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International Monetary Fund. Middle East and Central Asia Dept.

Abstract

The MENAP oil exporters were directly affected by the global financial crisis through a sharp drop in oil prices, a contraction in the global economy, and a sudden drying up of capital inflows. Although activity in the oil sector will likely drop by 3.5 percent in 2009, strong countercyclical macroeconomic policies have helped mitigate the impact of the crisis on the non-oil sector, which is projected to grow by 3.2 percent. Looking ahead, higher oil prices, a revival of global demand, and continued government spending will provide the basis for stronger growth in 2010. The crisis also revealed some vulnerabilities in the banking and corporate sectors, requiring countries to undertake exceptional stabilization measures and highlighting the need to strengthen financial sector supervision, enhance corporate governance, foster resource mobilization, and diversify risks.

International Monetary Fund. Middle East and Central Asia Dept.

Abstract

The MENAP oil importers are a diverse group, encompassing both emerging and low-income economies. Many have seen significant slowdowns in the past year but, overall, these countries have escaped the substantial contractions experienced in other parts of the world. Supportive policy responses, a low degree of integration with international capital markets and manufacturing supply chains, and banking systems that had little exposure to structured financial products have contained the fallout. While the slowdown has been modest, this group of countries is also likely to experience a slow recovery. Limited external financing, little space for fiscal stimulus, a real appreciation of most domestic currencies, sluggish receipts from tourism and remittances, and higher energy prices will all continue to be a drag on growth for some time.

International Monetary Fund. Middle East and Central Asia Dept.

Abstract

For many countries in the Caucasus and Central Asia (CCA) region, the impact of the global economic downturn has been severe, but prospects for energy importers and exporters differ starkly. For energy importers, the economic outlook remains challenging and recovery in 2010 is likely to be gradual, primarily because of their linkages with Russia. In particular, remittances have fallen sharply, hurting low-income households. Fiscal policy should remain accommodative in 2010 to support growth and mitigate the impact on the poor, but continued concessional donor support will be needed to prevent a buildup of unsustainable debt levels.

International Monetary Fund

This Selected Issues paper on Bangladesh underlies the export performance of readymade garment industry and inflation dynamics. Bangladesh has demonstrated that it is highly competitive in the world’s major garment markets. Inflation inertia, monetary factors, and exchange rate fluctuations are the main determinants of inflation in Bangladesh. Despite adoption of numerous tax policy measures during the past few years, policies implemented by the Bangladesh authorities have not been fully successful in lifting the revenue ratio to a level warranted by developmental objectives.

International Monetary Fund
This paper attempts to assess the impact of the oil shock on South Asian economies, including Sri Lanka, as well as policy responses to deal with the shock, and the real income loss for low-income households if fuel subsidies were fully removed. The most important impact has been on the balance of payments followed by the results of poverty and social impact analysis (PSIA) conducted for Sri Lanka. Finally, the paper explores to what extent Sri Lanka’s large receipts of worker remittances serve as a hedge against shocks.
International Monetary Fund
This Selected Issues paper on Haiti examines the observed reduction in outstanding real bank credit to the private sector. It examines the evolution of credit and real GDP growth and uses demand and supply indicators to characterize the reduction in credit allocation to the private sector. The paper also provides an overview of the taxation system for the major petroleum products under the present fixed pricing policy and a hypothetical implementation of the 1995 law introducing a flexible pricing mechanism.
Jaime Espinosa-Bowen, Mr. Nadeem Ilahi, and Fahad Alturki
We test the extent to which growth in the 11 CIS countries (excluding Russia) was associated with developments in Russia, overall, as well as through the trade, financial and remittance channels over the last decade or so. The results point to the continued existence of economic links between the CIS countries and Russia, though these links may have altered since the 1998 crisis. Russia appears to influence regional growth mainly through the remittance channel and somewhat less so through the financial channel. There is a shrinking role of the trade (exports to Russia) channel. Russian growth shocks are associated with sizable effects on Belarus, Kazakhstan, Kyrgyz Republic, Tajikistan, and, to some extent, Georgia.
Mr. Nadeem Ilahi and Riham Shendy
This paper tests the association between the Gulf Cooperation Council (GCC) countries' financial and remittance outflows and regional growth in the Middle East. The findings, based on 35-year panel data, indicate that growth rates of real GDP, private consumption and private investment in regional countries are strongly associated with remittance outflows from and the accumulation of financial surpluses in the GCC. Unlike in other developing and emerging market countries, growth in regional countries is not influenced by growth in the North, and is not export led. Linkages with the GCC could help sustain output growth in the regional countries in the face of the global economic slowdown and oil price shocks and could provide diversification gains to international capital seeking markets uncorrelated with Northern and emerging market countries.
Mrs. Poonam Gupta
Remittances to India have been growing rapidly since 1991, making it one of the largest recipients of remittances. This paper analyzes the determinants of remittances to India and finds that their growth over time can be explained by the increase in migration and total earnings of the migrants. Remittances are also affected by the economic environment in source countries, and appear to be countercyclical-that is, higher during periods of low economic growth in India. None of the remaining economic or political variables considered in the paper, including political uncertainty, interest rates, or exchange rate depreciation, are found to affect remittances significantly.
Stephen Snudden
This paper adds international migration and remittances into the IMF’s Flexible System of Global Models (FSGM). FSGM is a global general equilibrium model with endogenous primary commodity markets. A method to estimate the structural dynamics of major remitter regions is proposed. The dynamics of remittances and migration in FSGM are calibrated to be consistent with the main stylized facts of the empirical estimates. Structural disturbances pertinent to current global remittance flows are examined. These disturbances include disruptions to oil supply, output variation in Europe and the United States, labor nationalization policies in Saudi Arabia, and a global reduction in the cost to remit. The multilateral framework illustrates how remittance inflows need not originate from the region with the underlying economic disturbance but can arise from third party remitter regions affected by global commodity markets. The results also illustrate that the correlation of remittance inflows and the real GDP of labor-exporting economies can be either positively or negatively correlated. The evidence suggests that the behavioral incentive to migrate and remit cannot be deduced from correlations of real GDP and remittance inflows.