Transcript TFConf_Palacin

The impact of the global crisis on the
SPECA countries
José Palacín
Economic Cooperation and Integration Division
UNECE
1
Structure presentation

The crisis: channels of transmission
and domestic vulnerabilities
 Implications for SPECA countries
 What sort of recovery?
 Lessons from the crisis
2
Economic crisis. Part 1

The worldwide economic crisis started as a a financial crisis in
late 2007. Countries and companies that had to raise external
finance were exposed.
 Among SPECA countries, only Kazakhstan was initially
affected by disruptions in international capital markets.
 Kazakhstan’s banking system had grown rapidly, funded by
foreign borrowing.
 That rapid expansion came to an abrupt halt, together with the
real estate boom fuelled by growing credit.
 Cross-border links: Kazakh banks own around one third of
Kyrgystan banking assets.
3
Economic crisis. Part 2

In late 2008, financial turbulences intensified and prompted
robust policy intervention to avoid systemic breakdown.

But the crisis had evolved. The real sector was being affected
by financial problems and lack of confidence. A synchronised
worldwide slump in output was taking place.

Emerging markets were the only relatively bright spot in this
darkened landscape

But not in the CIS. Russia, the largest economy, was shrinking
fast.
4
Implications for SPECA countries

Worldwide output contraction led to falling commodity pricesnot only oil.

The rapid contraction of the Russian economy reduced the
demand for foreign goods and labour.

Financial troubles affected countries differently – but all of
them have been exposed to disruptions in the international
financial system, lower capital flows and increased risk
aversion.
5
Differences in economic performance

Widespread economic slowdown but with important
differences, reflecting exposure to the different channels for
the transmission of the crisis

Differences in the ability to implement offseting policies.

In non-energy exporting countries, IMF programmes are in
place.

Unlike other transition economies in the region, all SPECA
countries have continued to grow in 2009 – with the exception
of Kazakhstan where the financial shock was more important.
6
Net fuel exporters
(GDP growth, percentages)
12
10
2008
8
2009
6
2010
4
2
0
-2
-4
Azerbaijan
Source: UNECE
Kazakhstan
Turkmenistan
Uzbekistan
7
Net fuel importers
(GDP growth, percentages)
9.0
8.0
7.0
2008
6.0
2009
5.0
2010
4.0
3.0
2.0
1.0
0.0
Kyrgyzstan
Source: UNECE
Tajikistan
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Implications for SPECA countries
SUMMARY
 SHRINKING DEMAND IN KEY MARKETS

LOWER COMMODITY PRICES

LOWER REMITTANCES

LOWER FOREIGN INFLOWS AND TRADE
FINANCE DIFFICULTIES
DECLINE IN TRADE VOLUME AND VALUES
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A DRASTIC CHANGE: THE END OF
RUSSIAN EXPANSION
(GDP quarterly growth, year-on-year, percentage))
10
5
0
-5
-10
Source: Statistical Service of the Russian Federation
2009
2008
2007
2006
2005
2004
2003
2002
2001
-15
10
CIS -Terms of trade
(Annual growth, percentages)
Source: IMF
2010F
2009F
2008
2007
2006
2005
2004
2003
2002
2001
25
20
15
10
5
0
-5
-10
-15
-20
-25
11
Commodities dynamics
(Index numbers. January 2007=100)
250
200
150
100
Brent Crude
Gold
50
Aluminium
Cotton
Source: World Bank, own calculations
01/09/09
01/07/09
01/05/09
01/03/09
01/01/09
01/11/08
01/09/08
01/07/08
01/05/08
01/03/08
01/01/08
01/11/07
01/09/07
01/07/07
01/05/07
01/03/07
01/01/07
0
12
Remittances have been large
(Inflows as percentage of GDP)
Source: IMF
13
Remittances: sharp change of trend
Growth remittances 2003-2008
Growth H1 2009
(average annual, percent)
(Russian estimate)
Azerbaijan
66.8
-38.3
Kyrgyzstan
76.5
-26.9
Tajikistan
73.7
-32.7
Source: IMF, Central Bank of Russia
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Anti-crisis response

Energy-exporting countries have implemented strong
policy responses to the crisis, using the savings
accumulated during the boom years.

