caucasus and central asia - imf 2016-10-14آ  away from center signifies higher risks, easier...

Download Caucasus and Central Asia - IMF 2016-10-14آ  Away from center signifies higher risks, easier monetary

Post on 02-Apr-2020

0 views

Category:

Documents

0 download

Embed Size (px)

TRANSCRIPT

  • Regional Economic Outlook Caucasus and Central Asia

    October 21, 2016

  • Outline

    2

    Policy Priorities

    Outlook and Policy Actions

    Global and Regional Environment

  • 3

    Global growth remains lackluster

    World U.S. Euro Emerging China RussiaArea markets

    2015 3.2 2.6 2.0 4.0 6.9 -3.7

    2016 3.1 1.6 1.7 4.2 6.6 -0.8

    2017 3.4 2.2 1.5 4.6 6.2 1.1

  • Risks are to the downside―more pronounced from inward-looking policies and secular stagnation, less so from emerging markets

    4

    Oct 2016 GFSR Apr 2016 GFSR

    Credit risks

    Emerging market risks

    Market and liquidity risks

    Macroeconomic risks

    Monetary and financial conditions

    Risk appetite

    Global Risks

    Away from center signifies higher risks, easier monetary and financial conditions, or higher risk appetite. Source: IMF GFSR report.

    World GDP Growth (Percent change)

    Source: World Economic Outlook.

    0

    1

    2

    3

    4

    5

    6

    2013 2014 2015 2016 2017

    50 percent confidence interval

    70 percent confidence interval

    90 percent confidence interval

  • 5

    Commodity prices are expected to remain weak

    Brent Crude Oil Price (U.S. dollars per barrel)

    Commodity Prices (Index, June 2011=100)

    Sources: Bloomberg; and IMF staff calculations.

    0

    20

    40

    60

    80

    100

    120

    140

    2011 2012 2013 2014 2015 2016 2017 2018 2019 95% confidence interval 86% confidence interval 68% confidence interval Brent Futures

    WEO Baseline Average Oil Price: 2016: $43 2017: $51 2020: $56

    20

    30

    40

    50

    60

    70

    80

    90

    100

    110

    120

    2011 2012 2013 2014 2015 2016 2017 2018

    Copper

    Alumnium

    Gold

    Cotton

  • 6

    Despite some improvement, the outlook for CCA’s key export markets remains weak Real GDP Growth (Percent)

    Exports by Destination (Share of Total Exports)

    0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

    100%

    ARM GEO KGZ TJK AZE KAZ UZB TKM

    Russia China Euro area CIS excl. Russia Other

    -6

    -4

    -2

    0

    2

    4

    6

    8

    10

    12

    Euro area Russia China

    2001-14 average

    2015

    2016

    2017-21 average

  • 7

    Policy Priorities

    Outlook and Policy Actions

    Global and Regional Environment

  • 8

    Regional growth sharply weakening, with a modest recovery projected for 2017

    Real GDP Growth (Percent)

    -4

    -2

    0

    2

    4

    6

    8

    10

    2000-14 2015 2016 2017

    CCA Oil Exporters Oil Importers

    AZE KAZ

    TKMUZB

    ARM

    GEO

    KGZ

    TJK

    AZE

    KAZ

    TKM

    UZB

    ARM GEO

    KGZ

    TJK

    -4

    -2

    0

    2

    4

    6

    8

    10

    2016 2017

  • 9

    Exports and remittances are key channels through which external conditions affect regional growth Total Exports (Billions of USD)

    Remittances (Jan 2011 = 100)

    10

    15

    20

    25

    30

    0

    20

    40

    60

    80

    100

    120

    140

    160

    180

    2011 12 13 14 15 16 17

    CCA Oil Exporters CCA Oil Importers (RHS)

    100

    120

    140

    160

    180

    200

    220

    240

    260

    280

    11 12 13 14 15 16

    Rubles

    National Currency

    US Dollars

    2011

  • 10

    Budgetary support has helped economic activity

    Oil Exporters: Government Expenditure (Percent of Non-oil GDP)

    Oil Importers: Government Expenditure (Percent of GDP)

    -45

    -40

    -35

    -30

    -25

    -20

    -15

    -10

    -5

    0

    0

    10

    20

    30

    40

    50

    60

    70

    AZE KAZ TKM -10 -8 -6 -4 -2 0 2 4 6 8 10

    0 5

    10 15 20 25 30 35 40 45 50

    ARM GEO KGZ TJK

  • 11

    Public debt and adjustment needs have risen

    Illustrative Fiscal Adjustment Needs in Oil Exporters (Percent)

    1/ This is the gap between the projected nonhydrocarbon primary balance and the desirable fiscal balance based on a permanent income hypothesis.

