scenarios for alternative inter-arab financing for development abdallah al dardari director economic...
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Scenarios for alternative Inter-Arab Financing for Development
Abdallah Al DardariDirector
Economic Development and Globalisation DivisionUN-ESCWA
December 08 2011
• This work was initiated in the context of the preparation of two ESCWA publications: the Arab World 20-25 report, and the Arab Integration report.
• Given some of the main questions of the lead authors, a macroeconomic framework that ensures the coherency of model and judgment-based forecasts was deemed necessary.
• The main features of a small Macro-econometric modeling exercise in the Keynes-Klein/ Phillips- Bergstrom tradition will be presented.
• The model is a stochastic, dynamic, non-linear simultaneous-equations model formulated in discrete time.
The main purpose of a Macro-econometric Model is to forecast :
- Wealth/ Income/ GDP growth;
- Employment;
- Price/ Monetary developments;
- Balance of Payments Developments;
- Fiscal Sustainability Issues/ Public Debt Developments.
Structure of the Model:The model is structured along 5 main Blocks:- The real sector dealing with household demand,
factors demand by firms, and external trade.- The Balance of Payments block;- The Prices-Wages block;- The Monetary survey;- The Fiscal accounts.
The output of the model will be linked to sub-modules tackling several development issues (poverty, malnutrition,…) through cross-sectional regressions.
The main purpose of the framework is to:• to conduct simulations of the impact of budgetary (and
monetary) policies.• to shock indicators/ parameters related to:
- Intra-regional financial flows, in particular issues related to the reallocation of the global accumulated Oil Wealth;
- intra-regional aid flows;- Intraregional-trade in goods and services with reference the
two main modeled sub-regions;- Some structural developments related to Labor Supply,
particularly to simulate the impact of increases in the participation rates in the region;
- The model considers two sub-regional groupings, the Oil Exporters (the GCCs along with Algeria and Libya) and the Oil Importers. So far the model excludes Comoros, Djibouti, Iraq and Somalia. Iraq will be modeled separately.
Picture that: Real GDP per capita in the Arab World
The outcomes under the status quo are alarming for the Oil Importers…
1,100
1,200
1,300
1,400
1,500
1,600
1,700
00 02 04 06 08 10 12 14 16 18 20 22 24
Real GDP per capita - Oil Importing Countries
6,500
7,000
7,500
8,000
8,500
9,000
9,500
10,000
00 02 04 06 08 10 12 14 16 18 20 22 24
Real GDP per capita - Oil Exporting Countries
Baseline
800
850
900
950
1,000
1,050
1,100
00 02 04 06 08 10 12 14 16 18 20 22 24
Real Private Consumption per capita - Oil Importing Countries
2,600
2,800
3,000
3,200
3,400
3,600
3,800
4,000
00 02 04 06 08 10 12 14 16 18 20 22 24
Real Private Consumption per capita - Oil Exporting Countries
Baseline
Adverse capital accumulation dynamics…
0
200
400
600
800
1,000
80 85 90 95 00 05 10 15 20 25
Physical Capital Stock - Oil Importing Countries
0
1,000
2,000
3,000
4,000
80 85 90 95 00 05 10 15 20 25
Physical Capital Stock - Oil Exporting Countries
Baseline
0
20
40
60
80
100
120
70 75 80 85 90 95 00 05 10 15 20 25
Real Gross Fixed Capital Formation - Oil Importing CountriesR_GFCFOIEXO (Baseline)
Real Gross Fixed Capital Formation - Oil Importing Countries
40
80
120
160
200
240
280
320
70 75 80 85 90 95 00 05 10 15 20 25
Real Gross Fixed Capital Formation - Oil Exporting CountriesR_GFCFOXEXO (Baseline)
Real Gross Fixed Capital Formation - Oil Exporting Countries
.. Even if the trade balance of Oil Importers is set to reach equilibrium in 2025 on mechanical grounds
-60
-50
-40
-30
-20
-10
0
10
1995 2000 2005 2010 2015 2020 2025
Trade Balance - Oil Importing CountriesTrade Balance - Oil Importing Countries (Baseline)
Trade Balance - Oil Importing Countries
-12
-10
-8
-6
-4
-2
0
2
1995 2000 2005 2010 2015 2020 2025
Trade Balance as a percentage of GDP - Oil Importing CountriesTrade Balance as a percentage of GDP - Oil Importing Countries (Baseline)
Trade Balance as a percentage of GDP - Oil Importing Countries
0
100
200
300
400
500
600
700
1995 2000 2005 2010 2015 2020 2025
Trade Balance - Oil Exporting CountriesTrade Balance - Oil Exporting Countries (Baseline)
Trade Balance - Oil Exporting Countries
0
10
20
30
40
1995 2000 2005 2010 2015 2020 2025
Trade Balance as a percentage of GDP - Oil Exporting CountriesTrade Balance as a percentage of GDP - Oil Exporting Countries (Baseline)
Trade Balance as a percentage of GDP - Oil Exporting Countries
Some Simulations
• Main assumption: 10% of the projected oil receipts of the Oil Exporters are invested in the Oil Importing Countries, and 0.5% in increased intra-regional aid.
