regional economic outlook middle east and central asia department
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Regional Economic Outlook Middle East and Central Asia Department. International Monetary Fund October 2009. Outline. World Economic Outlook MENAP Economic Outlook. World Economic Outlook: Key Messages. - PowerPoint PPT PresentationTRANSCRIPT
1
Regional Economic OutlookRegional Economic Outlook
Middle East and Central Asia DepartmentMiddle East and Central Asia Department
International Monetary FundInternational Monetary FundOctober 2009
2INTERNATIONAL MONETARY FUND
October 2009
MENAP Oil Exporters
MENAP Oil Importers
3INTERNATIONAL MONETARY FUND
October 2009
OutlineOutline
World Economic Outlook
MENAP Economic Outlook
4INTERNATIONAL 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 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.
5INTERNATIONAL MONETARY FUND
October 2009
Exports and manufacturing 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
6INTERNATIONAL MONETARY FUND
October 2009
Consumer confidence slowly recovering, but unemployment 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
7INTERNATIONAL 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)
Policy has taken risk of another Great Depression offthe table, but financial conditions remain tight
Equity Markets(March 2000 = 100; national currency)
Sep.09
080604022000 Sep.09
080604022000Sep.090806042000 02
8INTERNATIONAL MONETARY FUND
October 2009
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)
-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
9INTERNATIONAL MONETARY FUND
October 2009
-10
-8
-6
-4
-2
0
2Advanced
Emerging and developing
World
0
20
40
60
80
100
120Advanced
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
10INTERNATIONAL MONETARY FUND
October 2009
Rebalancing will be a drawn-out process,implying slow global growth
Global Imbalances1
(Percent of world GDP)
1 OCADC: Bulgaria, Croatia, Czech Republic, Estonia, Greece, Hungary, Ireland, Latvia, Lithuania, Poland, Portugal, Romania, Slovak Republic, Slovenia, Spain, Turkey, and United Kingdom.
Discrepancy
1412100806040220001996 98
-3
-2
-1
0
1
2
3
U.S. Oil exporters DEU+JPN OCADC CHN+EMA ROW
11INTERNATIONAL MONETARY FUND
October 2009
Global growth is expected to pick up in 2010,but the recovery will be sluggish
-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
12INTERNATIONAL MONETARY FUND
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.
13INTERNATIONAL MONETARY FUND
October 2009
MENAP
►Oil Exporters
►Oil Importers
MCD Economic OutlookMCD Economic Outlook
14INTERNATIONAL MONETARY FUND
October 2009
Oil sector was hit hard during the crisis.
Authorities responded quickly and decisively.
Early signs of recovery, and future prospects are brightening.
Financial sector vulnerabilities need addressing.
Oil Exporters: Key MessagesOil Exporters: Key Messages
15INTERNATIONAL MONETARY FUND
October 2009
Global crisis strikes the oil sector
Real GDP Growth(Annual change; percent)
-4
-2
0
2
4
6
8
2005 2006 2007 2008 2009proj.
2010proj.
World
Advanced economies
MENAP oil exporters oil GDP
16INTERNATIONAL MONETARY FUND
October 2009
In response, countercyclical policies were pursued, dampening the downturn in the non-oil sector
Change in the Non-Oil Primary Fiscal Deficit, 2009
(Percent of non-oil GDP)
Real GDP Growth
(Annual change; percent)
0
2
4
6
8
10
SAU UAE
Fiscal impulseAutomatic stabilizersChange in non-oil primary deficit
-4
-2
0
2
4
6
8
10
2005 2006 2007 2008 2009proj.
2010proj.
Real GDPOil GDPNon-oil GDP
17INTERNATIONAL MONETARY FUND
October 2009
As oil prices fell and government spending rose,current account surpluses fell sharply
Current Account Balance(Billions of U.S. Dollars)
-50
0
50
100
150
200
250
300
2007 2008 2009proj.
