- International Monetary Fund. Middle East and Central Asia Dept.
- Published Date:
- May 2009
© 2009 International Monetary Fund
Regional economic outlook : Middle East and Central Asia.–[Washington, D.C.] : International Monetary Fund, 2009.
p.; cm. – (World economic and financial surveys, 0258-7440)
Includes bibliographical references.
1. Economic forecasting – Middle East. 2. Economic forecasting – Asia, Central. 3. Middle East – Economic conditions. 4. Middle East – Economic conditions – Statistics. 5. Asia, Central – Economic conditions. 6. Asia, Central – Economic conditions – Statistics. I. International Monetary Fund. II. Series: World economic and financial surveys.
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The views expressed in this publication are those of the contributors, and not necessarily of the IMF. The coordinating team from the Middle East and Central Asia Department comprised Adam Bennett, Aasim Husain, Gene Leon, Mandana Dehghanian, Muriel Vimond, and Patricia Poggi. In addition to the authors noted in specific chapters and boxes, Henry Ma provided valuable input with research support from Gohar Abajyan. Country desk economists, research assistants, and mission chiefs also provided important contributions.
- Assumptions and Conventions
- Country and Regional Groupings
- Executive Summary
- I. Middle Eastern Oil Exporters: Continued Spending Supports the Global Economy
- II. Middle Eastern Oil Importers: Delayed Slowdown Under Way
- III. The Caucasus and Central Asia: A Bumpy Road Ahead?
- Statistical Appendix
- 1 World Economic Outlook
- 2 Middle Eastern Oil Exporters’ Sovereign Wealth Funds: Impact and Implications of the Global Crisis
- 3 Linkages and Spillovers with the GCC Region and with Europe
- 4 How Important Are Different Forms of Foreign Inflows to Middle Eastern Oil Importers?
- 5 How Russia Affects the Neighborhood: Trade, Financial, and Remittance Channels
- 6 Exchange Rate Policies: Coping with New Challenges in Caucasus and Central Asia Countries
- 1 Credit Default Swaps
- 2 Real Estate Price Index
- 3 MEOEs: Change in Stock Market Indices
- 4 MEOEs: Current Account Balance
- 5 MEOEs: Government Fiscal Balance
- 6 Imports of Goods and Services
- 7 MEOIs: Change in Stock Market Indices
- 8 Sovereign Bond Spreads
- 9 MEOIs: Real GDP Growth
- 10 Consumer Price Inflation
- 11 Effective Exchange Rates
- 12 MEOIs: Current Account Balance
- 13 MEOIs: Government Fiscal Balance
- 14 CCA: Real GDP Growth
- 15 Trade Patterns in the CCA, 2008
- 16 Remittance Inflows
- 17 Remittance Outflows from Russia
- 18 Remittance Receipts
- 19 CCA: Government Fiscal Balance
- 20 CCA: Current Account Balance
- 21 Average Inflation, GDP-Weighted
- 22 Private External Debt, 2008
- 23 Credit Growth
- 24 Nonperforming Loans
- 25 Capital Adequacy Ratios
- 26 Existing House Prices
- 27 Foreign Exchange Share of Loans and Deposits, End-2008
- 28 CCA: Government Fiscal Balance
- 29 Sovereign Wealth Fund Assets and Public Debt, 2008
- 1 Middle Eastern Oil Exporters: Summary of Crisis Response Measures
- 2 Growth and Inflation, 2007–10
- 3 Banking Sector Performance and Soundness
- 4 Financial Soundness Indicators, 2008
- 5 Middle Eastern Oil Importers: Summary of Crisis Response Measures
- 6 Tax Revenue
- 7 The Caucasus and Central Asia: Real GDP Growth
- 8 The Caucasus and Central Asia: Summary of Crisis Response Measures
- Statistical Appendix Tables
- 1 Real GDP Growth
- 2 Nominal GDP
- 3 Oil and Non-Oil Real GDP Growth for Oil Exporters
- 4 Crude Oil Production and Exports
- 5 Consumer Price Inflation
- 6 Central Government Fiscal Balance
- 7 Broad Money Growth
- 8 Central Government Total Revenue, Excluding Grants
- 9 Oil Exporters: Central Government Non-Oil Fiscal Balance
- 10 Oil Exporters: Central Government Non-Oil Revenue
- 11 Central Government Total Expenditure and Net Lending
- 12 Total Government Debt
- 13 Exports of Goods and Services
