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Serpil Bouza
,
Bashar Hlayhel
,
Thomas Kroen
,
Marcello Miccoli
,
Borislava Mircheva
,
Greta Polo
,
Sahra Sakha
, and
Yang Yang
Against the backdrop of a rapidly digitalizing world, there is a growing interest in central bank digital currencies (CBDCs) among central banks, including in the Middle East and Central Asia (ME&CA) region. This paper aims to support ME&CA policymakers in examining key questions when considering the adoption of a CBDC while underscoring the importance of country-specific analyses. This paper does not provide recommendations on CBDC issuance. Instead, it frames the discussion around the following key questions: What is a CBDC? What objectives do policymakers aim to achieve with the issuance of a CBDC? Which inefficiencies in payment systems can CBDCs address? What are the implications of CBDC issuance for financial stability and central bank operational risk? How can CBDC design help achieve policy objectives and mitigate these risks? The paper provides preliminary answers to these questions at the regional level. A survey of IMF teams and public statements from ME&CA policymakers confirm that promoting financial inclusion and making payment systems more efficient (domestic and cross-border) are the top priorities in the region. Payment services through CBDCs, if offered at a lower cost than existing alternatives, could spur competition in the payment market and help increase access to bank accounts, improve financial inclusion, and update legacy technology platforms. CBDCs may also help improve the efficiency of cross-border payment services, especially if designed to address frictions arising from a lack of payment system interoperability, complex processing of compliance checks, long transaction chains, and weak competition. At the same time, CBDCs could negatively impact bank profitability while introducing a substantial operational burden for central banks. However, the exact economic and financial impacts of CBDCs need further study and would depend on estimates of CBDC demand, which are uncertain and country- dependent. CBDC issuance and adoption is a long journey that policymakers should approach with care. Policymakers need to analyze carefully whether a CBDC serves their country’s objectives and whether the expected benefits outweigh the potential costs, in addition to risks for the financial system and operational risks for the central bank.
Diego Mesa Puyo
,
Augustus J Panton
,
Tarun Sridhar
,
Martin Stuermer
,
Christoph Ungerer
, and
Alice Tianbo Zhang
The global energy transition is affecting fossil fuel exporters from multiple angles. It is adding to longstanding uncertainties on relative movements of fossil fuel demand and supply—which impact fossil fuel-related exports, fiscal flows, investment and subsequently external and fiscal accounts, economic growth, and employment. While policymakers are very familiar with these challenges, they now also face expectations of a permanent decline in the long-run global demand for fossil fuels. Key factors that could determine country-level impacts include (i) the type of fossil fuel a country exports (ii) extraction costs and (iii) country characteristics. The monitoring and mitigation of fiscal risks will need to be stepped up. Fiscal policy also has a role in reducing domestic emissions, encouraging adoption of low-carbon technologies, and helping those most vulnerable to changes from the transition. Broader macroeconomic risks can be reduced by accelerating ongoing structural reforms that support alternative engines of growth. Low- or zero-carbon emission energy industries could offer new avenues that build on existing fossil fuel knowledge and infrastructure. Concurrently, improved financial regulation and supervision could reduce financial sector exposures. Finally, international coordination on the design and implementation of climate policy as well as international transfer schemes (financing and capacity development) could reduce uncertainties surrounding the transition path and associated adverse economic consequences.
Bozena Radzewicz-Bak
,
Jérôme Vacher
,
Gareth Anderson
,
Filippo Gori
,
Mahmoud Harb
,
Yevgeniya Korniyenko
,
Jiayi Ma
,
Moheb T Malak
,
Dorothy Nampewo
, and
Sahra Sakha
The financial sectors of the Middle East and Central Asia (ME&CA) countries should play an important role in supporting climate-related policies for the region. The sectors are vulnerable to downside risks from climate-related shocks and at the same time offer the potential to help fill the financing gap for needed adaptation and mitigation strategies. Successful approaches to climate change in the region therefore need to coherently integrate financial sector strategies within the overall policy framework to meet this important challenge. To this end, policymakers must ensure that financial sectors are prepared for a green future. This means enhancing the resilience of banks to physical and transition risks from climate change and boosting the capacity of insurance sectors to speed recovery from climate-related disasters and help offset economic costs. Moreover, policies are needed to foster an enabling environment for private green finance, attract investment from other official entities, such as sovereign wealth funds (SWF), and facilitate support from international financial institutions and multilateral development banks. In the near term, policy efforts should center around better understanding and measuring climate-related risks. This includes prioritizing the implementation of methodologies for quantifying and reporting such risks, promoting their transparent disclosure by financial institutions, and strengthening frameworks for their forecasting and analyzing. Over the medium term, governments can play an important role in supporting green finance through incentives and market mechanisms, phasing-out energy subsidies, and introducing new tools and markets (such as carbon pricing frameworks), which can stimulate demand for investment in green technologies. The paper offers a unique regional perspective on climate risks in ME&CA's financial sectors and outlines the road ahead in transitioning to a green future. It is the first to evaluate the impact of climate change on banking institutions in the region and assess the capacity of insurance in mitigating climate-related damages and losses. It contributes to the existing literature by synthesizing the size and nature of regional financing needs for adaptation and mitigation and discussing both opportunities and challenges for the development of green finance. The paper's policy recommendations provide guidance to policymakers on how to develop regulatory responses to enhance financial sustainability amid climate change risks.
International Monetary Fund. Middle East and Central Asia Dept.
This paper on the Gulf Cooperation Council (GCC) discusses economic prospects and policy priorities for the GCC countries. A comprehensive package of policies should be implemented to respond to near-term shocks and uncertainty and to firmly address medium- and long-term challenges. In the near term, fiscal policy should remain prudent, avoiding procyclical spending and using the windfall from higher oil prices to rebuild buffers. Targeted and temporary fiscal measures could be undertaken to respond to shocks, if they materialize. In the medium term, GCC countries should continue pursuing fiscal consolidation consistent with ensuring intergenerational equity and sustainability, supported by a credible rules-based medium-term fiscal framework. Continued financial sector reforms are needed to support growth and stability. Structural policies should continue focusing on diversifying the economies away from hydrocarbon. Reform efforts aimed at further enhancing product market regulations, labor markets, and governance will spur growth, as will efficient investments in digital and green initiatives to accelerate transformation and support energy transition. The industrial policy should be carefully calibrated and not substitute for structural reforms while minimizing related inefficiencies.
International Monetary Fund. Middle East and Central Asia Dept.

