Download Slide 1

Regional Economic Outlook
Middle East and Central Asia Department
International Monetary Fund
October 2009
1
Caucasus and Central Asia
Energy exporters
Energy importers
Southwestern Asia
INTERNATIONAL MONETARY FUND
2
October 2009
Outline
 World Economic Outlook
 CCA Economic Outlook
INTERNATIONAL MONETARY FUND
3
October 2009
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.
INTERNATIONAL MONETARY FUND
4
October 2009
Exports and manufacturing helped by a turn
in the inventory cycle
Merchandise Exports
Industrial Production
(Percent change; 3mma; annualized)
(Percent change; 3mma; annualized)
20
60
40
10
20
0
0
-10
-20
-40
Advanced
Advanced
World
Emerging
-20
World
Emerging
-30
-60
-80
Jan-07
Jan-08
Jan-09
Jan-07
Jul-09
Jan-08
Jan-09
-40
Jul-09
INTERNATIONAL MONETARY FUND
5
October 2009
Consumer confidence slowly recovering,
but unemployment still rising
Consumer Confidence
Unemployment
(January 2005=100)
(Percent; weighted by labor force)
200
8.5
Advanced
World
Emerging
180
8.0
160
7.5
140
120
7.0
100
6.5
80
60
U.S. (Conf. Board)
6.0
Japan (Econ. Soc. Res. Inst.)
40
U.K. (Building Society)
20
5.5
Germany (Eur. Comm.)
5.0
0
05
06
07
08
09
05
Aug. 09
06
07
08
09
Jul. 09
INTERNATIONAL MONETARY FUND
6
October 2009
Policy has taken risk of another Great Depression off
the table, but financial conditions remain tight
Interbank Spreads
(Basis points)
Corporate Spreads
Equity Markets
(Basis points; averages of
Europe and United States)
(March 2000 = 100;
national currency)
1800
500
400
U.S. dollar
BB
Yen
AAA
130
DJ Euro Stoxx
1600
120
Wilshire 5000
Topix
Euro
110
1400
100
300
1200
90
1000
200
80
800
70
100
600
60
400
50
0
200
-100
2000
02
04
06
08
Sep.
09
2000
02
04
06
08
0
Sep.
09
40
30
2000
02
04
06
08
Sep.
09
INTERNATIONAL MONETARY FUND
7
October 2009
Expansionary monetary policy has been key,
but will not forestall a credit crunch
Bank Lending
Conditions
Credit Growth in Private
Nonfinancial Sectors
(q/q changes; billions of local currency)
250
2500
200
2000
150
-15
100
United States (LHS)
Euro Area (LHS)
Japan (inverted; RHS)
80
-10
60
-5
40
0
20
5
1500
100
1000
50
500
0
0
United States (RHS)
Euro area (LHS)
-50
-500
2000
02
04
06
08
09:
Q2
0
10
-20
15
-40
20
2000
02
04
06
08
09:
Q3
INTERNATIONAL MONETARY FUND
8
October 2009
Fiscal policy too has played a major role,
but fiscal support will diminish
Fiscal Balance
Public Debt
(Percent of GDP)
(Percent of GDP)
120
2
0
Advanced
Advanced
Emerging and developing
Emerging and developing
World
World
100
-2
80
-4
60
-6
40
-8
20
-10
1970
80
90
2000
10
14
1970
80
90
2000
10
14
0
INTERNATIONAL MONETARY FUND
9
October 2009
Rebalancing will be a drawn-out process,
implying slow global growth
Global Imbalances1
(Percent of world GDP)
U.S.
Oil exporters
DEU+JPN
OCADC
CHN+EMA
ROW
3
2
1
0
-1
Discrepancy
-2
-3
1996
98
2000
02
04
06
08
10
12
14
1 OCADC:
Bulgaria, Croatia, Czech Republic, Estonia, Greece, Hungary, Ireland, Latvia, Lithuania, Poland, Portugal,
