Caucasus and Central Asia - International Monetary Fund · Global outlook has weakened… 3...
Transcript of Caucasus and Central Asia - International Monetary Fund · Global outlook has weakened… 3...
Kazakhstan
Turkmenistan
Uzbekistan
Azerbaijan
Armenia
Georgia
Kyrgyz Republic
Tajikistan
Oil and gas exporters
Oil and gas importers
Caucasus and Central Asia Regional Economic Outlook
October 2011
Overview
Global outlook
Caucasus and Central Asia (CCA) outlook and policies
2 Caucasus and Central Asia
Global outlook has weakened…
3 Caucasus and Central Asia
-1.5
-1.0
-0.5
0.0
World U.S. Euro area CEE Russia Emerging Asia
2011 2012
Source: International Monetary Fund, World Economic Outlook.
Revisions to GDP growth (Percentage point change; June 2011 WEO to September 2011 WEO)
Russia
-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
Emerging Asia
Central and
Eastern
Europe
-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
Japan
Euro area
Real GDP Growth1
(percent change from a year earlier)
2000 02 04 10 06 08 12
Advanced Economies Emerging Economies
…and recovery is uneven
United States
2000 02 04 10 06 08 12
4 Caucasus and Central Asia
1Quarterly data, except for Central and Eastern Europe (CEE), where annual data are used.
Source: International Monetary Fund, World Economic Outlook.
5
Equity Markets (index; 2007=100; national currency)
2000 04 Sep.
11
06 08 02 10 0
20
40
60
80
100
120
140
160
DJ EURO STOXX
S&P 500
Asia
Latin America
0
20
40
60
80
100
120
140
160
Russia
Poland
Turkey
Romania
Equity markets have fallen
2000 04 06 08 02 10 Sep.
11 Sources: IMF, World Economic Outlook; and Bloomberg.
Caucasus and Central Asia
6
Government Bond Spreads (two-year yield spreads over German bunds; basis points)
Financial stability risks have increased
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2200
2400
-100
-50
0
50
100
150
200
250
300
350
400
450
500
550
600
650
700
750
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
Poland
Romania 1/
Russia (RHS)
Turkey (RHS)
Sources: IMF, World Economic Outlook; and Bloomberg.
1/ One-year yield spreads over German bunds.
-50
0
50
100
150
200
250
300
350
400
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
Spain
Italy
Belgium
France
Sep.
11
Sep.
11
Caucasus and Central Asia
80
105
130
155
180
205
230
Jan-05 Aug-06 Mar-08 Oct-09 May-11 Dec-12
Food Beverages Agricultural raw materials
Commodity Prices (index; 2005=100)
Commodity prices still high—but may have peaked
Source: IMF, Global Data Source.
-200
200
600
1000
1400
1800
80
120
160
200
240
280
Jan-05 Aug-06 Mar-08 Oct-09 May-11 Dec-12
Energy Metals Gold (RHS) US$ per troy ounce
7 Caucasus and Central Asia
8
Downside risks have increased sharply
Caucasus and Central Asia
Prospects for world GDP growth (annual percent change)
Downside risks:
• Euro area crisis
• Advanced economy sovereign risks
• Escalating global financial volatility
• Oil supply concerns (risk of higher
oil prices)
Source: IMF, World Economic Outlook.
-1
0
1
2
3
4
5
6
7
8
90% confidence interval
(Apr 2011 WEO)
90% confidence interval
(Sep 2011 WEO)
2008 2009 2010 2011 2012
9
Caucasus and Central Asia: Outlook and Challenges
CCA region:
• Broadly positive growth outlook, but growing external risks
• Inflation remains a concern in many countries
• Banking sectors still impaired in some countries
Oil and gas importers face:
• Limited fiscal space
• External vulnerabilities—
large current account deficits
and debt burden
Oil and gas exporters face:
• Large non-oil fiscal deficits
• The challenge of improving
the quality of public spending
Medium-term challenges:
•Creating jobs and fostering high and inclusive
growth
Caucasus and Central Asia
10
Exports and remittances continue to grow solidly
-90
-60
-30
0
30
60
90
120
May-09 Nov-09 May-10 Nov-10 May-11
ARM AZE GEO
KAZ KGZ TJK
Exports of Goods
Sources: National authorities; and IMF staff calculations.
