regional economic outlook: middle east and central asia
TRANSCRIPT
Regional Economic Outlook
Outline
Multi-speed recovery
Global Stocks(Morgan Stanley MSCI Stock Price Indices in U.S.
Dollars, MER Weighted; 2007 = 100)
1 Averages of BB-B US, BB-B Euro, and BBB Japan corporate bond spreads.
Sovereign and Corporate Bond Spreads(Basis points)
Global financial markets have recovered faster than expected
Emerging Market External Bond and Equity Issuance (Billions of U.S. dollars)
Capital flows have returned to emerging markets after sudden stop
Source: Bank of England, European Central Bank, and the Federal Reserve Board.
Private Credit Growth (Annualized percent change of 3mma over previous 3mma)
Banks need to rebuild capital
Bank credit remains hard to come by in many countries
Real GDP Growth(Percentage growth from previous year)
Fading fiscal stimulus
Less inventory restocking
will hold back growth later in 2010 and 2011
World economy set for a further recovery at varying speeds
Global GDP(Index, 2006=100)
Global financial crisis is leaving lasting scars on output levels
Devise credible exit strategies—medium-term fiscal consolidation plans urgently needed
Repair and reform financial systems
Combat unemployment
Manage capital flows
Global Policy Challenges
MENAP Oil Exporters
Afghanistan
Pakistan
IranIraq
Saudi Arabia
Yemen
Oman
QatarBahrain
Kuwait
Sudan
LibyaAlgeria
Morocco
Mauritania
Lebanon Syria
Jordan
Tunisia
Djibouti
Egypt United
Arab Emira
tes
West Bank & Gaza
Oil Exporters: Key Messages
Recovery is underway, driven by rising oil demand and continued supportive policies
Continue stimulus where there is fiscal room, to boost non-oil sector activity
Barring signs of overheating, accommodative monetary policy is appropriate to mitigate the current credit bust
Capital flows are recovering, but greater differentiation of sovereign risk can be expected, following Dubai World and Greece events
Rising oil prices have spurred recovery in exports and local stock markets
Merchandise Trade and Crude Oil Prices(Billions of U.S. dollars unless otherwise indicated)
Stock Markets(Indices: August 2008 = 100)
Source: IMF, Direction of Trade Statistics; IMF, International Financial Statistics. Source: Bloomberg.
Exports are recovering from early 2009 lows Stock markets have risen, even after Dubai World event
0
20
40
60
80
100
120
140
160
30
40
50
60
70
80
90
100
110
Dec-07 Jun-08 Dec-08 Jun-09 Dec-09
Exports
Imports
Crude oil; Dated Brent, WTI, and Dubai Fateh ($/barrel, right scale)
0
20
40
60
80
100
120
140
Aug-08 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10
BHR KWT QTR
SAU DUB ABU
IRN
GreeceDubai World
Overall fiscal balances will also improve, even with continued stimulus
Government Fiscal Balance(Percent of GDP)
Government Expenditure(Percent of GDP)
…as oil-related revenues rise
Sources: National authorities; and IMF staff estimates.
-5
0
5
10
15
20
25
30
2008 2009 2010
GCC
Non-GCC
MENAP Oil Exporters
0
10
20
30
40
2008 2009 2010
GCC
Non-GCC
MENAP Oil Exporters
Real GDP Growth(Percent)
Looking to 2010, recovery will continue
External environment is projected to be favorable to the oil sector
Non-oil sector will continue to be buoyed by accommodative macro policy
Overall future growth rates to remain lower than precrisis, but more sustainable
Source: National Authorities; and IMF staff estimates.
External balances are projected to improve
…as oil prices and crude oil production rise in 2010
Current Account Balances(Billions of U.S. dollars unless otherwise indicated)
Sources: National authorities; and IMF staff estimates.
Oil price uncertainty going forwardWTI Oil Price Prospects1
(U.S. dollars per barrel)
Sources: Bloomberg; and IMF staff calculations.1Derived from prices of futures options on May 17, 2010.
0
20
40
60
80
100
120
140
160
180
200
Jan-07 Aug-07 Mar-08 Oct-08 May-09 Dec-09 Jul-10 Feb-11 Sep-11 Apr-12 Nov-12
95% confidence interval
86% confidence interval
68% confidence interval
Futures
Clouding the horizon: sluggish post-crisis credit growth
Credit growth has slowed appreciably
Sources: National Authorities; and IMF, International Financial Statistics.1Excludes Iran, Iraq, and Libya due to data limitations.
