IMF Regional Economic Outlook for the Caucasus and Central Asia
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Transcript of IMF Regional Economic Outlook for the Caucasus and Central Asia
1
Regional Economic OutlookRegional Economic Outlook
Caucasus and Central Asia (CCA)Caucasus and Central Asia (CCA)
International Monetary FundInternational Monetary FundNovember 2009
2INTERNATIONAL MONETARY FUND
October 2009
OutlineOutline
World Economic Outlook
CCA Economic Outlook
3INTERNATIONAL MONETARY FUND
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 well established.
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 credible exit strategies from these expansionary policies will be needed to safeguard price and financial stability and the soundness of public finances.
Two key factors for the medium-term: Private demand needs to replace public demand; Demand in external surplus economies needs to rise to make up for
shrinking demand in external deficit economies.
4INTERNATIONAL MONETARY FUND
October 2009
Exports and manufacturing are helped by a turn in the inventory cycle
Industrial Production(Percent change; 3mma; annualized)
-40
-30
-20
-10
0
10
20
Jan-07 Jan-08 Jan-09
Advanced
Emerging
World
Jul-09Jan-07 Jan-08 Jan-09-80
-60
-40
-20
0
20
40
60
Advanced
World
Emerging
Merchandise Exports(Percent change; 3mma; annualized)
Jul-09
5INTERNATIONAL MONETARY FUND
October 2009
Consumer confidence is slowly recovering, but unemployment is still rising
Consumer Confidence(January 2005=100)
0
20
40
60
80
100
120
140
160
180
200
05 06 07 08 09
U.S. (Conf. Board)
Japan (Econ. Soc. Res. Inst.)
U.K. (Building Society)
Germany (Eur. Comm.)
Aug. 09 05 06 07 08 095.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
Advanced
World
Emerging
Unemployment(Percent; weighted by labor force)
Jul. 09
6INTERNATIONAL MONETARY FUND
October 2009
0
200
400
600
800
1000
1200
1400
1600
1800
BB
AAA
-100
0
100
200
300
400
500
U.S. dollar
Yen
Euro
30
40
50
60
70
80
90
100
110
120
130
DJ Euro Stoxx
Wilshire 5000
Topix
Corporate Spreads(Basis points; averages of Europe and United States)
Interbank Spreads(Basis points)
Good policies have removed the risk of another Great Depression, but financial conditions remain tight
Equity Markets(March 2000 = 100; national currency)
Sep.09
080604022000 Sep.09
080604022000Sep.090806042000 02
7INTERNATIONAL MONETARY FUND
October 2009
Expansionary monetary policy has been key,but will not prevent a credit crunch
Credit Growth in Private Nonfinancial Sectors
(q/q changes; billions of local currency)
-500
0
500
1000
1500
2000
2500
-50
0
50
100
150
200
250
United States (RHS)
Euro area (LHS)
042000 09:Q2
0602 08
-40
-20
0
20
40
60
80
100 -15
-10
-5
0
5
10
15
20
United States (LHS)Euro Area (LHS)Japan (inverted; RHS)
Bank Lending Conditions*
2000 02 0409:Q306 08
*Percent of net respondents reporting a tightening in lending standards
8INTERNATIONAL MONETARY FUND
October 2009
-10
-8
-6
-4
-2
0
2Advanced
Emerging and developing
World
0
20
40
60
80
100
120
Advanced
Emerging and developing
World
Fiscal policy, too, has played a major role,but fiscal support will diminish
Fiscal Balance(Percent of GDP)
901970 80 2000 10 901970 80 2000 10
Public Debt(Percent of GDP)
14 14
9INTERNATIONAL MONETARY FUND
October 2009
Global growth is expected to pick up in 2010,but the recovery will be slow
-6
-4
-2
0
2
4
6
8
10
12
World
Advanced
Emerging and developing
Real GDP Growth1
(Percent change from a year earlier)
-4
-2
0
2
4
6
2006 07 08 09 10
90% Confidence interval
70% Confidence interval
50% Confidence interval
Prospects for World GDP Growth(Percent change)
1 Quarterly data through 2010 and annual data afterwards.
1412100806042000 02
10INTERNATIONAL MONETARY FUND
October 2009
Key risks, mainly on the downside
• Premature withdrawal of public support, because recovery is seemingly self-sustaining—the 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.
• Loss of fiscal credibility or questions about continued independence of central banks.
• Upside risk: we may underestimate the effects of reduced uncertainty and greater confidence.
