February 2009 and anticipated only 1.35 trillion baht in revenues. Inflation levels have been low and stable but persistent increases in food prices could pose risks. Overall, slower growth in advanced economies will translate into lower GDP growth Thailand for the next two to three years. Notwithstanding a deceleration in the second half because of the waning global inventory cycle, year-on-year growth in 2010 is expected at 7.5 percent due to the low base of 2009 and the strong first half. Quarter-to-quarter growth will pick up modestly in 2011 to average over 4 percent, but the relatively high base in 2010 results in a year-on-year growth rate of 3.2 percent for 2011.

This paper provides a synthetic overview of the link between food insecurity and conflict, addressing both traditional (civil and interstate war) and emerging (regime stability, violent rioting and communal conflict) threats to security and political stability. In addition, it addresses the various attempts by national governments, intergovernmental organizations, and civil society to address food insecurity and, in particular, the link with conflict. It begins with a discussion of the various effects of food insecurity for several types of conflict, and discusses the interactions among political, social, and demographic factors that may exacerbate these effects. It then discusses the capabilities of states, international markets, intergovernmental organizations, and nongovernmental organizations (NGOs) to break the link between food security and conflict by focusing on mechanisms that can shield both food consumers and producers from short-term price instability. Finally, it discusses projected trends in both food insecurity and conflict and concludes with some brief comments on policies that can build resilience in light of projections of higher and volatile food prices and a changing climate.

The Thai economy runs on a single engine: external demand. The economic roller coaster since the onset of the global financial crisis can be overwhelmingly attributed to fluctuations in the output of three sectors most sensitive to external demand: manufacturing, logistics (transportation and storage), and tourism (hotels and restaurants). As global trade contracted between the fourth quarter of 2008 and first quarter of 2009, Thailand's real gross domestic product (GDP) fell 6.3 percent, before rebounding 6.9 percent through the end of 2009 on a revival in actual and expected external demand. At the end of 2009, real GDP was back to pre-crisis levels, as measured in seasonally adjusted terms. For 2009 as a whole, however, real GDP fell 2.2 percent. The dominance of sectors linked to external demand over Thailand's growth dynamics is not new. Both sets of sectors grew at about the same pace prior to the 1997 financial crisis. However, a structural break took place in the aftermath of the crisis, when sectors linked to external demand grew an average of 6.1 percent between 2001 and 2007 compared to a 4.3 percent growth rate of other sectors. While the sectors linked to external demand are expected to grow below the historical average in the near term due to lower growth in demand from advanced economies, a reversal of the structural change observed since 1998 is unlikely. This will require an acceleration of the growth of the sectors linked to domestic demand. But the constraints that limited the growth of these sectors in the past not only remain but have been compounded in the near term by the escalation of the political conflict. This will ensure that growth rates in sectors linked to domestic demand will also remain below their (already low) historical averages and the dominance of external demand on the economy will continue to increase.

Egypt's growth accelerated in the second half of FY10. Real Gross Domestic Product (GDP) growth in FY10 reached 5.8 percent, up from 4.4 percent in FY09 and 4.8 percent in FY10, taking up overall GDP growth to an average of 5.3 percent for the full FY10. Egypt's macroeconomic outlook is stable. Assuming that domestic demand holds up, and Egyptian exports continue their observed recent trend, we expect that the Egyptian economy grows in the range of 6.0 to 6.2 percent in FY11. This is underpinned by strong commitment to maintain structural reforms momentum, and a relatively stable global economy. However, unemployment will remain a challenge as growth as high as 6 percent will barely absorb the increasing number of new entrants to the labor market. Unemployment will continue to be an overriding concern and will gradually fall to around 8.7 percent in FY11. Finally, inflationary pressures are expected to rise, as global prices are likely to filter to domestic consumer prices, domestic demand will gain more solid ground, and gradual adjustment of energy prices will be implemented. Interest rates are not thus expected to rise, yet real interest rates will remain low or negative. This outlook is consistent with that of standard and poor's ratings services which affirmed in 2010.