Abstract

Au Moyen-Orient et en Asie centrale, les effets conjugués de vents contraires à l’échelle mondiale, de difficultés intérieures et de risques géopolitiques pèsent sur la dynamique économique, et une grande incertitude entoure les perspectives. La croissance devrait ralentir cette année dans la région Moyen-Orient et Afrique du Nord, sous l’effet d’une réduction de la production de pétrole, de politiques restrictives dans les pays émergents et pays à revenu intermédiaire, du conflit au Soudan et d’autres facteurs propres aux pays. Dans le Caucase et en Asie centrale, même si les flux migratoires, commerciaux et financiers après la guerre menée par la Russie en Ukraine continuent à soutenir l’activité économique, la croissance devrait opérer un léger repli cette année. L’activité économique dans la région Moyen-Orient et Afrique du Nord devrait s’améliorer en 2024 et en 2025 à mesure que certains facteurs qui pèsent sur la croissance cette année disparaîtront peu à peu, dont les réductions temporaires de la production de pétrole. Cependant, la croissance devrait rester modérée à l’horizon des prévisions, en raison d’obstacles structurels persistants. Selon les projections, la croissance économique dans la région Caucase et Asie centrale ralentira l’an prochain et continuera de reculer à moyen terme, dans la mesure où l’impulsion donnée à l’activité par les flux réels et financiers depuis la Russie s’estompera progressivement et les problèmes structurels profondément enracinés demeureront non résolus. L’inflation reflue dans l’ensemble, parallèlement au relâchement des tensions sur les prix à l’échelle mondiale, même si des facteurs propres aux pays (dont une croissance vigoureuse des salaires dans certains pays de la région Caucase et Asie centrale) et des phénomènes climatiques continuent à laisser leur empreinte. Malgré une certaine embellie depuis avril, les risques qui entourent les perspectives restent orientés à la baisse. Dans ce contexte, il est indispensable d’accélérer les réformes structurelles pour promouvoir la croissance et gagner en résilience, tandis que des politiques monétaires et budgétaires restrictives demeurent essentielles dans plusieurs pays afin de réduire l’inflation durablement et de garantir la viabilité de la dette publique

International Monetary Fund. Middle East and Central Asia Dept.