GCC
Other
18INTERNATIONAL MONETARY FUND
October 2009
Liquidity and funding problems also hurt the banking sector, hampering its ability to lend
Growth in Credit to the Private Sector (Annualized percent)
-10
0
10
20
30
40
50
60
DZA BHR KWT QAT SAU SDN YMN
Dec. 2004–Jun 2008June 2008–latest
19INTERNATIONAL MONETARY FUND
October 2009
Authorities also responded quickly to stabilizethe financial sector
Central Bank Net Credit to the Banking System(Change as a percentage of base money)
0
2
4
6
8
10
12
BHR KWT SAU SDN
20INTERNATIONAL MONETARY FUND
October 2009
Local stock markets are recovering…
Percentage Change in Stock Market Indices
Jan 1, 2008 – Mar 3, 2009 Mar 3, 2009 – Sept 21, 2009
-43
-52
-60
-75
-56
-49
-49
-48
-90 -80 -70 -60 -50 -40 -30 -20 -10 0
Bahrain
Abu Dhabi
Oman
Kuwait
S&P 500
Qatar
Saudi Arabia
Dubai
29
22
53
72
38
43
-2
39
-20 0 20 40 60 80
Bahrain
Abu Dhabi
Oman
Kuwait
S&P 500
Qatar
Saudi Arabia
Dubai
21INTERNATIONAL MONETARY FUND
October 2009
External financing conditions are improving
CDS Spreads(Basis points)
0
100
200
300
400
500
600
700
800
900
1000
Aug
-08
Sep
-08
Oct
-08
Nov
-08
Jan-
09
Feb-
09
Mar
-09
Apr
-09
May
-09
Jun-
09
Jul-0
9A
ug-0
9S
ep-0
9
BahrainOmanQatarSaudi ArabiaAbu DhabiDubai
22INTERNATIONAL MONETARY FUND
October 2009
Despite a boost to domestic demand, no signs of inflationary pressures so far
Consumer Price Index(Percent change; year-on-year)
0
5
10
15
20
25
30
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
DZAIRNKWTLBYOMNSAUSDNYMN
23INTERNATIONAL MONETARY FUND
October 2009
Looking forward, external and fiscal balances Looking forward, external and fiscal balances should improve: scope for continued spendingshould improve: scope for continued spending
External Current Account and Fiscal Balances(Percent of GDP)
GCC Countries Non-GCC Countries
0
5
10
15
20
25
30
2007 2008 2009proj.
2010proj.
Current account balance
Government fiscal balance
-5
0
5
10
15
20
2007 2008 2009proj.
2010proj.
Current account balance
Government fiscal balance
24INTERNATIONAL MONETARY FUND
October 2009
Policy PrioritiesPolicy Priorities
Maintain public spending in countries with fiscal space
Orderly workout of financial/corporate balance sheet effects of asset price falls
Promote broad-based financial development
25INTERNATIONAL MONETARY FUND
October 2009
Impact of global crisis has been limited, with growth slowing modestly to 3.6 percent in 2009.
Low integration in international financial markets and manufacturing have contained the fallout. Proactive policy responses and positive spillovers from regional oil exporters have helped.
Limited fiscal space, currency appreciation, and sluggish external receipts imply recovery will be muted.
As the rebound takes hold, policy focus will need to shift towards private sector development.
Oil Importers: Key MessagesOil Importers: Key Messages
26INTERNATIONAL MONETARY FUND
October 2009
MENAP Oil Importers: External Receipts(Billions of U.S. dollars)
Lower external receipts,but even greater drop in imports
MENAP Oil Importers: Saving and Investment Balance
(Percent of GDP)
Note: Excludes Afghanistan and Djibouti. Tourism receipts also excludes Pakistan.
0
20
40
60
80
100
120
Export ofgoods
Tourismreceipts
Remittances FDI
20082009 proj.2010 proj.
17
19
21
23
25
27
2008 2009proj.
2010proj.
-10
-8
-6
-4
-2
0Domestic savings (left axis)Gross national investment (left axis)Current account balance (right axis)
27INTERNATIONAL MONETARY FUND
October 2009
Economic indicators are now picking up
Merchandise Exports(Annualized percent change of 3-month moving
average over previous 3-month moving average)
Stock Market Performance (Index, January 1, 2008 = 100)
-75
-50
-25
0
25
50
75
100
125
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
EGYPAKMARMENAP oil importersWorld
20
40
60
80
100
120
140
160
1-Jan-08 3-Mar-09 21-Sep-09
EGYJORLBNMARPAKTUNMSCI emerging markets
28INTERNATIONAL MONETARY FUND
October 2009
Growth improvement will remain muted
Real GDP Growth(Annual percent change)
-2
0
2
4
6
8
2005–07average
2008 2009proj.
2010proj.