- 14 Imports of Goods and Services
- 15 Current Account Balance (in billions of U.S. dollars)
- 16 Current Account Balance (in percent of GDP)
- 17 Gross Official Reserves
- 18 Total Gross External Debt
Assumptions and Conventions
A number of assumptions have been adopted for the projections presented in the Regional Economic Outlook: Middle East and Central Asia. It has been assumed that established policies of national authorities will be maintained; that the price of oil will average US$52 a barrel in 2009 and US$62.5 in 2010; and that the six-month London interbank offered rate (LIBOR) on U.S. dollar deposits will average 1.5 percent in 2009 and 1.4 percent in 2010. These are, of course, working hypotheses rather than forecasts, and the uncertainties surrounding them add to the margin of error that would in any event be involved in the projections. The 2008 data in the figures and tables are estimates. These estimates for 2008 and projections for 2009 and 2010 are based on statistical information available through end-March 2009.
The following conventions are used in this publication:
- In tables, ellipsis points (. . .) indicate “not available,” and 0 or 0.0 indicates “zero” or “negligible.” Minor discrepancies between sums of constituent figures and totals are due to rounding.
- An en dash (–) between years or months (for example, 2007–08 or January–June) indicates the years or months covered, including the beginning and ending years or months; a slash or virgule (/) between years or months (for example, 2007/08) indicates a fiscal or financial year, as does the abbreviation FY (for example, FY2008).
- “Billion” means a thousand million; “trillion” means a thousand billion.
- “Basis points (bps)” refer to hundredths of 1 percentage point (for example, 25 basis points are equivalent to ¼ of 1 percentage point).
As used in this publication, the term “country” does not in all cases refer to a territorial entity that is a state as understood by international law and practice. As used here, the term also covers some territorial entities that are not states but for which statistical data are maintained on a separate and independent basis.
This report on the Regional Economic Outlook: Middle East and Central Asia is available in full on the IMF’s Internet site, www.imf.org.
Inquiries about the content of the Regional Economic Outlook: Middle East and Central Asia should be sent by mail or e-mail (telephone inquiries cannot be accepted) to:
Regional Economic Outlook
Middle East and Central Asia Department
International Monetary Fund
700 19th St., N.W.
Washington, D.C. 20431, U.S.A.
Country and Regional Groupings
The May 2009 Regional Economic Outlook: Middle East and Central Asia (REO), covering countries in the Middle East and Central Asia Department (MCD) of the International Monetary Fund (IMF), provides a broad overview of recent economic developments in 2008 and prospects and policy issues for the remainder of 2009 and 2010. To facilitate the analysis, the 30 MCD countries covered in this report are divided into three groups: Middle Eastern oil-exporting countries, Middle Eastern oil-importing countries, and Caucasus and Central Asia countries. The country acronyms used in some figures are included in parentheses.
Middle Eastern Oil Exporters (MEOEs) comprise Algeria (DZA), Bahrain (BHR), Iran (IRN), Iraq (IRQ), Kuwait (KWT), Libya (LBY), Oman (OMN), Qatar (QAT), Saudi Arabia (SAU), Sudan (SDN), the United Arab Emirates (U.A.E.), and Yemen (YMN).
Middle Eastern Oil Importers (MEOIs) comprise Afghanistan (AFG), Djibouti (DJI), Egypt (EGY), Jordan (JOR), Lebanon (LBN), Mauritania (MRT), Morocco (MAR), Pakistan (PAK), Syria (SYR), and Tunisia (TUN).
Caucasus and Central Asia (CCA) countries comprise Armenia (ARM), Azerbaijan (AZE), Georgia (GEO), Kazakhstan (KAZ), the Kyrgyz Republic (KGZ), Tajikistan (TJK), Turkmenistan (TKM), and Uzbekistan (UZB).