Romania, Slovak Republic, Slovenia, Spain, Turkey, and United Kingdom.
INTERNATIONAL MONETARY FUND
10
October 2009
Global growth is expected to pick up in 2010,
but the recovery will be sluggish
Real GDP Growth1
Prospects for World GDP Growth
(Percent change from a year earlier)
(Percent change)
12
6
10
4
8
6
2
4
2
0
0
-2
-2
World
90% Confidence interval
Advanced
-4
70% Confidence interval
50% Confidence interval
Emerging and developing
-4
-6
2000
1 Quarterly
02
04
06
08
10
12
2006
14
07
08
09
10
data through 2010 and annual data afterwards.
INTERNATIONAL MONETARY FUND
11
October 2009
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.
INTERNATIONAL MONETARY FUND
12
October 2009
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 2010; 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.
INTERNATIONAL MONETARY FUND
13
October 2009
CCA in the grip of the global crisis
Global crisis hit the region in 2009; only
a modest recovery is projected for 2010
Per capita incomes are declining
in the energy importing countries
Real GDP Growth
Gross National Disposable Income
Per Capita 1/
(Annual change; in percent)
(In U.S. dollars)
15
4500
10
3000
5
Armenia
Georgia
Kyrgyz Republic
Tajikistan
0
-5
Commonwealth of Independent States
CCA energy exporters
CCA energy importers
World
Russia
1500
-10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
proj. proj.
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1/ GNDI is defined as GDP + non-factor income + transfers.
INTERNATIONAL MONETARY FUND
14
October 2009
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/
Remittances Inflows
(Percent change; year-on-year)
(Percent change; year-on-year)
100
100
CCA
Russian construction
80
ARM
80
GEO
KGZ
60
60
TJK
40
40
20
20
0
-20
0
Ju
n-
09
9
M
ar
-0
8
D
ec
-0
-0
08
n-
ar
M
Ju
Ju
-0
09
n-
9
ar
-0
M
D
ec
-0
08
Se
p-
Ju
n-
8
ar
-0
M
Se
p
-80
8
-40
8
-60
08
-20
8
-40
1/ Includes compensation of employees and migrants capital transfer.
INTERNATIONAL MONETARY FUND
15
October 2009
Exports contracted sharply in 2009,
but imports also falling
Exports of Goods in U.S. Dollars
Imports of Goods in U.S. Dollars
(In percent; year-on-year)
(In percent; year-on-year)
150
160
Energy exporters
Energy exporters
Energy importers
Energy importers
120
100
80
50
40
0
0
Ja
Ja
nFe 08
bM 08
ar
Ap 08
r
M -08
ay
Ju 08
n0
Ju 8
lAu 08
gSe 08
pO 08
ct
N 08
ov
D -08
ec
Ja 08
nFe 09
bM 09
ar
Ap 09
r-0
9
-40
nFe 08
bM 08
ar
Ap 08
r
M -08
ay
Ju 08
n0
Ju 8
l-0
Au 8
gSe 08
pO 08
ct
N 08
ov
D -08
ec
Ja 08
nFe 09
bM 09
ar
Ap 09
r-0
9
-50
INTERNATIONAL MONETARY FUND
16
October 2009
Net external demand holding back growth in 2009,
but contributes to 2010 recovery
Net External Demand
(Annual change; in percent)
120
2009
100
2010
80
60
40
20
0
-20
-40
-60
-80
AZE
KAZ
TKM
UZB
ARM GEO KGZ
TJK
INTERNATIONAL MONETARY FUND
17
October 2009
Macroeconomic policies have been
accommodative in 2009
Country
Fiscal
stimulus
Armenia