Abstract

Across the Middle East and Central Asia, the combined effects of global headwinds, domestic challenges, and geopolitical risks weigh on economic momentum, and the outlook is highly uncertain. Growth is set to slow this year in the Middle East and North Africa region, driven by lower oil production, tight policy settings in emerging market and middle-income economies, the conflict in Sudan, and other country-specific factors. In the Caucasus and Central Asia, although migration, trade, and financial inflows following Russia’s war in Ukraine continue to support economic activity, growth is set to moderate slightly this year. Looking ahead, economic activity in the Middle East and North Africa region is expected to improve in 2024 and 2025 as some factors weighing on growth this year gradually dissipate, including the temporary oil production cuts. But growth is expected to remain subdued over the forecast horizon amid persistent structural hurdles. In the Caucasus and Central Asia, economic growth is projected to slow next year and over the medium term as the boost to activity from real and financial inflows from Russia gradually fades and deep-seated structural challenges remain unsolved. Inflation is broadly easing, in line with globally declining price pressures, although country-specific factors—including buoyant wage growth in some Caucasus and Central Asia countries—and climate-related events continue to make their mark. Despite some improvement since April, the balance of risks to the outlook remains on the downside. In this context, expediting structural reforms is crucial to boost growth and strengthen resilience, while tight monetary and fiscal policies remain essential in several economies to durably bring down inflation and ensure public debt sustainability.

International Monetary Fund. Middle East and Central Asia Dept.

Abstract

Совокупное воздействие глобальных неблагоприятных факторов, внутренних проблем и геополитических рисков в странах Ближнего Востока и Центральной Азии сдерживает темпы экономического роста, а перспективы крайне неопределенны. Экономический рост в регионе Ближнего Востока и Северной Африки, по прогнозам, в этом году замедлится, что обусловлено снижением добычи нефти, жесткими параметрами политики в странах с формирующимся рынком и странах со средним доходом, конфликтом в Судане и другими характерными для отдельных стран факторами. Хотя миграционные, торговые и финансовые притоки после начала войны России в Украине продолжают способствовать экономической активности в регионе Кавказа и Центральной Азии, в этом году ожидается небольшое замедление роста. В перспективе, по мере постепенного ослабления некоторых факторов, которые сдерживают рост в этом году, включая временные сокращения добычи нефти, ожидается, что экономическая активность в регионе Ближнего Востока и Северной Африки усилится в 2024 и 2025 годах. Но на протяжении горизонта прогнозирования темпы роста, как ожидается, останутся сдержанным на фоне сохраняющихся структурных препятствий. В регионе Кавказа и Центральной Азии прогнозируется замедление экономического роста в следующем году и в среднесрочной перспективе, поскольку стимулирование активности за счет реальных и финансовых притоков из России постепенно ослабевает, а глубоко укоренившиеся структурные проблемы остаются нерешенными. Инфляция в целом ослабевает соразмерно снижению ценового давления в мире, хотя продолжают сказываться характерные для отдельных стран факторы, включая динамичный рост заработной платы в некоторых странах Кавказа и Центральной Азии, а также события, связанные с климатом. Несмотря на некоторое улучшение по сравнению с апрелем, баланс рисков для перспектив попрежнему смещен в сторону ухудшения ситуации. На этом фоне ускорение структурных реформ имеет решающее значение для активизации роста и повышения устойчивости, в то время как вряде стран по-прежнему необходимы жесткая денежно-кредитная и налогово-бюджетная политика для долгосрочного снижения инфляции и обеспечения устойчивости государственного долга

International Monetary Fund. Middle East and Central Asia Dept.