In addition, the following geographical groupings are used:
The GCC (Gulf Cooperation Council) is composed of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.
The Maghreb comprises Algeria, Libya, Mauritania, Morocco, and Tunisia.
The Mashreq comprises Egypt, Jordan, Lebanon, and Syria.
MENAP (Middle East and North Africa, Afghanistan, and Pakistan) refers to the following countries covered by MCD: Afghanistan, Algeria, Bahrain, Djibouti, Egypt, Iran, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Pakistan, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, the United Arab Emirates, and Yemen.
The Regional Economic Outlook: Middle East and Central Asia (REO) is prepared every six months by the Middle East and Central Asia Department (MCD) of the International Monetary Fund. The last REO was published in October 2008, just as the global economic crisis was breaking, when it was not yet clear how it would manifest itself around the world and affect the countries in the region. The scale and reach of the economic downturn is now much more evident. This REO, therefore, focuses on how the evolving crisis is affecting countries in the Middle East and Central Asia.
The Middle East and Central Asia region comprises a diverse set of countries, ranging from some of the poorest countries in the world to some of the richest, from oil and commodity exporters to oil importers, from countries on the Atlantic coast with strong links to Europe to countries in Central Asia with ties to Russia and lands farther east. The global crisis is meanwhile spreading around the world in many different ways. Ironically, the one channel through which the downturn is not affecting the MCD region in any significant way is through direct exposure to financial stress (and “toxic” assets) in the United States and Europe. The downturn is instead affecting the region through three indirect channels:
- the sharp drop in oil prices, which is shrinking revenues for oil exporters, as well as import costs for oil importers;
- the contraction in global demand, trade, and related activity, which is lowering exports, tourism, and remittances; and
- the tightening of international credit markets and lower investor appetite for risk, which is affecting capital inflows, depressing local asset prices, and reducing investment.
These factors are weighing on MCD countries in different ways, depending on where they are and what they do. The drop in oil prices has most directly affected the oil-exporting countries, whose oil revenues in 2009 will be less than half what they were in 2008. Lower oil prices are, by contrast, helping to reduce import costs for oil-importing countries, offsetting to some extent the decline in their own export receipts. Countries in the Caucasus and Central Asia, many of which are commodity exporters and are suffering from lower commodity prices, have also been affected by the sharp economic downturn in Russia.
In view of these differences, and in order to better analyze the effects of the crisis, this REO has divided the countries of the Middle East and Central Asia region into three subregions: Middle Eastern oil exporters (MEOEs), Middle Eastern oil importers (MEOIs), and the Caucasus and Central Asia (CCA).
Highlights of the REO are shown overleaf. The bottom line is that nearly all countries in the region will be seriously affected by the global crisis in important but different ways. Because of their different starting conditions, for example, outstanding debt levels or inflation rates, some countries may have more room than others to adjust policies to resist the downturn.
In sum, countries that can afford to maintain or enhance spending, such as many of the oil and commodity exporters, can and should do so. Other countries in the Middle East will be more fiscally constrained, but most countries will have some scope to loosen monetary policy. All countries will need to keep a close eye on conditions in their banking systems. And some countries will need to allow greater flexibility in their exchange rates.
The countries in the Middle East and Central Asia region grew strongly in 2008, but the global crisis is now affecting these countries, and economic and financial vulnerabilities are rising.
- The downturn in the advanced economies and the drop in international commodity prices since the fall of 2008 have hit export earnings, investment flows, and remittances.
- Economic growth in the MCD countries could slow to 2½ percent in 2009 from 6 percent in 2008.
Despite lower oil revenues, many Middle Eastern oil-exporting countries (MEOEs) are expected to maintain their spending programs, which will contribute an important stimulus to global demand.
- The external current account of the MEOEs as a whole could record a deficit of $10 billion in 2009, compared with a surplus of $400 billion in 2008.
- Inflation is coming down sharply from the peaks recorded in the summer of 2008, in line with lower food and fuel prices.
- A few MEOEs have seen problems emerge in their banking systems, but the authorities have acted swiftly to deal with them through capital injections and liquidity measures.