Azerbaijan

Georgia

Kazakhstan
Exchange rate
depreciation

Monetary
easing
Liquidity
support
Increased
provisioning
Capital
injections

















Kyrgyz Republic




Tajikistan






Deposit
guarantees
Enhanced

Enhanced
Enhanced
Turkmenistan
Uzbekistan


INTERNATIONAL MONETARY FUND
18
October 2009
Fiscal policy expansionary in 2009, but some
countries face limited fiscal space in 2010
Fiscal Space Indicators
Change in the Non-oil Primary
Fiscal Deficit, 2009
(In percent, 2009)
(In percent of non-oil GDP)
10
160
Fiscal stimulus
Automatic stabilizer
Change in primary deficit
Less fiscal space
Total Public Debt/GDP
8
6
4
2
0
120
80
Kyrgyz Republic
Tajikistan
40
Georgia
Armenia
-2
Azerbaijan
0
-4
-10
AZE
KAZ
TKM
UZB
ARM GEO
KGZ
TJK
0
10
20
30
40
Real Lending Rates
Note: methodology based on IMF (2009), and is briefly described in the Amex.
Source: IMF staff estimates; lending rates are from the International Financial Statistics.
INTERNATIONAL MONETARY FUND
19
October 2009
Where debt levels were already high, donor support
has helped finance the fiscal stance
Some governments are constrained
by already high debt levels
2009 increase in donor support
expected to reverse in 2010
Public Debt
Grants to Energy Importers
(In percent of GDP)
60
50
(In percent of GDP)
7
2008
2009 proj.
2010 proj.
2008
2009 proj.
2010 proj.
6
5
40
4
30
3
20
2
10
1
0
0
AZE
KAZ
TKM
UZB
ARM GEO
KGZ
TJK
ARM
GEO
KGZ
TJK
INTERNATIONAL MONETARY FUND
20
October 2009
Inflation down sharply, but pressures may
return in 2010
… but commodity prices on the
rise again
Inflation down sharply from
historical highs…
Consumer Price Index
Commodity Prices
(Annual change; in percent)
(Index 2008 = 100)
40
ARM
GEO
KGZ
TKM
30
150
AZE
KAZ
TJK
UZB
100
20
10
50
Aluminum
Cotton
Crude oil
Gold
0
Ja
n
Fe -08
b
M -08
ar
Ap -08
M r-0
ay 8
Ju -08
nJu 08
Au l-08
g
Se -08
p
O -08
ct
N -08
o
D v-08
ec
Ja -08
n
Fe -09
b
M -09
ar
Ap -09
M r-0
ay 9
Ju -09
nJu 09
Au l-09
g09
0
Ja
n
Fe -08
b
M -08
ar
Ap -08
M r-08
ay
Ju -08
nJu 08
Au l-08
g
Se -08
p
O -08
ct
N -08
ov
D -08
ec
Ja -08
n
Fe -09
b
M -09
ar
Ap -09
M r-09
ay
Ju -09
n09
-10
INTERNATIONAL MONETARY FUND
21
October 2009
Currencies have depreciated ...
…. against dollar, and energy
Importers’ currencies have caught up
with weakening ruble …
… helping reverse competitiveness
losses suffered in 2008
Local Currencies Against the U.S.
Dollar and Russian Ruble
Real Effective Exchange Rate
(Index Jan 2005 = 100; increase indicates
appreciation)
(Aug 31, 2008 – Aug 31, 2009, increase
indicates appreciation)
180
30
20
160
10
140
0
120
-10
100
-20
80
-30
-40
60
Against the U.S. dollar
Against the Russian ruble
AZE
KAZ
TKM
UZB
ARM
AZE
GEO
KAZ
KGZ
TJK
UZB
5
ARM GEO
KGZ
n-0
Ja
TJK
6
5
l-0
Ju
n-0
Ja
7
6
l-0
Ju
n-0
Ja
8
7
l-0
Ju
n-0
Ja
8
l-0
Ju
9
9
n-0 Jul-0
Ja
INTERNATIONAL MONETARY FUND
22
October 2009
Financial sectors are under stress,
with NPLs set to rise further
Nonperforming Loans
(In percent of total loans)
20
2007
2008
2009, latest
16
12
8
4
0
AZE
KAZ
TKM
UZB
ARM GEO
KGZ
TJK
INTERNATIONAL MONETARY FUND
23
October 2009
In response, credit growth has slowed
Credit boom has come to an
abrupt halt
Real lending rates on the rise as
inflation declines
Credit to the Private Sector
Real Lending Rate
(Percent change; year-on-year)
(In percent)
120
25
ARM
100
AZE
20
GEO
80
60
KAZ
2007
2008
2009, latest 1/
15
KGZ
10
40
5
20
0
0
-5
-20
Ja
n
Fe -08
b
M -08
ar
Ap -08
M r-08
ay
Ju -08
nJu 08
Au l-08
g
Se -08
p
O -08
ct
N -08
ov
D -08
ec
Ja -08
n
Fe -09
b
M -09
ar
Ap -09
M r-09
ay
Ju -09
nJu 09
l-0
9
-10
AZE
KAZ
TKM
UZB
ARM GEO
KGZ
TJK
1/ Lending rate for Georgia is on loan flows for all maturities.
INTERNATIONAL MONETARY FUND
24
October 2009
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
INTERNATIONAL MONETARY FUND
25
October 2009
Policy Priorities
• Fiscal stimulus needs to be sustained in most countries in 2010
– 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
INTERNATIONAL MONETARY FUND
26
October 2009
Please visit the IMF’s website
Full report and copy of the presentation:
http://www.imf.org/external/pubs/
ft/reo/2009/MCD/eng/mreo1009.htm
What do you think?
Make your point on the related blog:
http://blog-imfdirect.imf.org
INTERNATIONAL MONETARY FUND
27
October 2009