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Regional Economic OutlookRegional Economic OutlookCaucasus and Central AsiaCaucasus and Central Asia
Middle East and Central Asia DepartmentMiddle East and Central Asia Department
International Monetary FundInternational Monetary FundMay 2009
2INTERNATIONAL MONETARY FUND May 2009
Southwestern Asia
Armenia
Azerbaijan
Georgia
Kazakhstan
KyrgyzRepublic
TajikistanTurkmenistan
Uzbekistan
Oil and gas exportersOil and gas importers
Caucasus and Central AsiaCaucasus and Central Asia
3INTERNATIONAL MONETARY FUND May 2009
OutlineOutline
World Economic Outlook
CCA Economic Outlook
4INTERNATIONAL MONETARY FUND May 2009
World Economic Outlook: Key MessagesWorld Economic Outlook: Key Messages
Financial markets remain highly stressed. Total write-downs on global assets are estimated at $4 trillion.
The world economy will contract in 2009 by around 1¼ percent before recovering gradually in 2010. Deepest post WWII recession.
Emerging economies face dramatic drops in capital inflows, demand for their exports, and commodity prices.
A third wave of the global crisis is hitting the world’s poorest.
Turning around global growth calls for concerted policy actions to stabilize financial conditions and bolster demand.
5INTERNATIONAL MONETARY FUND May 2009
CDS Spreads for High-Grade Financials (Basis points)
Systemic risks remain elevated despiteforceful policy efforts.
Source: Bloomberg.
0
100
200
300
400
500
600
Jan-
07
Feb-0
7
Apr-0
7
Jun-
07
Jul-0
7
Sep-0
7
Nov-0
7
Dec-0
7
Feb-0
8
Apr-0
8
Jun-
08
Jul-0
8
Sep-0
8
Nov-0
8
Dec-0
8
Feb-0
9
Apr-0
9
0
40
80
120
160
200
240U.S. (left axis)
Europe (right axis)
Lehman Bros. bankruptcy
Bear Stearns collapse
Banks begin issuing govt. guaranteed debtBleak economic
releases globally
6INTERNATIONAL MONETARY FUND May 2009
Recent data show contraction may be moderating.
Equities(1/1/2007=100; FTSE)
30
40
50
60
70
80
90
100
110
120
Jan-
07
Feb-0
7
Apr-0
7
Jun-
07
Jul-0
7
Sep-0
7
Nov-0
7
Dec-0
7
Feb-0
8
Apr-0
8
Jun-
08
Jul-0
8
Sep-0
8
Nov-0
8
Dec-0
8
Feb-0
9
Apr-0
9
U.S.JapanEuro areaU.K.
Lehman Brothers
-80
-60
-40
-20
0
20
40
60
Jan-
00
Jul-0
0
Jan-
01
Jul-0
1
Jan-
02
Jul-0
2
Jan-
03
Jul-0
3
Jan-
04
Jul-0
4
Jan-
05
Jul-0
5
Jan-
06
Jul-0
6
Jan-
07
Jul-0
7
Jan-
08
Jul-0
8
Jan-
09
WorldEmerging marketsAdvanced economies
Merchandise Exports(Annualized percent change) 1/
1/ Three-month moving average.
7INTERNATIONAL MONETARY FUND May 2009
Real GDP Growth(In percent; quarter on quarter annualized)
Unemployment Rate 1/(In percent)
Across the globe, GDP is falling and unemployment is rising.
1/ Aggregated using total labor force as weights.2/ Excludes China, India, Indonesia, Hungary, and Pakistan.
4.5
5.5
6.5
7.5
8.5
9.5
10.5
Jan-
04
Jun-
04
Nov-0
4
Apr-0
5
Sep-0
5
Feb-0
6
Jul-0
6
Dec-0
6
May
-07
Oct-07
Mar
-08
Aug-0
8
Jan-
09
World Emerging markets 2/Industrial countries
-8
-4
0
4
8
12
Jun-
04
Dec-0
4
Jun-
05
Dec-0
5
Jun-
06
Dec-0
6
Jun-
07
Dec-0
7
Jun-
08
Dec-0
8
World Emerging marketsIndustrial countries
8INTERNATIONAL MONETARY FUND May 2009
There are downside risks to theThere are downside risks to theworld economic outlook.world economic outlook.
