Reg ional Economic Ou O tl ttlook Middle East and Central Asia Department Middle International Monetary Fund October 2009

Transcription

1 Regional Economic Outlook Middle East and Central Asia Department International Monetary Fund October 29 1

2 Caucasus and Central Asia Energy exporters Energy importers Southwestern Asia 2 October 29

3 Outline World Economic Outlook CCA Economic Outlook 3 October 29

4 World Economic Outlook: Key Messages The global economy is beginning to grow again, but recovery is likely to be sluggish. The slow recovery calls for sustained policy support until the expansion is firmly entrenched. Financial market conditions continue to improve but remain tight, with the global financial system remaining far from normal. Expansionary monetary and fiscal policy will continue to underpin the global recovery, but to safeguard price and financial stability and the soundness of public finances, credible exit strategies will be needed. Two key factors for the medium-term: private demand replacing public demand; and demand in external surplus economies rising to make up for shrinking demand in external deficit economies. 4 October 29

5 Exports and manufacturing helped by a turn in the inventory cycle Merchandise Exports (Percent change; 3mma; annualized) 6 Industrial Production (Percent change; 3mma; annualized) Advanced -4 World Emerging -6 Advanced Emerging World Jan-7 Jan-8 Jan-9 Jul-9-4 Jan-7 Jan-8 Jan-9 Jul-9 5 October 29

6 Consumer confidence slowly recovering, but unemployment still rising Consumer Confidence (January 25=1) Unemployment (Percent; weighted by labor force) Advanced 8. World Emerging U.S. (Conf. Board) Japan (Econ. Soc. Res. Inst.) U.K. (Building Society) Germany (Eur. Comm.) Aug Jul. 9 6 October 29

7 Policy has taken risk of another Great Depression off the table, but financial conditions remain tight Interbank Spreads (Basis points) Corporate Spreads (Basis points; averages of Europe and United States) Equity Markets (March 2 = 1; national currency) U.S. dollar Yen Euro BB AAA DJ Euro Stoxx Wilshire 5 Topix Sep Sep Sep October 29

8 Expansionary monetary policy has been key, but will not forestall a credit crunch Credit Growth in Private Nonfinancial Sectors (q/q changes; billions of local currency) Bank Lending Conditions United States (LHS) Euro Area (LHS) Japan (inverted; RHS) United States (RHS) Euro area (LHS) : Q : Q3 October 29

9 Fiscal policy too has played a major role, but fiscal support will diminish 2 Fiscal Balance (Percent of GDP) Advanced Emerging and developing World Public Debt (Percent of GDP) Advanced Emerging and developing World October 29

10 Rebalancing will be a drawn-out process, implying slow global growth Global Imbalances 1 (Percent of world GDP) U.S. Oil exporters DEU+JPN OCADC CHN+EMA ROW Discrepancy OCADC: Bulgaria, Croatia, Czech Republic, Estonia, Greece, Hungary, Ireland, Latvia, Lithuania, Poland, Portugal, Romania, Slovak Republic, Slovenia, Spain, Turkey, and United Kingdom October 29

11 Global l growth is expected to pick up in 21, but the recovery will be sluggish Real GDP Growth 1 (Percent change from a year earlier) 12 Prospects for World GDP Growth (Percent change) World Advanced Emerging and developing % Confidence interval 7% Confidence interval 5% Confidence interval Quarterly data through 21 and annual data afterwards. 11 October 29

12 Key risks, mainly on the downside Premature withdrawal of public support, because recovery seemingly self-sustaining public s appetite for fiscal support seems low. New financial disaster, geopolitical issues/oil price surge, swine flue: economy s capacity to absorb new shocks is very low. Fiscal credibility loss or questions about continued independence of central banks. Upside: we may underestimate effects of reduced uncertainty/greater confidence. 12 October 29

13 CCA Economic Outlook Global crisis has severely affected CCA energy importers and Kazakhstan: Energy importers hit by sharp drop in remittances Kazakhstan held back by lingering banking crisis Other energy exporters still growing Modest recovery in prospect for 21; stronger for energy exporters than for importers. Effective countercyclical policies have limited the downturn; concessional donor support has been important for energy importers. Financial sectors remain under stress, with NPLs expected to rise further. 13 October 29

14 CCA in the grip of the global crisis Global crisis hit the region in 29; only Per capita incomes are declining a modest recovery is projected for 21 in the energy importing countries Real GDP Growth (Annual change; in percent) Gross National Disposable Income Per Capita 1/ (In U.S. dollars) Commonwealth of Independent States CCA energy exporters CCA energy importers World Russia 3 15 Armenia Georgia Kyrgyz Republic Tajikistan proj. 21 proj / GNDI is defined as GDP + non-factor income + transfers. 14 October 29

15 Remittances down sharply Many migrants worked in the Russian construction sector A collapse in remittances affects household incomes Remittances Outflow from Russia to the CCA 1/ (Percent change; year-on-year) CCA Russian construction Remittances Inflows (Percent change; year-on-year) year) ARM GEO KGZ TJK Mar-8 Jun-8 Sep-8 Dec-8 Mar-9 Jun-9-8 Mar-8 Jun-8 Sep-8 Dec-8 Mar-9 Jun-9 1/ Includes compensation of employees and migrants capital transfer. 15 October 29

16 Exports contracted sharply in 29, but imports also falling Exports of Goods in U.S. Dollars (In percent; year-on-year) Imports of Goods in U.S. Dollars (In percent; year-on-year) 15 Energy exporters 16 Energy exporters Energy importers Energy importers Jan-8 Feb-8 Mar-8 Apr-8 May-8 Jun-8 Jul-8 Aug-8 Sep-8 Oct-8 Nov-8 Dec-8 Jan-9 Feb-9 Mar-9 Apr-9 Jan-8 Feb-8 Mar-8 Apr-8 May-8 Jun-8 Jul-8 Aug-8 Sep-8 Oct-8 Nov-8 Dec-8 Jan-9 Feb-9 Mar-9 Apr-9 16 October 29