Abstract

یخیم على الآفاق قدر كبیر من عدم الیقین، حیث یؤدي مزیج من التداعیات الناجمة عن عوامل معاكسة عالمیة وتحدیات محلیة ومخاطر جغرافیة-سیاسیة إلى آثار سلبیة على الزخم الاقتصادي عبر منطقة الشرق الأوسط وآسیا الوسطى. وتشیر التوقعات إلى تباطؤ النمو ھذا العام في منطقة الشرق الأوسط وشمال إفریقیا بسبب تراجع إنتاج النفط، وتشدید بیئة السیاسات في اقتصادات ُ الأسواق الصاعدة والاقتصادات متوسطة الدخل، والنزاع في السودان، وعو طریة. وفي القوقاز امل أخرى ذات خصوصیة قوآسیا الوسطى، تواصل الھجرة والتجارة والتدفقات المالیة عقب الحرب الروسیة في أوكرانیا دعم النشاط الاقتصادي، وإن كان ُتوقع أن یسجل النمو تراجعا طفیفا ھذا العام. وتشیر التوقعات إلى تحسن النشاط الاقتصادي مستقبلا في منطقة الشرق الأوسط یوشمال إفریقیا خلال عامي 2024 و2025 مع انحسار بعض العوامل المؤثرة على النمو ھذا العام تدریجیا، بما في ذلك التخفیضات المؤقتة في إنتاج النفط. ولكن من المتوقع استمرار تباطؤ النمو على مدار فترة التنبؤات بفعل معوقات النمو الھیكلیة ُتوقع تباطؤ النمو الاقتصادي العام القادم مواصلا تراجعھ على المدى المتوسط، حیث المزمنة. وفي القوقاز وآسیا الوسطى، یتتلاشى تدریجیا حالة التحسن التي شھدھا النشاط نتیجة التدفقات الحقیقیة والمالیة الوافدة من روسیا وتستمر التحدیات الھیكلیة الراسخة دون حل. وبوجھ عام، تتراجع معدلات التضخم تماشیا مع انخفاض الضغوط السعریة عالمیا، رغم استمرار التداعیات ُطریة – بما في ذلك النمو الھائل في الأجور في بعض بلدان القوقاز وآسیا الوسطى – والأحداث المرتبطة الناجمة عن العوامل القبالمناخ. وقد طرأ بعض التحسن منذ إبریل، ولكن میزان المخاطر المحیطة بالآفاق لا یزال یمیل نحو التطورات السلبیة. وفي ھذا السیاق، یتعین التعجیل بالإصلاحات الھیكلیة لتعزیز النمو والصلابة، بینما یظل تشدید السیاسات النقدیة والمالیة ضرورة في عدة اقتصادات لتحقیق خفض دائم في مستویات التضخم وضمان استدامة القدرة على تحمل الدین العام.

Mrs. Nina Budina
,
Mr. Christian H Ebeke
,
Ms. Florence Jaumotte
,
Andrea Medici
,
Augustus J Panton
,
Marina M. Tavares
, and
Bella Yao
In the aftermath of the COVID-19 pandemic, emerging market and developing economies are grappling with economic scarring, social tension, and reduced policy space. Policy actions are already urgently needed to boost growth in the near term and support the ongoing green transition. At the same time, high public debt and persistently high inflation have constrained policy space, posing difficult policy trade-offs. This Staff Discussion Note focuses on emerging market and developing economies and proposes a framework for prioritization, packaging, and sequencing of macrostructural reforms to accelerate growth, alleviate policy trade-offs, and support the green transition. The note shows that prioritizing the removal of the most binding constraints on economic activity, bundling reforms (governance, business deregulation, and external sector reforms), and appropriate sequencing of other reforms (such as labor market and credit sector reforms) can help front-load reform gains. In emerging market and developing economies with large initial structural gaps, the estimated output effects of such a major reform package are sizable—about 4 percent in two years and 8 percent in four years. Achieving higher growth and lower absolute carbon emissions over time requires a well-designed strategy that includes both macrostructural and green reforms.
Etienne Espagne
,
William Oman
,
Jean-François Mercure
,
Romain Svartzman
,
Ulrich Volz
,
Hector Pollitt
,
Gregor Semieniuk
, and
Emanuele Campiglio
This paper analyzes the cross-border risks that could result from a decarbonization of the world economy. We develop a typology of cross-border risks and their respective channels. Our qualitative and quantitative scenario analysis suggests that the mid-transition – a period during which fossil-fuel and low-carbon energy systems co-exist and transform at a rapid pace – could have profound stability and resilience implications for global trade and the international financial system.