Amid heightened global uncertainties, Russia is experiencing a bumpy recovery. Domestic demand is rising, but unemployment remains high, and credit and investment remain limited. The budget has benefited from higher oil prices, but fiscal consolidation remains important in the medium term. Crumbling infrastructure, especially in transport, could hamper the economy's competitiveness and longer-term growth prospects. The debt crisis in Western Europe sharpens the downside risks to global recovery and oil prices. But the effects on Russia are likely to be blunted by its stronger fiscal and debt positions and by limited trade and financial links with the affected countries. Russia is likely to grow by 4.5 percent in 2010, followed by 4.8 percent in 2011, as domestic demand expands in line with gradual improvements in the labor and credit markets. Employment is expected to improve gradually, however, enabling some further reductions in poverty.

Man-made climate change is affecting water infrastructure in all regions of the world, affecting large numbers of people in their daily life and the development of their societies. As part of the World Bank Water Anchor's analytical and advisory work on water and climate change, consultants have investigated how private sector services to infrastructure may address the challenges related to climate change while, at the same time, improving development opportunities for people. This report, which is one of the outcomes of the work, addresses the role of private providers of non-financial climate change-related services with relevance for water infrastructure. This report investigates to need for additional services with regard to climate change and analyzes the potential for the private sector in providing these services. The analysis focuses on the water sectors likely to be affected by climate change, that is, water resources management, irrigation and drainage, hydropower, coastal protection, flood protection, urban water supply, and sanitation as well as water quality. In addition, opportunities for mutual engagement of public and private agencies are analyzed and the perspectives of market development are explored. The central aim of the report is to deepen our understanding of the opportunities for engaging private providers of climate change services in climate change adaptation combined with socioeconomic development opportunities.

How hospitable will the global environment be for economic growth in the developing world as we come out of the present financial crisis? The answer depends on how well the author manage the following tension. On the one hand, global macro stability requires that we prevent external imbalances from getting too large. On the other hand, growth in poor nations requires that the world economy be able to absorb a rapid increase in the supply of tradable produced in the developing world. It is possible to render these two requirements compatible, but doing so requires greater use of explicit industrial policies in developing countries, which have the potential of encouraging of modern tradable activities without spilling over into trade surpluses. The 'price' to be paid for greater discipline on real exchange rates and external imbalances is greater use (and permissiveness) towards industrial polices.

This paper analyzes the relations between leadership, the policy making process, policies and institutions, and development results in Chile. It starts with a stylized model for the dynamics of development that derives a Kuznets type relation between growth and distribution of income, determined by the quality of leadership, the policy making process, institutions, and policies. This framework is applied to Chile, identifying the features of the policy making process and leadership that allowed for continuation of growth enhancing reform, with a stronger focus on equity goals, since the transition to democracy. As a result of three decades of reforms, Chile has recorded a quantum leap in economic growth, which is traced down to specific reforms. Yet Chile's equity experience is much more mixed: poverty has declined massively but income remains highly concentrated, a likely result of shortcomings in the quality of education and in labor markets. The paper reviews the major risks to the country's future development pace and points out the main reform challenges faced by policy makers.

A solid financial armor could not protect Thailand against the impact of the global financial crisis on its real economy. Despite a sound banking system and low external vulnerabilities, the Thai economy contracted 5.7 percent between October 2008 and March 2009, as the magnitude and speed of the contraction in foreign demand, and resulting shock to the real economy, has been greater than anticipated. There continues to be little impact of the global financial crisis on Thailand's banks: liquidity remained adequate as financial institutions did not face solvency concerns given their adequate capitalization and lack of exposure to 'toxic' assets or risky derivative contracts. The combination of a sound financial sector, low external roll-over and balance-of-payment financing requirements, and, more recently, large current account surpluses, has led to capital inflows, build-up in reserves and an appreciation of the Baht relative to other currencies in the region. However, the impact of the global crisis on the real sector was far more severe than expected. Export volumes contracted by 8.9 percent in the fourth quarter of 2008, compared to the World Bank's forecast in December of a 3.0 percent expansion. Exports contracted a further 16 percent in the first quarter of 2009. The aggravation of Thailand's political crisis, which had been dampening investor and consumer confidence since 2006, compounded the shock to the real economy. As a result, real gross domestic product (GDP) contracted in the fourth quarter of 2008 and first quarter of 2009 after 38 quarters of growth, and is expected to contract for 2009 as a whole, the first annual contraction since the Asian financial crisis of 1997-1998.