Further delays in implementing policies to stabilize financial conditions.
Deflation risks could reinforce a deeper and longer downturn.
Rising threat of corporate defaults in emerging economies.
Risks of trade and financial protectionism.
Sovereign fiscal sustainability concerns.
But, there is upside potential, hinging on bold implementation of policies.
9INTERNATIONAL MONETARY FUND May 2009
CCA Economic Outlook: Key MessagesCCA Economic Outlook: Key Messages
The region is being hit by external shocks.
Contraction in world economy, esp. RussiaDeclining commodity pricesDrying-up of capital inflows
Current account positions have weakened.
Fiscal balances are worsening, and public debt is rising.
Growth will drop sharply in 2009 and recover gradually in 2010.
Inflation is falling.
10INTERNATIONAL MONETARY FUND May 2009
The global economy is set to decline in 2009 and recover only gradually in 2010.
2009 2010
World -1.3 1.9
Advanced Economies -3.8 0.0United States -2.8 0.0Euro Area -4.2 -0.4Japan -6.2 0.8
Emerging and Developing Economies 1.6 4.0China 6.5 7.5India 4.5 5.6Russia -6.0 0.5
Real GDP Growth(In percent)
11INTERNATIONAL MONETARY FUND May 2009
Remittances from Russia are large, but are falling in 2009.
0
5
10
15
20
25
30
2001 2002 2003 2004 2005 2006 2007 2008est.
0
5
10
15
20
25
30
35
40
45
50
55
KAZ TKM AZE GEO ARM KGZ TJK
2006
2007
2008
Remittances Outflow from Russia(In billions of U.S. dollars)
Remittances Inflow(In percent of GDP)
12INTERNATIONAL MONETARY FUND May 2009
Commodity prices have dropped.
Commodity Prices
0
2,000
4,000
6,000
8,000
10,000
00 01 02 03 04 05 06 07 08 09 10
200
400
600
800
1,000
1,200Copper (US$ per metric tonne, left axis)
Aluminum (US$ per metric tonne, left axis)
Gold (US$ per troy ounce, right axis)
13INTERNATIONAL MONETARY FUND May 2009
Capital inflows are drying up.
-20
-10
0
10
20
30
AZE UZB TJK ARM TKM KGZ KAZ GEO
200720082009 (proj.)
Private Capital Flows, Net(In percent of GDP)
14INTERNATIONAL MONETARY FUND May 2009
Current account positions have weakened.
Current Account Balance(In percent of GDP)
Gross International Reserves 1/
1/ March 2009 data includes SBA purchases of $249 million (Armenia) and $250 million (Georgia).
-25
-20
-15
-10
-5
0
5
10
15
20
GEO ARM KGZ KAZ TJK UZB AZE TKM
In months of next year's imports (March 2009)
Change (in percent, June 2008 - March 2009)
-16
-8
0
8
16
2004 2005 2006 2007 2008 2009
CCAOil & gas exportersOil & gas importers
15INTERNATIONAL MONETARY FUND May 2009
Fiscal balances are worsening, and public debt is low, but rising again.
Fiscal Balance(In percent of GDP)
Government Debt(In percent of GDP)
0
20
40
60
80
100
2000 2002 2004 2006 2008 2010
CCAOil & gas exportersOil & gas importers
-6
-3
0
3
6
9
2004 2005 2006 2007 2008 2009
CCAOil & gas exportersOil & gas importers
16INTERNATIONAL MONETARY FUND May 2009
Growth in the region is slowing sharply . . .
Real GDP Growth(In percent)
-2
0
2
4
6
8
10
12
14
16
2000 2002 2004 2006 2008 2010
CCA
Oil & gas exporters
Oil & gas importers
17INTERNATIONAL MONETARY FUND May 2009
. . . but could recover slowly in 2010.
