Regional Economic Outlook
Caucasus and Central Asia
Middle East and Central Asia Department
International Monetary Fund
May 2009
1
Caucasus and Central Asia
Oil and gas exporters
Oil and gas importers
Kazakhstan
Southwestern Asia
Uzbekistan
Georgia
Kyrgyz
Republic
Azerbaijan
Armenia
Turkmenistan
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Tajikistan
May 2009
Outline
 World Economic Outlook
 CCA Economic Outlook
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May 2009
World 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.
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May 2009
Systemic risks remain elevated despite
forceful policy efforts.
CDS Spreads for High-Grade Financials
600
500
(Basis points)
240
Lehman Bros.
bankruptcy
U.S. (left axis)
Europe (right axis)
200
Bear Stearns
collapse
400
160
300
120
200
80
100
Bleak economic
releases globally
Banks begin
issuing govt.
guaranteed
debt
0
Ja
n
Fe -07
b
Ap -07
r
Ju -07
nJu 07
Se l-07
p
N -07
ov
D -07
ec
Fe -07
b
Ap -08
r
Ju -08
nJu 08
Se l-08
p
N -08
ov
D -08
ec
Fe -08
b
Ap -09
r-0
9
0
40
Source: Bloomberg.
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May 2009
Recent data show contraction may be moderating.
Merchandise Exports
Equities
(Annualized percent change) 1/
(1/1/2007=100; FTSE)
120
60
Lehman
Brothers
110
40
100
20
90
80
0
70
-20
60
50
40
U.S.
Japan
Euro area
U.K.
-40
-60
30
World
Emerging markets
Advanced economies
Ja
nJu 00
l
Ja -00
nJu 01
l
Ja -01
nJu 02
l
Ja -02
nJu 03
l
Ja -03
nJu 04
l
Ja -04
nJu 05
l
Ja -05
nJu 06
l
Ja -06
nJu 07
l
Ja -07
nJu 08
l
Ja -08
n09
Ja
n
Fe -07
bAp 07
rJu 07
n0
Ju 7
l
Se -07
p
N -07
ov
D -07
ec
Fe -07
bAp 08
rJu 08
n0
Ju 8
l
Se -08
pN 08
ov
D -08
ec
Fe -08
bAp 09
r-0
9
-80
1/ Three-month moving average.
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May 2009
Across the globe, GDP is falling and
unemployment is rising.
Real GDP Growth
Unemployment Rate 1/
(In percent; quarter on quarter annualized)
(In percent)
10.5
12
9.5
8
World
Emerging markets 2/
Industrial countries
8.5
4
7.5
0
6.5
-4
-0
Ju 4
n0
N 4
ov
-0
4
Ap
r-0
Se 5
p0
Fe 5
b06
Ju
l-0
D 6
ec
-0
M 6
ay
-0
7
O
ct
-0
M 7
ar
-0
Au 8
g0
Ja 8
n09
8
Ja
n
D
ec
-0
-0
8
Ju
n
7
D
ec
-0
-0
7
Ju
n
6
4.5
D
ec
-0
5
-0
6
Ju
n
D
ec
-0
4
-0
5
Ju
n
D
ec
-0
-0
4
-8
Ju
n
5.5
World
Emerging markets
Industrial countries
1/ Aggregated using total labor force as weights.
2/ Excludes China, India, Indonesia, Hungary, and Pakistan.
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May 2009
There are downside risks to the
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.
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May 2009
CCA Economic Outlook: Key Messages
 The region is being hit by external shocks.
Contraction in world economy, esp. Russia
Declining commodity prices
Drying-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.
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May 2009
The global economy is set to decline in 2009
and recover only gradually in 2010.
Real GDP Growth
(In percent)
2009
2010
World
-1.3
1.9
Advanced Economies
United States
Euro Area
Japan
-3.8
-2.8
-4.2
-6.2
0.0
0.0
-0.4
0.8
Emerging and Developing Economies
China
India
Russia
1.6
6.5
4.5
-6.0
4.0
7.5
5.6
0.5
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May 2009
Remittances from Russia are large,
but are falling in 2009.
Remittances Outflow from Russia
Remittances Inflow
(In billions of U.S. dollars)
(In percent of GDP)
55
30
50
25
45
2006
2007
2008
40
20
35
30
15
25
20
10
15
5
10
5
0
2001
2002
2003
2004
2005
2006
2007
0
2008
est.
KAZ
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TKM
AZE
GEO
ARM
KGZ
TJK
May 2009
Commodity prices have dropped.
Commodity Prices
10,000
1,200
Copper (US$ per metric tonne, left axis)
Aluminum (US$ per metric tonne, left axis)
Gold (US$ per troy ounce, right axis)
8,000
1,000
6,000
800
4,000
600
2,000
400
0
200
00
01
02
03
04
05
INTERNATIONAL MONETARY FUND
12
06
07
08
09
10
May 2009
Capital inflows are drying up.
Private Capital Flows, Net
(In percent of GDP)
30
2007
2008
2009 (proj.)
20
10
0
-10
-20
AZE
UZB
TJK
ARM
INTERNATIONAL MONETARY FUND
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TKM
KGZ
KAZ
GEO
May 2009
Current account positions have weakened.
Current Account Balance
(In percent of GDP)
Gross International Reserves
16
1/
20
In months of next year's imports (March 2009)
CCA
Oil & gas exporters
Oil & gas importers
15
Change (in percent, June 2008 - March 2009)
10
8
5
0
0
-5
-10
-8
-15
-20
-16
-25
2004
2005
2006
2007
2008
2009
GEO
ARM
KGZ
KAZ
TJK
UZB
AZE
TKM
1/ March 2009 data includes SBA purchases of $249 million (Armenia) and $250
million (Georgia).
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May 2009
Fiscal balances are worsening, and public debt
is low, but rising again.
9
6
Fiscal Balance
Government Debt
(In percent of GDP)
(In percent of GDP)
100
CCA
Oil & gas exporters
Oil & gas importers
CCA
Oil & gas exporters
Oil & gas importers
80
3
60
0
40
-3
20
-6
0
2004
2005
2006
2007
2008
2009
2000
INTERNATIONAL MONETARY FUND
15
2002
2004
2006
2008
2010
May 2009
Growth in the region is slowing sharply . . .
Real GDP Growth
(In percent)
16
14
12
10
8
6
4
2
CCA
Oil & gas exporters
Oil & gas importers
0
-2
2000
2002
2004
2006
INTERNATIONAL MONETARY FUND
16
2008
2010
May 2009
. . . but could recover slowly in 2010.
Real GDP Growth
(Annual percentage change)
CCA
Armenia
Azerbaijan
Georgia
Kazakhstan
Kyrgyz Republic
Tajikistan
Turkmenistan
Uzbekistan
2006
2007
2008
Proj.
2009
13.1
13.2
30.5
9.4
10.7
3.1
7.0
11.4
7.3
12.0
13.8
23.4
12.4
8.9
8.5
7.8
11.6
9.5
6.3
6.8
11.6
2.0
3.2
7.6
7.9
9.8
9.0
0.9
-5.0
2.5
1.0
-2.0
0.9
2.0
6.9
7.0
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Proj.
2010
5.0
0.0
12.3
3.0
1.5
2.9
3.0
7.0
7.0
May 2009
Inflationary pressures are subsiding,
but food prices remain high.
Average Inflation, GDP Weighted
(Annual percentage change)
20
Overall
18
Excluding food
16
14
12
10
8
6
Dec-06
Jun-07
Dec-07
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Jun-08
Dec-08
May 2009
Measures Taken Thus Far
Country
Armenia
Azerbaijan
Georgia
Kazakhstan
Kyrgyz Republic
Tajikistan
Turkmenistan
Uzbekistan
Fiscal
stimulus
Exchange
rate
depreciation
Monetary
easing
Liquidity
support