11INTERNATIONAL MONETARY FUND
October 2009
Southwestern Asia
Energy exportersEnergy importers
Outlook for Caucasus and Central Asia (CCA)Outlook for Caucasus and Central Asia (CCA)
12INTERNATIONAL MONETARY FUND
October 2009
CCA Economic OutlookCCA Economic Outlook• Global crisis has severely affected CCA energy importers
and Kazakhstan:
• Energy importers have been hit by sharp drops in remittances• Kazakhstan has been held back by its lingering banking crisis• Other energy exporters are 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.
13INTERNATIONAL MONETARY FUND
October 2009
CCA in the grip of the global crisis
Per capita incomes are decliningin the energy importing countries
Global crisis hit the region in 2009; only a modest recovery is projected for 2010
Real GDP Growth(Annual change; percent)
Gross National Disposable IncomePer Capita 1/
(U.S. dollars)
0
1500
3000
4500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Armenia
Georgia
Kyrgyz Republic
Tajikistan
1/ GNDI is defined as GDP + non-factor income + transfers.
-10
-5
0
5
10
15
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009proj.
2010proj.
Commonwealth of Independent StatesCCA energy exportersCCA energy importersWorldRussia
14INTERNATIONAL MONETARY FUND
October 2009
Remittances down sharply
Many migrants worked in the Russian construction sector
A collapse in remittances affects household incomes
Remittance Outflows from Russia to the CCA1
(Percent change; year-on-year)
Remittance Inflows(Percent change; year-on-year)
1/ Includes compensation of employees and migrants capital transfer.
-40
-20
0
20
40
60
80
100
Mar
-08
Jun-
08
Sep-0
8
Dec-0
8
Mar
-09
Jun-
09
CCARussian construction
-80
-60
-40
-20
0
20
40
60
80
100
Mar
-08
Jun-
08
Sep-0
8
Dec-0
8
Mar
-09
Jun-
09
ARM
GEO
KGZ
TJK
15INTERNATIONAL MONETARY FUND
October 2009
Exports contracted sharply in 2009, but imports also falling
Exports of Goods in U.S. Dollars(Percent; year-on-year)
Imports of Goods in U.S. Dollars(Percent; year-on-year)
-50
0
50
100
150
Jan-
08
Feb-0
8
Mar
-08
Apr-0
8
May
-08
Jun-
08
Jul-0
8
Aug-0
8
Sep-0
8
Oct-08
Nov-0
8
Dec-0
8
Jan-
09
Feb-0
9
Mar
-09
Apr-0
9
Energy exporters
Energy importers
-40
0
40
80
120
160
Jan-
08
Feb-0
8
Mar
-08
Apr-0
8
May
-08
Jun-
08
Jul-0
8
Aug-0
8
Sep-0
8
Oct-08
Nov-0
8
Dec-0
8
Jan-
09
Feb-0
9
Mar
-09
Apr-0
9
Energy exporters
Energy importers
16INTERNATIONAL MONETARY FUND
October 2009
Net external demand is holding back growth in 2009,but contributes to 2010 recovery
-80
-60
-40
-20
0
20
40
60
80
100
120
AZE KAZ TKM UZB ARM GEO KGZ TJK
2009
2010
Net External Demand1
(Annual change; in percent)
1 Exports minus imports.
17INTERNATIONAL MONETARY FUND
October 2009
Macroeconomic policies have beenaccommodative in 2009
CountryFiscal
stimulusExchange rate depreciation
Monetary easing
Liquidity support
Increased provisioning
Capital injections
Deposit guarantees
Armenia Enhanced
Azerbaijan
Georgia
Kazakhstan Enhanced
Kyrgyz Republic Enhanced
Tajikistan
Turkmenistan
Uzbekistan
18INTERNATIONAL MONETARY FUND
October 2009
Fiscal policy has been expansionary in 2009Change in the Non-oil Primary
Fiscal Deficit, 2009(Percent of non-oil GDP)
-4
-2
0
2
4
6
8
10
AZE KAZ TKM UZB ARM GEO KGZ TJK
Fiscal stimulusAutomatic stabilizerChange in primary deficit
19INTERNATIONAL MONETARY FUND
October 2009
Where debt levels were already high, donor supporthas helped to finance the fiscal stance
2009 increase in donor supportexpected to reverse in 2010
Some governments are constrainedby already high debt levels
Grants to Energy Importers (Percent of GDP)
Public Debt(Percent of GDP)
0
10
20
30
40
50
60
AZE KAZ TKM UZB ARM GEO KGZ TJK
2008
2009 proj.
2010 proj.