Proj. Proj.2006 2007 2008 2009 2010
CCA 13.1 12.0 6.3 0.9 5.0Armenia 13.2 13.8 6.8 -5.0 0.0Azerbaijan 30.5 23.4 11.6 2.5 12.3Georgia 9.4 12.4 2.0 1.0 3.0Kazakhstan 10.7 8.9 3.2 -2.0 1.5Kyrgyz Republic 3.1 8.5 7.6 0.9 2.9Tajikistan 7.0 7.8 7.9 2.0 3.0Turkmenistan 11.4 11.6 9.8 6.9 7.0Uzbekistan 7.3 9.5 9.0 7.0 7.0
Real GDP Growth(Annual percentage change)
18INTERNATIONAL MONETARY FUND May 2009
Inflationary pressures are subsiding, but food prices remain high.
Average Inflation, GDP Weighted(Annual percentage change)
6
8
10
12
14
16
18
20
Dec-06 Jun-07 Dec-07 Jun-08 Dec-08
Overall
Excluding food
19INTERNATIONAL MONETARY FUND May 2009
Measures Taken Thus FarMeasures Taken Thus Far
CountryFiscal
stimulus
Exchange rate
depreciationMonetary
easingLiquidity support
Increased provisioning
Capital injections
Deposit guarantees
Armenia
Azerbaijan
Georgia
Kazakhstan EnhancedKyrgyz Republic
Tajikistan
TurkmenistanUzbekistan
20INTERNATIONAL MONETARY FUND May 2009
Risks to the OutlookRisks to the Outlook
Prolonged global recession and stress in global financial markets
Rising external debt and rollover risks
Further exchange rate pressures
Credit constraints and rising nonperforming loans
21INTERNATIONAL MONETARY FUND May 2009
In some countries, the ability to meet external debt obligations is a cause for concern.
0
10
20
30
40
50
60
UZB KGZ AZE TJK GEO KAZ
Private External Debt(In percent of GDP)
22INTERNATIONAL MONETARY FUND May 2009
Regional currencies are under pressure.
90
100
110
120
130
140
150
160
7/31
8/30
9/29
10/2
911
/28
12/2
81/
272/
263/
28
KGZ
23INTERNATIONAL MONETARY FUND May 2009
Regional currencies are under pressure.
90
100
110
120
130
140
150
160
7/31
8/30
9/29
10/2
911
/28
12/2
81/
272/
263/
28
GEOKGZ
24INTERNATIONAL MONETARY FUND May 2009
Regional currencies are under pressure.
90
100
110
120
130
140
150
160
7/31
8/30
9/29
10/2
911
/28
12/2
81/
272/
263/
28
TJK
GEO
KGZ
25INTERNATIONAL MONETARY FUND May 2009
Regional currencies are under pressure.
90
100
110
120
130
140
150
160
7/31
8/30
9/29
10/2
911
/28
12/2
81/
272/
263/
28
KAZ
TJK
GEO
KGZ
26INTERNATIONAL MONETARY FUND May 2009
Regional currencies are under pressure.
90
100
110
120
130
140
150
160
7/31
8/30
9/29
10/2
911
/28
12/2
81/
272/
263/
28
ARMKAZTJKGEOKGZ
27INTERNATIONAL MONETARY FUND May 2009
Regional currencies are under pressure.
90
100
110
120
130
140
150
160
7/31
8/30
9/29
10/2
911
/28
12/2
81/
272/
263/
28
ARMGEOKAZKGZTJKRUS
28INTERNATIONAL MONETARY FUND May 2009
Credit growth is slowing down, and nonperforming loans are rising.
Credit Growth(In percent, annual growth)
Nonperforming Loans(In percent of total loans)
0
2
4
6
8
10
12
14
TKM UZB AZE ARM TJK KGZ KAZ GEO
20072008
-20
0
20
40
60
80
100
120
2002 2003 2004 2005 2006 2007 2008 2009
ReservesCredit to private sector
29INTERNATIONAL MONETARY FUND May 2009
Policy PrioritiesPolicy Priorities
Ensure external stability.
Identify and deal with financial sector risks early on.
Exploit opportunities for fiscal stimulus.
Prepare contingency plans to deal with potential crisis.