Credit and Deposit Growth1
(PPP GDP weighted year-on-year growth rates, percent)
4
8
12
16
20
24
28
32
36
Dec-07 Jun-08 Dec-08 Jun-09 Dec-09
Credit to private sector
Deposits
…and inflation generally not a concern
Sources: National authorities.
Inflation(Consumer price index, year-on-year growth, percent)
-10
-5
0
5
10
15
20
25
30
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10
BHR IRN IRQ KWT LBYOMN SAU SDN UAE YMN
-10%
0%
10%
20%
30%
40%
50%
60%
-4 -2 0 2 4 6 8 10 12 14 16
Rea
l cre
dit g
row
th (Y
ear-
on-y
ear)
Historical median
Saudi Arabia 2008 boom
United Arab Emirates 2008 boom
Slow credit growth is likely to persist
Historical patterns show protracted period of sluggishness following booms
Sources: IMF, International Financial Statistics; and staff calculations.Note: Unweighted average of real credit growth around boom years identified between 1983 and 2008. Credit was deflated by the CPI index. Boom year in shaded area.
Real credit surrounding credit booms (Percent change)
Quarters
Capital inflows: boom, bust, and partial recoveryCapital Flows(Percent of GDP)
Large increase in inflows to the Gulf up to 2007, followed by reversal of mainly non-FDI flows…
…while international issuance has begun to recover, concentrated in bonds and in the Gulf
Sources: IMF, World Economic Outlook.
0
50
100
150
200
0
10
20
30
40
2003 04 05 06 07 08 09
Equity
Syndicated Loans
External Bonds
Emerging markets total (right scale)
MENAP Oil Exportrers
International Issuance(Billions of U.S. dollars)
Dubai World event led todisruption in bond issuance
-10
0
10
20
30
2003
2004
2005
2006
2007
2003
2004
2005
2006
2007
2008
2009
Inward FDI
Change in portfolio and other investment liabilities
MENAP oil exporters Emerging and developing economies
2009
2008
MENAP Oil Importers
Afghanistan
Pakistan
IranIraq
Saudi Arabia
Yemen
Oman
QatarBahrain
Kuwait
Sudan
LibyaAlgeria
Morocco
Mauritania
Lebanon Syria
Jordan
Tunisia
Djibouti
Egypt United
Arab Emira
tes
West Bank & Gaza
Oil Importers: Key Messages
The region is slowly recovering from last year’s slowdown
Trade is rising along with the global rebound Investment and bank credit are still subdued
Obstacles to growth ahead and room for stimulus is narrowing
Persistent weakness in EU demand and competition from other emerging markets
Governments facing high debt will need to cut back on fiscal expansion
High inflation in some countries
Policy focus will need to shift to medium-term structural agenda
Raising growth and creating employment is again at center stage
Developing capital markets can help revive credit and investment
Structural reforms key to improving competitiveness
International trade is mending…Merchandise Trade in U.S. dollars1
(Annual percent change of 3-month moving average)External Receipts(Billions of U.S. dollars)
Sources: National authorities; and Haver Analytics.¹ Egypt, Jordan, Lebanon, Morocco, Pakistan, and Tunisia.
Sources: IMF, World Economic Outlook; National authorities; and IMF staff estimates.¹ Excludes Afghanistan, Mauritania, and Pakistan.2Excludes Afghanistan and Djibouti.
0
20
40
60
80
100
120
Export of goods Tourist receipts¹ Remittances² FDI
2008 2009 2010 proj.
Trade is recovering after the sharp fall during the global crisis
But expansion will be slow, with exports and FDI still well below 2008 levels
-40
-20
0
20
40
60
80
100
Dec-07 Jun-08 Dec-08 Jun-09 Dec-09
Exports
Imports
…and financial markets have rebounded
Stock Market Indices(January 1, 2007 = 100)
Sovereign Bond Spreads(Basis Points)
Source: Bloomberg.1Morgan Stanley Capital International Index, emerging markets.
Source: Bloomberg.