Debates over the nature and direction of economic policy in Iran have intensified rather than abated after the tumultuous changes brought about by the revolution in 1979. In the span of these three decades, Iran has witnessed sweeping institutional changes and has been affected by significant economic and political upheavals. At the macroeconomic level, too, there have been a number of shocks ranging from oil booms and busts, to war (with Iraq), trade sanctions, and internal political strife. This paper uses Iran's experience to reflect on growth and development in the context of political upheaval and an uncertain institutional environment. It is a premise of the paper that Iran's recent past presents a rare, 'laboratory' like, case for the study of growth and development in a broad context. This paper examines post-revolutionary Iran's macroeconomic policies and performance in a comparative context, appraising it against Iran's past trends and real potential. It shows how recurrent cycles of populism and pragmatism have characterized this period. The paper argues that two sets of factors have conditioned Iran's performance and will continue to taint her prospects for sustainable growth into the future. These are: (i) Iran's limited economic diversification and continued dependence on the oil sector, and (ii) the institutional setting in which post-revolutionary economic policies have been formulated and implemented for much of the last three decades.

In 1990, Australia and New Zealand were ranked around 25th and 37th in terms of Gross National Product (GNP) per capita, having been the highest-income countries in the world one hundred years earlier. Those countries relatively poor economic growth performance over that long period contrasts markedly with that of the past 15 years, when these two economies out-performed most other high-income countries. This difference in growth performance is due to major economic policy reforms during the past two to three decades, both at and behind the border. The report provide new evidence on the extent of governmental distortions to agricultural incentives in particular in the Australian and New Zealand economies since the late 1940s, both directly due to agricultural policies per se and indirectly (and negatively) through protection to manufacturing.

Real Gross Domestic product (GDP) in Thailand is projected to grow at 5.0 percent in 2008, driven by recovery in domestic demand. The key reason for the strengthened growth this year is the higher confidence of both consumers and investors with the return of democracy and the election of a new government late in 2007. Last year's better than-expected growth of 4.8 percent was due to buoyant export performance throughout the year even as domestic consumption and investment declined amidst the uncertain political environment and sudden shifts in policy. But this year, the opposite is likely. The external current account may weaken slightly in 2008, as the global downturn slows exports and robust domestic demand stimulates imports. Private investment should recover after its slump last year. Recovery in private consumption and investment could be fragile as there remain large down side risks to their growth, but could be mitigated by additional fiscal stimulus. In addition to the short-term measures have been introduced by the government to mitigate risks this year and next, longer term measures are needed to sustain Thailand's growth and poverty alleviation.

Botswana represents one of the few development success stories in Sub-Saharan Africa. Real Gross Domestic Product (GDP) growth averaged almost 9 percent between 1960 and 2005, far above the Sub-Saharan Africa average. Real GDP per capita grew even faster, averaging more than 10 percent a year -- the most rapid economic growth of any country in the world. The crucial question is: Why has Botswana grown the way it has done, and what lessons does it offer? This evidence-based story is an account of policy and institutional dynamics of sustained growth and development in Botswana -- illuminating the role of leadership. It shows how a secure political elite has pursued growth-promoting policies and developed, modified, and maintained viable inherited traditional and modern institutions of political, economic, and legal restraint. These institutions have remained robust in the face of initial large aid inflows and spectacular mineral rents, producing a growth pattern that has been both rapid and cautious. The nature of the Botswana developmental state is illustrated by the way in which the state mobilized development resources-especially savings, investment, and human resources, widely known as the primary drivers of economic growth, and prudently managed the economy without becoming excessively involved in the nuts. It demonstrates that through intentional policy choices and countercyclical instruments, countries can shift from aid-dependent to trade-led natural resource development (though probably with narrow-based growth), to a broader development strategy as long as the state is capable and operates within effective institutional design. Botswana's story is sterling example of how the critical issue in development is not so much access to resources but how resources are managed.

This paper outlines the methodological issues associated with the task of measuring that actual delivered direct protection or taxation to individual agricultural industries, as well as the direct protection or anti-protection to non-agricultural sectors. It begins with a guide to what elements in principle could be measured. There are two key purposes of the distortion estimates being generated by this project are: 1) to provide a long annual time series of indicators showing the extent to which price incentives faced by farmers and food consumers have been distorted directly and indirectly by own-government policies in all major developing, transition and high-income countries, and hence for the world as a whole; and 2) to attribute the price distortion estimates for each farm product to specific border or domestic policy measures, so they can serve as inputs into various types of partial and general equilibrium economic models for estimating the effects of those various policies on such things as national and international agricultural markets, farm value added, income inequality, poverty, and national, regional and global welfare.