17 Net external demand holding back growth in 29, but contributes to 21 recovery Net External Demand (Annual change; in percent) AZE KAZ TKM UZB ARM GEO KGZ TJK 17 October 29

18 Macroeconomic policies have been accommodative in 29 Fiscal Exchange rate Monetary Liquidity Increased Capital Deposit Country stimulus depreciation easing support provisioning injections guarantees Armenia Enhanced Azerbaijan Georgia Kazakhstan Enhanced Kyrgyz Republic Enhanced Tajikistan Turkmenistan Uzbekistan 18 October 29

19 Fiscal policy expansionary in 29, but some countries face limited fiscal space in 21 Change in the Non-oil Primary Fiscal Deficit, 29 (In percent of non-oil GDP) Fiscal Space Indicators (In percent, 29) Fiscal stimulus Automatic stabilizer Change in primary deficit tal Public Debt/GD DP Tot Kyrgyz Republic Tajikistan Armenia Less fiscal space Georgia -2-4 AZE KAZ TKM UZB ARM GEO KGZ TJK Azerbaijan Real Lending Rates Note: methodology based on IMF (29), and is briefly described in the Amex. Source: IMF staff estimates; lending rates are from the International Financial Statistics. 19 October 29

20 Where debt levels were already high, donor support has helped finance the fiscal stance Some governments are constrained by already high debt levels 29 increase in donor support expected to reverse in Public Debt (In percent of GDP) proj proj Grants to Energy Importers (In percent of GDP) proj. 21 proj. AZE KAZ TKM UZB ARM GEO KGZ TJK ARM GEO KGZ TJK 2 October 29

21 Inflation down sharply, but pressures may return in 21 Inflation down sharply from historical highs but commodity prices on the rise again Consumer Price Index Commodity Prices (Annual change; in percent) (Index 28 = 1) ARM AZE GEO KAZ KGZ TJK TKM UZB Aluminum Cotton Crude oil Gold eb-8 Mar ar-8 Apr pr-8 May ay-8 Jun un-8 Jul-8 Aug ug-8 Sep ep-8 Oct-8 Nov ov-8 Dec ec-8 Jan an-9 Feb eb-9 Mar ar-9 Apr pr-9 May ay-9 Jun un-9 Jan an-8 FebMar eb-8 ar-8 Apr pr-8 May JunJul ay-8 un-8 ul-8 ug-8 ep-8 Oct-8 Aug SepOct ov-8 ec-8 an-9 Nov DecJan Feb MarApr eb-9 ar-9 pr-9 ay-9 un-9 ul-9 May JunJul Aug ug-9 21 October 29 Jan an-8 Feb

22 Currencies have depreciated.... against dollar, and energy Importers currencies have caught up with weakening ruble helping reverse competitiveness losses suffered in Local Currencies Against the U.S. Dollar and Russian Ruble (Aug 31, 28 Aug 31, 29, increase indicates appreciation) Real Effective Exchange Rate (Index Jan 25 = 1; increase indicates appreciation) ARM AZE GEO KAZ KGZ TJK UZB Against the U.S. dollar Against the Russian ruble AZE KAZ TKM UZB ARM GEO KGZ TJK 6 Jan- 5 Jul- 5 Jan- 6 Jul- 6 Jan- 7 Jul- 7 Jan- 8 Jul- 8 Jan- 9 Jul October 29

23 Financial sectors are under stress, with NPLs set to rise further Nonperforming Loans , latest (In percent of total loans) AZE KAZ TKM UZB ARM GEO KGZ TJK 23 October 29

24 In response, credit growth has slowed Credit boom has come to an abrupt halt Credit to the Private Sector (Percent change; year-on-year) Jan-8 Feb-8 Mar-8 Apr-8 May-8 Jun-8 Jul-8 Aug-8 Sep-8 Oct-8 Nov-8 Dec-8 Jan-9 Feb-9 Mar-9 Apr-9 May-9 Jun-9 Jul-9 Real lending rates on the rise as inflation declines Real Lending Rate (In percent) 25 ARM 27 AZE 28 2 GEO 29, latest 1/ KAZ 15 KGZ AZE KAZ TKM UZB ARM GEO KGZ TJK 1/ Lending rate for Georgia is on loan flows for all maturities. 24 October 29

25 Social Impact of the Crisis With per capita income and social spending rising in the oil exporters, poverty is expected to fall In the oil importers, despite some increase in social spending, poverty is expected to pick up via the following channels: Disposable income is projected to drop by 5 percent on account of lower remittances alone Softening of labor markets will likely see unemployment edging up Depreciated exchange rates have led to some increases in import prices for consumers Simulations for several countries suggest the poverty rate could increase as much as 5 percentage points 25 October 29

26 Policy Priorities Fiscal stimulus needs to be sustained in most countries in 21 more concessional donor financing would support growth and social protection and limit debt increase in energy importers Flexible exchange rate regimes will help preserve competitiveness Further steps to stabilize financial sectors important in some countries Not too early to start thinking about exit strategy, to reverse debt increase and take best advantage of global recovery: Medium term fiscal consolidation Further reforms to improve business environment Enhanced regional cooperation Financial sector development 26 October 29

27 Please visit the IMF s website Full report and copy of the presentation: / t / ft/reo/29/mcd/eng/mreo19.htm What do you think? Make your point on the related blog: 27 October 29