Simulation Results
150
200
250
300
350
00 02 04 06 08 10 12 14 16 18 20 22 24
Real Private Consumption - Oil Importing Countries (Scenario 3)R_CPOIEXO (Baseline)
Real Private Consumption - Oil Importing Countries
200
250
300
350
400
450
500
00 02 04 06 08 10 12 14 16 18 20 22 24
Real Gross Domestic Product - Oil Importing Countries (Scenario 3)R_GDPOI2 (Baseline)
Real Gross Domestic Product - Oil Importing Countries
1,000
1,200
1,400
1,600
1,800
2,000
00 02 04 06 08 10 12 14 16 18 20 22 24
Real GDP per capita - Oil Importing Countries (Scenario 3)R_GDPOI_CAP2 (Baseline)
Real GDP per capita - Oil Importing Countries
400
600
800
1,000
1,200
1,400
00 02 04 06 08 10 12 14 16 18 20 22 24
Physical Capital Stock - Oil Importing Countries (Scenario 3)KOI (Baseline)
Physical Capital Stock - Oil Importing Countries
-100
-80
-60
-40
-20
0
20
00 02 04 06 08 10 12 14 16 18 20 22 24
Trade Balance - Oil Importing Countries (Scenario 3)Trade Balance - Oil Importing Countries (Baseline)
Trade Balance - Oil Importing Countries
-16
-12
-8
-4
0
4
00 02 04 06 08 10 12 14 16 18 20 22 24
Trade Balance as a percentage of GDP - Oil Importing Countries (Scenario 3)Trade Balance as a percentage of GDP - Oil Importing Countries (Baseline)
Trade Balance as a percentage of GDP - Oil Importing Countries
0
100
200
300
400
500
600
700
00 02 04 06 08 10 12 14 16 18 20 22 24
Trade Balance - Oil Exporting Countries (Scenario 3)Trade Balance - Oil Exporting Countries (Baseline)
Trade Balance - Oil Exporting Countries
8
12
16
20
24
28
00 02 04 06 08 10 12 14 16 18 20 22 24
Trade Balance as a percentage of GDP - Oil Exporting Countries (Scenario 3)Trade Balance as a percentage of GDP - Oil Exporting Countries (Baseline)
Trade Balance as a percentage of GDP - Oil Exporting Countries
3.4
3.6
3.8
4.0
4.2
1,000
2,000
3,000
4,000
5,000
6,000
2010 2012 2014 2016 2018 2020 2022 2024
N_GDPARAB (Scenario 3)N_GDPARAB (Baseline)Perc ent Dev iation
N_GDPARAB
0
10
20
30
40
600
800
1,000
1,200
1,400
2010 2012 2014 2016 2018 2020 2022 2024
Phys ical Capital Stock - Oil Importing Countries (Scenario 3)KOI (Bas eline)Perc ent Dev iation
Physical Capital Stock - O il Importing Countries
.54
.55
.56
.57
.58
.59
60
70
80
90
100
2010 2012 2014 2016 2018 2020 2022 2024
Labor Demand - Oil Importing Countries (Scenario 3)LDOI (Bas eline)Perc ent Dev iation
Labor Demand - O il Importing Countries
.026
.028
.030
.032
.034
20
30
40
50
2010 2012 2014 2016 2018 2020 2022 2024
Labor Demand - Oil Exporting Countries (Scenario 3)LDOX (Bas eline)Perc ent Dev iation
Labor Demand - O il Exporting Countries
12.0
12.4
12.8
13.2
900
1,000
1,100
1,200
1,300
2010 2012 2014 2016 2018 2020 2022 2024
Real Private Consumption per capita - Oil Importing Countries (Scenario 3)R_CPOIEXO_CAP (Bas eline)Perc ent Dev iation
Real Private Consumption per capita - O il Importing Countries
.00
.04
.08
.12
.16
3,400
3,500
3,600
3,700
3,800
3,900
2010 2012 2014 2016 2018 2020 2022 2024
Real Private Consumption per capita - Oil Exporting Countries (Scenario 3)R_CPOXEXO_CAP (Bas eline)Perc ent D ev iation
Real Private Consumption per capita - O il Exporting Countries
12.4
12.8
13.2
13.6
350
400
450
500
2010 2012 2014 2016 2018 2020 2022 2024
Real Gross Domestic Produc t - Oil Importing Countries (Scenario 3)R_GDPOI2 (Bas eline)Perc ent Dev iation
Real G ross Domestic Product - O il Importing Countries
12.4
12.8
13.2
13.6
1,400
1,500
1,600
1,700
1,800
1,900
2010 2012 2014 2016 2018 2020 2022 2024
Real GDP per capita - Oil Importing Countries (Scenario 3)R_GDPOI_CAP2 (Bas eline)Perc ent Dev iation
Real GDP per capita - O il Importing Countries
.13
.14
.15
.16
.17
700
800
900
1,000
1,100
2010 2012 2014 2016 2018 2020 2022 2024
Real Gross Domestic Product - Oil Exporting Countries (Scenario 3)R_GDPOX2 (Bas eline)Perc ent Dev iation
Real Gross Domestic Product - O il Exporting Countries
.13
.14
.15
.16
.17
8,400
8,800
9,200
9,600
10,000
2010 2012 2014 2016 2018 2020 2022 2024
Real GDP per capita - Oil Exporting Countries (Scenario 3)R_GDPOX_CAP2 (Bas eline)Perc ent Dev iation
Real GDP per capita - O il Exporting Countries
.00
.04
.08
.12
.16
1,500
2,000
2,500
3,000
3,500
4,000
2010 2012 2014 2016 2018 2020 2022 2024
Physical Capital Stock - Oil Exporting Countries (Scenario 3)KOX (Bas eline)Perc ent Dev iation
Physical Capital Stock - O il Exporting Countries
Further simulation of Innovative Financing
• Liquidity Surplus in Arab Banks in MICs and LDCs is estimated at US$150 billion
• Effective intermediation with strctural transformation would have much higher impact on poverty reduction, employment and equity.
THANK YOU