MENAP oil importersEmerging and developing economiesWorld
29INTERNATIONAL MONETARY FUND
October 2009
Limited reliance on international capital flows...
Emerging Market Bond Issuance(Billions of U.S. dollars)
Cross-Border Loans(Billions of U.S. dollars)
0
20
40
60
80
2004
:Q1
2004
:Q3
2005
:Q1
2005
:Q3
2006
:Q1
2006
:Q3
2007
:Q1
2007
:Q3
2008
:Q1
2008
:Q3
2009
:Q1
0
5
10
15
20Emerging markets (left axis)Lebanon (right axis)Other MENAP oil importers (right axis)
0
1
2
3
4
2004
:Q1
2004
:Q3
2005
:Q1
2005
:Q3
2006
:Q1
2006
:Q3
2007
:Q1
2007
:Q3
2008
:Q1
2008
:Q3
2009
:Q1
EGYPAKTUNOther
30INTERNATIONAL MONETARY FUND
October 2009
... contained the disruption of local credit markets
MENAP Oil Importers: Private Credit Growth
(Annual percentage change)Sovereign Bond Spreads
(Basis points)
0
500
1000
1500
2000
2500
1/1/
2008
2/17
/200
8
4/4/
2008
5/21
/200
8
7/7/
2008
8/23
/200
8
10/9
/200
8
11/2
5/20
08
1/11
/200
9
2/27
/200
9
4/15
/200
9
6/1/
2009
7/18
/200
9
9/3/
2009
EGYLBNMARPAKTUNEMBIG
5
10
15
20
25
Jan-
08
Mar
-08
May
-08
Jul-0
8
Sep-0
8
Nov-0
8
Jan-
09
Mar
-09
May
-09
31INTERNATIONAL MONETARY FUND
October 2009
Policy responses constrained by limited fiscal space
Change in Non-oil Primary Fiscal Deficit, 2010
(Percent of non-oil GDP)
Real T-Bill Rates and Total Public Debt/GDP, 2009
(Percent)
Note: Excludes countries where fiscal years differ from calendar years.
0
40
80
120
160
-5 0 5 10
Real T-Bill Rates
To
tal P
ub
lic D
ebt/
GD
P
Egypt
Morocco
Jordan
Mauritania
Lebanon
Pakistan Tunisia
Less fiscal space
-3
-2
-1
0
1
JOR LBN MAR SYR TUN
Automatic stabilizer
Fiscal impulse
Change in primary deficit
32INTERNATIONAL MONETARY FUND
October 2009
Inflation has receded, but real effective exchange rates have appreciated
Effective Exchange Rates(Percent change, year to July 2009)
MENAP Oil Importers: Consumer Price Inflation
(Annual percentage change)
7
9
11
13
15
17
19
21
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 -10
-5
0
5
10
15
DJI EGY JOR LBN MRT MAR PAK SYR TUN
Nominal Real
33INTERNATIONAL MONETARY FUND
October 2009
With tight budgets, and exports under pressure, growth hinges on private consumption
MENAP Oil Importers: Contribution to Real GDP Growth(Percent)
Note: Excludes Afghanistan and Jordan.
-4
-2
0
2
4
6
8
10
2008 2009proj.
2010proj.
Net exportsInvestmentConsumptionReal GDP Growth
34INTERNATIONAL MONETARY FUND
October 2009
Banks are generally well capitalized, but NPLs remain high in some cases
Capital Adequacy Ratio(Percent)
Nonperforming Ratio to Total Loans(Percent)
0
5
10
15
20
25
30
35
DJI EGY JOR LBN MRT MAR PAK TUN
2007
Latest
0
5
10
15
20
AFG DJI EGY JOR LBN MAR PAK TUN
2007
Latest
36INTERNATIONAL MONETARY FUND
October 2009
Policy PrioritiesPolicy Priorities
As recovery takes hold, focus will need to shift toward raising countries’ productive capacity.
Addressing unemployment calls for greater private sector-led growth.
Low integration with global economy means losing out on the upside potential.
37INTERNATIONAL MONETARY FUND
October 2009
Full report and copy of the presentation: Full report and copy of the presentation: http://www.imf.org/external/pubs/http://www.imf.org/external/pubs/
ft/reo/2009/MCD/eng/mreo1009.htmft/reo/2009/MCD/eng/mreo1009.htm
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