0
1
2
3
4
5
6
7
ARM GEO KGZ TJK
20082009 proj.2010 proj.
20INTERNATIONAL MONETARY FUND
October 2009
Inflation is down sharply, but pressures may return in 2010
Inflation is down sharply from historical highs…
… but commodity prices are on the rise again
Consumer Price Index(Annual change; percent)
Commodity Prices(Index 2008 = 100)
-10
0
10
20
30
40
Jan-
08
Feb-0
8
Mar
-08
Apr-0
8
May
-08
Jun-
08
Jul-0
8
Aug-0
8
Sep-0
8
Oct-08
Nov-0
8
Dec-0
8
Jan-
09
Feb-0
9
Mar
-09
Apr-0
9
May
-09
Jun-
09
ARM AZEGEO KAZKGZ TJKTKM UZB
0
50
100
150
Jan-
08
Feb-0
8
Mar
-08
Apr-0
8
May
-08
Jun-
08
Jul-0
8
Aug-0
8
Sep-0
8
Oct-08
Nov-0
8
Dec-0
8
Jan-
09
Feb-0
9
Mar
-09
Apr-0
9
May
-09
Jun-
09
Jul-0
9
Aug-0
9
AluminumCottonCrude oilGold
21INTERNATIONAL MONETARY FUND
October 2009
Currencies have depreciated ...
… helping reverse competitivenesslosses suffered in 2008
…. against the dollar, and energyimporters’ currencies have caught up
with the weakening ruble …
Local Currencies Against the U.S. Dollar and Russian Ruble
(Aug 31, 2008 – Aug 31, 2009;increase indicates appreciation)
Real Effective Exchange Rate(Index Jan 2005 = 100;
increase indicates appreciation)
-40
-30
-20
-10
0
10
20
30
AZE KAZ TKM UZB ARM GEO KGZ TJK
Against the U.S. dollarAgainst the Russian ruble
60
80
100
120
140
160
180
Jan-05Jul-0
5Jan-06
Jul-06
Jan-07Jul-0
7Jan-08
Jul-08
Jan-09Jul-0
9
ARMAZEGEOKAZKGZTJKUZB
22INTERNATIONAL MONETARY FUND
October 2009
Financial sectors are under stress,with NPLs set to rise further
Nonperforming Loans (NPLs) (Percent of total loans)
0
4
8
12
16
20
AZE KAZ TKM UZB ARM GEO KGZ TJK
2007
2008
2009, latest
23INTERNATIONAL MONETARY FUND
October 2009
In response, credit growth has slowed
Credit boom has come to anabrupt halt
Real lending rates are risingas inflation declines
Credit to the Private Sector(Percent change; year-on-year)
Real Lending Rate(Percent)
1/ Lending rate for Georgia is on loan flows for all maturities.
-20
0
20
40
60
80
100
120
Jan-
08
Feb-0
8
Mar
-08
Apr-0
8
May
-08
Jun-
08
Jul-0
8
Aug-0
8
Sep-0
8
Oct-08
Nov-0
8
Dec-0
8
Jan-
09
Feb-0
9
Mar
-09
Apr-0
9
May
-09
Jun-
09
Jul-0
9
ARM
AZE
GEO
KAZ
KGZ
-10
-5
0
5
10
15
20
25
AZE KAZ TKM UZB ARM GEO KGZ TJK
2007
2008
2009, latest 1/
24INTERNATIONAL MONETARY FUND
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 lead to higher
unemployment– Depreciated exchange rates have led to some increases in
import prices for consumers– Simulations for several countries suggest the poverty rate
could increase by as much as 5 percentage points
25INTERNATIONAL MONETARY FUND
October 2009
Policy PrioritiesPolicy Priorities• Fiscal stimulus needs to be sustained in most countries in 2010• More concessional donor financing would support growth and social
protection, and would limit debt increases in energy importers• Flexible exchange rate regimes will help preserve competitiveness
• Further steps to stabilize financial sectors are important in some countries
• It is not too early to start thinking about an exit strategy, reverse the debt increase, and take the best advantage of the global recovery:
– Medium term fiscal consolidation– Further reforms to improve business environment– Enhanced regional cooperation– Financial sector development
26INTERNATIONAL MONETARY FUND
October 2009
Full report and copy of the presentation: Full report and copy of the presentation: http://www.imf.org/yerevan
What do you think? What do you think?Make your point on the related blog:Make your point on the related blog:
http://blog-imfdirect.imf.org
Please visit the IMF’s websitePlease visit the IMF’s website