regional economic outlook caucasus and central asia middle east and central asia department

1

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


OutlineOutline

World Economic Outlook

CCA Economic Outlook


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.


CDS Spreads for High-Grade Financials (Basis points)

Systemic risks remain elevated despiteforceful policy efforts.

Source: Bloomberg.

0

100

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Jan-

07

Feb-0

7

Apr-0

7

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7

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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


Recent data show contraction may be moderating.

Equities(1/1/2007=100; FTSE)

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07

Feb-0

7

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U.S.JapanEuro areaU.K.

Lehman Brothers

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WorldEmerging marketsAdvanced economies

Merchandise Exports(Annualized percent change) 1/

1/ Three-month moving average.


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

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8

12

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World Emerging marketsIndustrial countries


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.


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.


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)


Remittances from Russia are large, but are falling in 2009.

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2001 2002 2003 2004 2005 2006 2007 2008est.

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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)


Commodity prices have dropped.

Commodity Prices

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1,200Copper (US$ per metric tonne, left axis)

Aluminum (US$ per metric tonne, left axis)

Gold (US$ per troy ounce, right axis)


Capital inflows are drying up.

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30

AZE UZB TJK ARM TKM KGZ KAZ GEO

200720082009 (proj.)

Private Capital Flows, Net(In percent of GDP)


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

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-10

-5

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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


Fiscal balances are worsening, and public debt is low, but rising again.

Fiscal Balance(In percent of GDP)

Government Debt(In percent of GDP)

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2000 2002 2004 2006 2008 2010


-6

-3

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6

9

2004 2005 2006 2007 2008 2009



Growth in the region is slowing sharply . . .

Real GDP Growth(In percent)

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2000 2002 2004 2006 2008 2010

CCA

Oil & gas exporters

Oil & gas importers


. . . 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)


Inflationary pressures are subsiding, but food prices remain high.

Average Inflation, GDP Weighted(Annual percentage change)

6

8

10

12

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Dec-06 Jun-07 Dec-07 Jun-08 Dec-08

Overall

Excluding food


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


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


In some countries, the ability to meet external debt obligations is a cause for concern.

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UZB KGZ AZE TJK GEO KAZ

Private External Debt(In percent of GDP)


Regional currencies are under pressure.

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ARMGEOKAZKGZTJKRUS


Credit growth is slowing down, and nonperforming loans are rising.

Credit Growth(In percent, annual growth)

Nonperforming Loans(In percent of total loans)

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TKM UZB AZE ARM TJK KGZ KAZ GEO

20072008

-20

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2002 2003 2004 2005 2006 2007 2008 2009

ReservesCredit to private sector


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.

regional economic outlook caucasus and central asia middle east and central asia department

Documents

global economy

theworld economic outlook

world economy

global growth

risks of trade

downside risks

deflation risks

financial conditions