Remittance Inflows
-40
-20
0
20
40
60
May-09 Nov-09 May-10 Nov-10 May-11
ARM GEO
KGZ TJK
(3-month moving average of year-on-year growth, percent)
Caucasus and Central Asia
11
Growth outlook broadly positive…
Sources: National authorities; IMF, World Economic Outlook; and IMF staff calculations and projections.
-9
-6
-3
0
3
6
9
12
15
2005-08 2009 2010 2011 2012
CCA oil and gas exporters
CCA oil and gas importers
Russia
China
Real GDP (annual growth, percent)
Real GDP Growth
projection 2012
Caucasus and Central Asia
TKM
UZB
AZE
TJK KGZ
KAZ GEO
ARM
World
CEE
2
3
4
5
6
7
8
2012
…but with downside risks
Global Slowdown
Russia
- Remittances
- Exports
- FDI
Commodity Prices and Volumes
- Oil & gas
- Aluminum
- Cotton
- Non-ferrous metals
Financial flows
- Bank credit lines
- FDI
- Rollover needs
- Investment in EUR banks and the region
Risk Channel CCA Impact
12 Caucasus and Central Asia
13
Inflation remains a concern in the oil and gas exporters…
Headline and Core Inflation (average annual rate, in percent)
Sources: National authorities; IMF, World Economic Outlook; and IMF staff calculations and projections.
0
2
4
6
8
10
12
2009 2010 2011 2012
Headline inflation Core inflation
Caucasus and Central Asia
…and in some oil and gas importers
0
5
10
15
20
25 ARM
GEO
KGZ
TJK
CEE
14
Sources: National authorities; and IMF staff calculations.
Headline CPI Inflation (12-month change; percent)
TJK KGZ
GEO
CEE ARM
Caucasus and Central Asia
Fiscal consolidation is needed
-30
-25
-20
-15
-10
-5
0
2005 2006 2007 2008 2009 2010 2011 2012
CCA oil and gas exporters¹
CCA oil and gas importers
CEE
Fiscal Deficits (fiscal balance; percent of GDP)
Sources: National Authorities; and IMF staff calculations.
¹ Non-oil and gas fiscal balance over non-oil and gas GDP is used.
15
0
10
20
30
40
50
60
2005 2006 2007 2008 2009 2010 2011 2012
Public Debt (percent of GDP)
Caucasus and Central Asia
Monetary policy – more tightening needed
16 Caucasus and Central Asia
Nominal Policy Rates1,2
(percent)
0
2
4
6
8
10
12
14
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
CCA oil and gas exporters CCA oil and gas importers CEE
Jun-11
1Weighted by PPPGDP. 2CEE policy rate is the weighted average of Bulgaria, Hungary, Latvia,
Lithuania, Poland, Romania, and Turkey.
Sources: IMF, Global Data Source (GDS) database; and IMF staff calculations and projections.
Real Policy Rates1,2
(percent)
-8
-6
-4
-2
0
2
4
6
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
CCA oil and gas exporters CCA oil and gas importers CEE
Jun-11
17
Need to address external vulnerabilities in the oil and gas importers
Current Account Balance (percent of GDP)
External Debt (percent of GDP)
Sources: National authorities, IFS database, and IMF staff calculations and projections.
Caucasus and Central Asia
-20
-15
-10
-5
0
5
10
15
2007 2008 2009 2010 2011 2012
CCA oil and gas exporters CCA oil and gas importers CEE
30
35
40
45
50
55
60
65
70
75
2007 2008 2009 2010 2011 2012
0
5
10
15
20
25
30
35
2007 2008 2009 2010 2011 2012
International Reserves
(percent of GDP)
18
Need to repair bank balance sheets in some countries
Caucasus and Central Asia
0
5
10
15
20
25
30
AZE POL TJK ² Emerging Europe¹
KGZ SRB KAZ
2008 2009 2010 2011 (latest)
Nonperforming Loans (on a 90-day basis; percent of total loans)
Sources: National authorities; GFSR.