Oil-importing countries in the Middle East and North Africa (MEOIs) will be particularly affected by the slowdown in Europe.
- Many MEOIs that have high debt levels lack sufficient fiscal space to undertake countercyclical expenditure and thereby cushion the impact of lower external inflows.
- With inflation coming down, there is more room for monetary easing.
- In some MEOI countries, rising unemployment will likely intensify poverty and other social pressures, and increase the need to enhance social safety nets.
Countries in the Caucasus and Central Asia (CCA) are suffering from lower commodity prices and adverse economic developments in Russia.
- Countries in the CCA tend to have relatively low debt levels and therefore have scope to support domestic demand through higher public spending.
- CCA countries’ exchange rates need to be more flexible because the Russian ruble has depreciated.
- Continued vigilance over the financial systems of some CCA countries will be necessary.
The global slowdown could be longer and more severe than expected (Box 1); country authorities should prepare for this contingency.
- MCD countries may need to support domestic demand for a longer period, strengthen financial systems further, and develop crisis management frameworks.
- For low-income countries, increased donor financing will be necessary to maintain needed economic development.
Box 1.World Economic Outlook1
The global credit crunch has set off by far the deepest worldwide recession since the Great Depression. World economic activity is projected to decline 1.3 percent in 2009. All corners of the globe are being affected: output per capita is projected to decline in countries representing three-quarters of the global economy, and growth in virtually all countries has decelerated sharply from rates observed in 2003–07. Growth is projected to reemerge in 2010, but at 1.9 percent would still be well below potential. These projections build in fiscal stimulus plans in G-20 countries amounting to 1¾ percent of GDP in 2009 and 1¼ percent of GDP in 2010, as well as the operation of automatic stabilizers in most of these countries.
|Of which: United States||2.0||1.1||-2.8||0.0|
|Emerging and developing economies||8.3||6.1||1.6||4.0|
|Of which: Middle East and Central Asia||6.6||5.8||2.5||3.8|
|Commonwealth of Independent States||8.6||5.5||-5.1||1.2|
|Of which: Russia||8.1||5.6||-6.0||0.5|
|World trade volume (goods and services)||7.2||3.3||-11.0||0.6|
|Commodity prices (U.S. dollars)|
|Nonfuel (average based on world commodity export weights)||14.1||7.5||-27.9||4.4|
The advanced economies are projected to suffer deep recessions. Overall output is projected to contract by 3¾ percent in 2009. Among the major economies, the United States and the United Kingdom will continue to suffer most severely from credit constraints. The euro area will suffer an even deeper decline in activity than the United States as the sharp contraction in export sectors increasingly curtails demand.
Continuing stress and balance sheet adjustment in mature markets will have serious consequences for financing to emerging economies. Overall, emerging markets are expected to experience net capital outflows in 2009 of more than 1 percent of their GDP. Emerging and developing economies as a group are still projected to eke out a modest 1½ percent growth in 2009, rising to 4 percent in 2010. However, real GDP would contract across a wide swathe of countries in 2009. The biggest output declines are projected in the Commonwealth of Independent States countries, most notably Russia, as a reversal of capital flows has punctured credit booms and commodity export revenues have dwindled.
The dominant downside risk to this scenario is that policies will be insufficient to arrest the negative feedback between deteriorating financial conditions and weakening economies. As activity contracts across the globe, the threat of rising corporate and household defaults will imply still-higher risk spreads, further falls in asset prices, and greater losses across financial balance sheets. The risks of systemic events will rise, the task of restoring credibility and trust will be complicated, and the fiscal costs of bank rescues will escalate further.
Against this scenario must be balanced an upside potential to the outlook. Bold policy implementation that is able to convince markets that financial strains are being decisively dealt with could set off a mutually reinforcing “relief rally” in markets, a revival in business and consumer confidence, and a greater willingness to make longer-term spending commitments. The problem is that the longer the downturn continues to deepen, the slimmer the chances that such a strong rebound will occur, as pessimism about the outlook becomes entrenched and balance sheets are damaged further.1See World Economic Outlook (IMF) April 2009 for more information.