    Public Debt (Percent of GDP)

    0

    5

    10

    15

    20

    25

    30

    35

    40

    AZE KAZ

    Decrease in spending needed to balance 2016 budget (percent change)

    Distance to intergenerationally- neutral fiscal balance (2016, percent of non-oil GDP) 1

    0

    10

    20

    30

    40

    50

    60

    70

    80

    ARM GEO KGZ TJK AZE KAZ TKM UZB

    Change 2014– 16

    2014

  • 12

    Exchange rate policy has also been a useful tool for coping with the shocks

    40

    50

    60

    70

    80

    90

    100

    110

    Oil Exporters (U.S. dollars per national currency, January 2010 = 100)

    AZE KAZ TKM UZB

    40

    50

    60

    70

    80

    90

    100

    110

    Oil Importers (U.S. dollars per national currency, January 2010 = 100)

    ARM GEO KGZ TJK

  • 13

    Currency adjustment has helped unwind previous real appreciations, but temporarily increased inflation

    Nominal Effective Exchange Rates and Inflation

    (Percent)

    Real Effective Exchange Rates (Percent Change, Trough to Peak or vice versa)

    ARM

    GEO KGZ

    TJK

    AZE

    KAZ

    TKM UZB

    –50

    –40

    –30

    –20

    –10

    0 0 10 20 30 40 50

    Po st

    -s ho

    ck D

    ep re

    ci at

    io n

    Pre-shock Appreciation

    45 degree line

    real appreciation

    re al

    d ep

    re ci

    at io

    n

    ARM

    GEO KGZ

    TJK

    AZE

    KAZ

    TKM

    UZB

    -2

    0

    2

    4

    6

    8

    10

    12

    14

    -10 0 10 20 30 40 50

    In fla

    tio n

    in 2

    01 6

    Nominal effective exchange depreciation (Percent change, peak to trough in REER)

  • 14

    Financial vulnerabilities have risen amid weaker currencies and slowing economic activity

    -15

    -10

    -5

    0

    5

    10

    15

    20

    25

    2011 2012 2013 2014 2015 2016

    Credit Deposits

    Private Credit and Deposits (Percent Change)

    Note: Adjusted for exchange rate effects. Data not available for Turkmenistan and Uzbekistan.

    Non-performing Loans (Percent of Total Loans)

    Note: NPLs in Azerbaijan include only the overdue portion of the loans. In Kazakhstan, the reduction reflects the de-licensing of a bank with significant NPLs and legislation changes allowing banks to move NPLs to a Special Purpose Vehicle. Turkmenistan's data are not available.

    0

    5

    10

    15

    20

    25

    30

    35 2013 2014 Latest

  • Risks to the outlook are tilted to the downside

    Further weakening of prices for oil and other commodities

    Weaker growth in trading partners (Russia, China, Europe)

    Increase in global risk aversion and financing costs

    15

    Increase in global protectionism and/or Slower domestic reforms

  • 16

    Policy Priorities

    Outlook and Policy Actions

    Global and Regional Environment

  • 17

    Fiscal • Continue to support growth in the near term if budget space and

    buffers allow • Develop credible medium-term consolidation plans to ensure

    sustainability

    Monetary • Focus on inflationary pressures taking into account growth and financial

    stability • Strengthen monetary and exchange rate frameworks

    Financial Sector • Improve supervision, macro-prudential policies, and crisis management

    frameworks

    Macroeconomic and Financial Policy Priorities

  • 18

    Without reforms, medium-term growth prospects and gains in living standards will be slow

    GDP per Capita (In Percent of Emerging Market Average)

    Real GDP Growth (Percent)

    Note: GDP per capita in 2022-2035 is expected to growth at the same rate as 2021.

    0

    2

    4

    6

    8

    10

    12

    14

    –2 –1 0 1 2 3

    Russian crisis (1998 = 0)

    Global financial crisis (2009 = 0)

    Current recovery (2016 = 0)

    30

    35

    40

    45

    80

    90

    100

    110

    120

    1995 2000 2005 2010 2015 2020 2025 2030 2035

    Oil Exporters Oil Importers (RHS)

  • 19

    Need to change growth models: diversify away from commodities & remittances, make growth inclusive

    Oil Exports and Remittances (2015, Percent)

    Poverty Rates (Percent)

    0

    10

    20

    30

    40

    KGZ TJK ARM UZB GEO AZE KAZ 0

    10

    20

    30