Transcript Global Economy - Iktissad Events

Global
Developments
and Regional
Implications
0
Mahmoud Mohieldin,
SVP
Arab Economic Forum
Beirut, Lebanon
Global Economy and Regional
Implications: The Big Picture
Myth
Hope
Reality
Global
Growth
A global recession
underway
Growth will
accelerate
No ongoing global
recession; weaker
growth; larger risks
Cyclical
Policies
No policy space;
no longer effective
Current policies
will deliver
Available Space but
Smaller; Unintended
consequences
Produce only
long-term gains
Delaying is an
option
Immediate gains;
Signaling value
Structural
Policies
1
Four Questions
1
How have global economic conditions changed since the
beginning of 2016? Renewed financial market volatility; Weaker growth prospects
2
Is a global recession underway? Not now… But risks rising… the recovery in
3
What are the major risks? Further growth setbacks; Financial turbulence; Geopolitical
advanced economies weakest and the one in emerging economies losing steam
risks; Loss of confidence in policies; Lower potential growth
4
What are the main policy challenges? Shrinking space for cyclical policies;
Implementation of structural reforms...
2
Four Questions
1
How have global economic conditions changed since the
beginning of 2016? Renewed financial market volatility; Weaker growth prospects
3
Global Economy: Muddling Through…
GDP Growth
(Percent)
12
World
Advanced Economies
Emerging and Developing Economies
8
4
0
-4
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: World Bank.
4
Global and Regional Forecasts:
Global and Regional Forecasts:
Revised Down
GDP Growth
(Percent)
Current forecast
Change from
January 2016
2016
2017
2014
2015
2016
2017
World
2.6
2.4
2.5
2.9
-0.4
-0.2
Advanced economies
1.7
1.8
1.9
2.0
-0.3
-0.1
Emerging and developing economies
4.2
3.4
3.5
4.4
-0.6
-0.3
6.8
1.8
1.0
2.3
6.8
4.5
6.5
-0.1
-0.8
2.5
7.0
3.0
6.3
0.8
-1.3
3.1
7.1
3.3
6.2
2.4
1.3
3.9
7.3
4.3
0.0
-0.8
-1.3
-0.7
-0.2
-0.9
0.0
-0.2
-0.8
-0.5
-0.2
-0.3
East Asia and Pacific
Europe and Central Asia
Latin America and Caribbean
Middle East and North Africa
South Asia
Sub-Saharan Africa
Source: World Bank.
5
Commodity Markets:
A Historical Collapse in Prices
Commodities with Lower Prices
from Previous Year
(Fraction of commodities, Percent)
Real Commodity Prices
(Cumulative change, Percent)
0
100
-10
Maximum 1980-2008
80
-20
60
-30
-40
40
Minimum 1980-2008
-50
20
-60
Jul 2014-Mar 2016
Mar 2011-Jul 2014
-70
0
Energy
Metals
Agriculture
2009 2010 2011 2012 2013 2014 2015
Source: World Bank, IMF World Economic Outlook.
Right Panel: Fraction of commodities (out of a total of almost 50 commodities) for which prices declined from the previous year.
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Commodity Markets:
Oil Markets Searching for an Equilibrium
Oil Production in the United States
(Year-on-year change, million barrels per day)
3
Crude Oil Price and Excess Supply
(Million barrels per day)
(US dollars per barrel)
4
160
2
2
120
0
80
1
-2
-4
The plunge begins
-6
Source: World Bank, Bloomberg, International Energy Agency.
Left panel: The shaded area is IEA forecast (since April 2016).
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
-1
Excess supply: Forecast
Excess supply: Actual
Brent (RHS)
40
0
Jan-07
Oct-07
Jul-08
Apr-09
Jan-10
Oct-10
Jul-11
Apr-12
Jan-13
Oct-13
Jul-14
Apr-15
Jan-16
Oct-16
0
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Commodity Markets:
Low Prices; Still Above 2000 Levels
Real Commodity Price Indices
(Index, real, 2010=100)
160
120
Changes in real prices (%)
1986-2004 to 2015
1998 to 2015
Agriculture
23
21
Energy
87
167
Metals
21
45
80
40
Agriculture
Metals
Energy
0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
Source: World Bank
Note: 2016-25 figures are forecasts as of January 2016.