¹Simple average of NPLs for Albania, Bosnia, Bulgaria, Croatia, Hungary, Lithuania, Latvia, Macedonia,
Montenegro, Poland, Romania, Russia, Serbia, Turkey, and Ukraine. 230-day basis.
Policy Advice in the Event that Risks Materialize
Allow greater ER flexibility
• Step-up communications on risks now
• Allow flexibility if pressures emerge
• Avoid a ―re-run‖ of the 2008-09 response: limit loss of reserves
Ease monetary policy, if conditions warrant
• Lower global commodity prices may allow for easing of monetary policy
Improve quality of fiscal spending—assess scope for targeted
response
• Reorient spending to protect the most vulnerable
• In CCA countries with fiscal space, consider counter-cyclical response
19 Caucasus and Central Asia
20
Medium-term challenges: Need to address unemployment,...
Measuring Unemployment in the
South Caucasus (2009, percent)
18.7
9.9
6.8 6.1
16.9
0
5
10
15
20
25
30
35
Armenia Azerbaijan² Georgia
Alternative/unofficial¹
Official
30
20
¹Sources: Armenia: Asian Development Bank (2011); Azerbaijan: World
Bank (2010); Georgia: National Demographic Institute, Transparency
International, and Oxford Analytica.
²Data for Azerbaijan refer to 2008.
Youth Population and Unemployment¹ (percent)
0
5
10
15
20
25
30
35
40
45
0 10 20 30 40 50
Yo
uth
Un
em
plo
ym
en
t R
ate
(2
00
9)
Youth Population Share (2010)
Sources: United Nations; International Labour Organization;
Eurostat; and national authorities.
¹ 2008 youth unemployment for Azerbaijan, Croatia, and Georgia;
2005 for Ukraine. Youth are those in the 15–24 age group.
Croatia
Georgia
EU27
Serbia
Russia
Ukraine
Slovenia
Kazakhstan
Azerbaijan
Turkey
Armenia
Caucasus and Central Asia
21
...improve the business environment,...
Doing Business Ranking (2012 )
Source: World Bank, Doing Business Survey.
Caucasus and Central Asia
Bett
er
bu
sin
ess e
nvir
on
men
t
0
20
40
60
80
100
120
140
160
180
GEO KAZ ARM AZE CEE KGZ EAP MENA LAC EM SA LIC SSA TJK UZB
22
...and enhance governance
Rule of Law (country Rankings, 2010)
Control of Corruption (country Rankings, 2010)
Source: World Bank, Worldwide Governance Indicators 2009.
1/ The Resource-rich group comprises the 41 resource-rich countries that are included in the Revenue Watch Institute's 2010 index.
Caucasus and Central Asia
0
10
20
30
40
50
60
Bett
er
go
vern
an
ce
0
10
20
30
40
50
60
Bett
er
go
vern
an
ce
23
Policy Priorities
Oil and Gas Importers:
• Aim for sustained fiscal
consolidation
• Rein in large current
account deficits
• Tighten monetary policy
further (KGZ, TJK)
Oil and Gas Exporters:
• Exit from accommodative
fiscal and monetary
policies to combat inflation
• Improve the transparency,
quality, and efficiency of
public spending
• If global growth deteriorates sharply,
macroeconomic policy tightening may
need to be put on hold in the short term
• Need to repair bank balance sheets and
tackle high NPLs in some countries
Medium-term policy priorities:
• Address unemployment
• Improve the business environment
• Enhance governance
Caucasus and Central Asia
24
To access the full report online or to provide comments, please visit:
http://www.imf.org/external/pubs/ft/reo/2011/ mcd/eng/mreo1011.htm
or go to
http://www.imf.org and click on the link for Regional Economic Outlook