Increased
provisioning
Capital
injections
Deposit
guarantees






















Enhanced




INTERNATIONAL MONETARY FUND
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
May 2009
Risks 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
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May 2009
In some countries, the ability to meet external debt
obligations is a cause for concern.
Private External Debt
(In percent of GDP)
60
50
40
30
20
10
0
UZB
KGZ
AZE
TJK
INTERNATIONAL MONETARY FUND
21
GEO
KAZ
May 2009
Regional currencies are under pressure.
160
KGZ
150
140
130
120
110
100
INTERNATIONAL MONETARY FUND
22
28
3/
26
2/
27
1/
/2
8
12
/2
8
11
/2
9
10
29
9/
30
8/
7/
31
90
May 2009
Regional currencies are under pressure.
160
GEO
KGZ
150
140
130
120
110
100
INTERNATIONAL MONETARY FUND
23
28
3/
26
2/
27
1/
/2
8
12
/2
8
11
/2
9
10
29
9/
30
8/
7/
31
90
May 2009
Regional currencies are under pressure.
160
TJK
GEO
KGZ
150
140
130
120
110
100
INTERNATIONAL MONETARY FUND
24
28
3/
26
2/
27
1/
/2
8
12
/2
8
11
/2
9
10
29
9/
30
8/
7/
31
90
May 2009
Regional currencies are under pressure.
160
KAZ
150
TJK
GEO
140
KGZ
130
120
110
100
INTERNATIONAL MONETARY FUND
25
28
3/
26
2/
27
1/
/2
8
12
/2
8
11
/2
9
10
29
9/
30
8/
7/
31
90
May 2009
Regional currencies are under pressure.
160
ARM
KAZ
TJK
GEO
KGZ
150
140
130
120
110
100
INTERNATIONAL MONETARY FUND
26
28
3/
26
2/
27
1/
/2
8
12
/2
8
11
/2
9
10
29
9/
30
8/
7/
31
90
May 2009
Regional currencies are under pressure.
160
ARM
GEO
KAZ
KGZ
TJK
RUS
150
140
130
120
110
100
INTERNATIONAL MONETARY FUND
27
28
3/
26
2/
27
1/
/2
8
12
/2
8
11
/2
9
10
29
9/
30
8/
7/
31
90
May 2009
Credit growth is slowing down,
and nonperforming loans are rising.
Credit Growth
(In percent, annual growth)
120
Nonperforming Loans
(In percent of total loans)
14
Reserves
Credit to private sector
100
12
80
10
60
8
40
6
20
4
0
2
-20
2002
2007
2008
0
2003
2004
2005
2006
2007
2008
2009
TKM
INTERNATIONAL MONETARY FUND
28
UZB
AZE
ARM
TJK
KGZ
KAZ
GEO
May 2009
Policy 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.
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29
May 2009