Stocks are up, but - aside from Tunisia - still well below earlier highs
Bond spreads have narrowed over the past year; little impact so far from Greece
0
40
80
120
160
200
240
EGY JOR LBN MAR PAK TUN MSCI¹
Latest (16-May-10)
Ranges since January 1, 2007
0
500
1,000
1,500
2,000
2,500
0
200
400
600
800
1,000
Jan-09 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10
EGY LBN
MAR TUN
EMBIG PAK (right scale)
But credit and capital inflows still sluggish
Bank Credit to the Private Sector(Year-on-year growth, in percent)
International Issuance(Billions of U.S. dollars)
Source: National Authorities and IMF staff calculations. Source: Dealogic.
Credit growth has fallen sharply in several countries
Capital inflows to the region have been slow to come back and equity still lagging
-5
0
5
10
15
20
25
30
35
DJI EGY JOR LBN MAR PAK TUN
Jun-08 Feb-10
0
50
100
150
200
0
3
6
9
12
2003 04 05 06 07 08 09
Equity
Syndicated Loans
External Bonds
Emerging markets total (right scale)
MENAP Oil Importers
Growth picking up, but falling short of other EMs
Region is rebounding, but less so than comparators
Source: National Authorities; and IMF staff estimates.
Real GDP Growth(Percent)
Trade linkages to Europe highest in the Maghreb
Europe share of total merchandise exports, 2009(Percent)
Sources: Direction of Trade Statistics, IMF
0 10 20 30 40 50 60 70 80
YMNSDNBHR
OMNKGZJORUAEAFG
KWTUZBSAU
DJIQATLBNTJKIRNPAKIRQ
TKMSYR
MRTEGYGEOKAZ
ARMAZEDZA
MARTUNLBY
Limited room for further policy stimulus
Inflation pressures mount in several countries, limiting room for monetary policy
High public debt levels constrain fiscal policy options
Sources: National Authorities; and IMF staff estimates.Sources: National Authorities.
Prices(Annual percent change)
Fiscal Deficit and Public Debt, 2010(Percent of GDP)
End-2010
Competitive challenges are again at the fore
Exports continue to underperform Business environment mostly lagging
Sources: World Bank; and World Economic Forum.Source: IMF, World Economic Outlook.Note: Excludes oil exports.
Exports Per Capita(Percent of world average)
Competitiveness Indicators(Latest rankings)
10
15
20
25
30
35
40
1990 1995 2000 2005 2010
MENAP oil importers
Emerging and developing economies
Emerging and developing
economy averageMENAP Oil Importers average
EGY
JOR
MRT
MAR
PAK
SYR
TUN
0
40
80
120
160
200020406080100120140
Ease
of D
oing
Bus
ines
s(R
anki
ng a
mon
g 18
3 co
untri
es)
Global Competitiveness Index(Ranking among 134 countries)
More competitive
Unemployment looms large
Unemployment and Growth1
(Percent)High unemployment
Spillovers from a tepid recovery in Europe
Large structural component
Government jobs not the solution
Weakened prospects for exports and remittances
Impact on development aid?
Sources: National Authorities; and IMF staff estimates.1Egypt, Jordan, Morocco, and Tunisia.
0
1
2
3
4
5
6
7
8
0
2
4
6
8
10
12
14
16
1990 1993 1996 1999 2002 2005 2008
Unemployment rate
Real GDP growth (right scale)
Growth and job creation will have to come from the private sector
Focus on enhancing business environment, labor market flexibility, and education systems
Gear fiscal and monetary policy to creating supportive conditions: strengthening revenue, scaling back subsidies, and addressing NPLs
Policy Priorities
Fiscal stimulus: until private-sector activity regains momentum
Monetary support/regulatory policy: balance goal of supporting credit growth with that of financial stability
Ensure smooth process of cleanup of bank balance sheets: upfront recognition of losses and bank recapitalization if needed
Structural reforms to improve competitiveness
Oil Importers
Maintain fiscal and monetary stimulus as conditions permit
Oil Exporters
Develop local capital markets to provide alternatives to bank credit
Please visit the IMF’s website
Full report: Full report: http://www.imf.org/external/pubs/http://www.imf.org/external/pubs/
ft/reo/2010/MCD/eng/mreo0510.htmft/reo/2010/MCD/eng/mreo0510.htm
What do you think?What do you think?Make your point on the related blogs:Make your point on the related blogs:
http://blog-imfdirect.imf.orghttp://blog-imfdirect.imf.org