In energy-importing countries, who have suffered the most
from labour market linkages with the large economies in
the region, official financing has provided some fiscal space
to offset the negative impact of the crisis.
15
International support
(percent of GDP)
Budget grants
2007
2008
2009
IMF disbursements
2007
2008
2009
Source: IMF
Kyrgyzstan
2.4
1.7
5.6
Tajikistan
1.9
1.6
3.1
0.1
0.8
1.1
0.9
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Open economies
(Exports and imports as percentage GDP, 2008, BOP basis)
0
20
40
60
80
Azerbaijan
Exports
Kazakhstan
Imports
Kyrgyzstan
Tajikistan
Turkmenistan
Uzbekistan
Source: ADB.2007 for Turkmenistan.
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Sharp falls in trade
(3-months, rolling window, $ miilion)
KAZAKHSTAN
AZERBAIJAN
10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
18000
16000
Exports
14000
Imports
12000
Exports
Imports
10000
8000
6000
4000
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Source: IMF, own calculations
2009M3
2008M9
2008M3
2007M9
2007M3
2006M9
2006M3
2005M9
0
2005M3
2008M12
2008M7
2008M2
2007M9
2007M4
2006M11
2006M6
2006M1
2005M8
2005M3
2000
Sharp falls in trade
(3-months, rolling window, $ miilion)
KYRGYZSTAN
4500
1400
4000
3500
TAJIKISTAN
Exports
1200
Imports
1000
3000
Exports
2500
800
2000
600
Imports
1500
400
1000
200
500
0
2005M3
2006M2
2007M1 2007M12 2008M11
0
2005M3
2006M2 2007M1 2007M12 2008M11
19
Source: IMF, own calculations
Sharp falls in trade
(3-months, rolling window, $ miilion)
TURKMENISTAN
UZBEKISTAN
3500
3000
3000
2500
Exports
2500
Imports
Exports
2000
Imports
2000
1500
1500
1000
1000
500
500
0
2005M3
2006M2 2007M1 2007M12 2008M11
0
2005M3
2006M3
2007M3
2008M3
20
Source: IMF, own calculations
2009M3
Trade Finance
WTO EXPERT GROUP MEETING ON TRADE FINANCE – 15
SEPTEMBER 2009:
Liquidity has improved for the larger banks on tenures of up
to one year, albeit selectively across regions and categories
of banks.
Capital requirements for short-term trade related lending
under Basel II are a constraint.
Liquidity has not returned in some regions and countries,
including low income countries in Central Asia.
“Participants expressed concern regarding the situation in
Kazakhstan and Ukraine, where perceived risk was very
high and bank default could have systemic repercussions in
trade finance”
21
Exchange rate volatility
National currency per Russian rouble
(January 2008=100)
160
150
140
AZ
KZ
TJ
UZ
KY
130
120
110
100
90
Source: CIS Stat, own calculations
Jul-09
May-09
Mar-09
Jan-09
Nov-08
Sep-08
Jul-08
May-08
Mar-08
Jan-08
80
22
Exchange rate regimes
National currency per USD dollar
(January 2008=100)
110
105
100
95
90
AZ
KZ
85
TJ
UZ
KY
80
Source: CIS Stat, own calculations
Jul-09
May-09
Mar-09
Jan-09
Nov-08
Sep-08
Jul-08
May-08
Mar-08
Jan-08
75
23
External positions

Exchange rate pegs and incomplete adjustments:
competitiveness losses for some countries
 Non-energy exporting countries have large current
account deficits.
 Official financing has become more important to
close the gap.
 Exchange rate tensions have implications for
dollarized financial systems.
24
Improved (but uncertain)
global outlook

Economic and financial indicators suggest
an improved outlook for the global
economy.
 With some exceptions, most economies are
expected to grow in 2009
 But there is yet a great deal of uncertainty
25
Improving global prospects
GDP growth, percentages
10
8
6
4
2
0
-2
World
-4
Advanced
Emerging
-6
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: IMF
26
Improving global prospects
Emerging markets net private capital inflows
Source: Institute for International Finance
27
What sort of recovery?

Commodity prices will increase but
improvement in terms of trade will benefit
energy exporters the most.
 The speed of the upturn in Russia will
influence economic prospects in energyimporting countries – but remittances are
not returning to previous levels.
 The banking sector remains fragile
28
The crisis: a reminder

The origin of the crisis was external
 It has shown:
– the risks of excessive economic concentration
– the importance of prudent management of
resources in energy-rich countries.
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What role for regional cooperation?
A way to increase economic resilience
through:
 Trade facilitation
 Infrastructure development
that promotes:
 Economic diversification
 Employment opportunities in new sectors
30