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Four Questions
2
Is a global recession underway? Not now… But risks rising… the recovery in
advanced economies weakest and the one in emerging economies losing steam
9
Global Recessions:
Contractions in World Output per Capita
World Output
(Index numbers, 1960=100, per capita)
350
2009
300
1991
250
1982
1975
200
PPP-weighted
150
Market-weighted
100
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
Sources: Kose and Terrones (2015), World Bank, IMF.
Notes: The index number is equal to 100 in 1960. Shaded bars indicate the years of global recessions: 1975, 1982, 1991 and 2009. PPP-weighted refers to “Purchasing Power
Parity” weighted global GDP growth and Market-weighted refers to market exchange rate weighted global GDP growth.
10
An Ongoing Global Recession?
Not now…
2009
130
120
2016
Average (1975, 1982 and 1991)
115
Output
(index)
Industrial production
(index)
105
110
100
95
90
85
80
-4 -3 -2 -1
140
0
1
2
3
-4
4
-3
-2
-1
0
1
2
3
4
1
2
3
4
8
Unemployment rate
7 (percent)
Trade flows
(index)
120
6
100
5
80
4
-4
-3
-2
-1
0
1
2
3
4
-4
-3
-2
-1
0
11
Sources: Kose and Terrones (2015), World Bank, IMF.
Notes: Time 0 denotes the year of the respective global recession (shaded with gray). All variables are in annual frequency. Output, industrial production, and trade
are index numbers equal to 100 one period before the global recession year.
But Risks Rising:
Recovery: Weakest for Advanced, Weakening for Emerging
Emerging Market Economies
Advanced Economies
6
6
Output
(percent)
4
4
2
2
0
0
1977-81
8
6
1977-81
1984-90 1993-2008 2011-16
Investment
(percent)
4
2
2
0
0
1984-90 1993-2008 2011-16
1984-90 1993-2008 2011-16
8 Investment
(percent)
6
4
1977-81
Output
(percent)
1977-81
1984-90 1993-2008 2011-16
12
Sources: Kose and Terrones (2015), World Bank, IMF.
Notes: Each bar represents the average growth of the respective variable during the years of the global expansions (excluding the first year).
Four Questions
3
What are the major risks? Further growth setbacks; Financial turbulence;
Geopolitical risks; Loss of confidence in policies; Lower potential growth
13
Downside Risks: On the Rise…
Further growth setbacks and adverse spillovers
Financial market turbulence
Geopolitical risks
Terrorist attacks; regional conflicts; refugee crisis, Brexit
Eroding confidence in cyclical policies
Eroding confidence in cyclical policies
Lower potential growth
14
Gap in Policy Rate Expectations;
Large Stock of Debt
Share of countries with rapidly
rising private debt
(Percent of sample countries)
Gap between market and FOMC expectations
for policy rates at end 2017
(Basis points)
160
70
140
60
120
AE
EMDE
50
100
40
80
30
60
40
20
20
10
0
Mar-15 Jun-15 Sep-15 Dec-15 Mar-16
0
1996
2000
2004
2008
2012
Source: World Bank, FOMC.
Right Panel. “Rapidly rising private debt” countries are defined as those experienced an increase in private non-financial debt to GDP in excess of 15 percentage point
over the prior three years. Sample includes 14 Emerging Economies and 24 Advanced Economies. Data is the market value of private sector non-financial debt to GDP.
Last observation is 2015Q2. AE and EMDE stand for Advanced Economies and Emerging Market and Developing Economies, respectively.
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Four Questions
4
What are the main policy challenges? Shrinking space for cyclical policies;
Implementation of structural reforms...
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Policy: Multiple Challenges
Space
Effectiveness
Complications
Monetary
Policy
Shrinking
Declining
Facing trade-offs
Fiscal Policy
Shrinking
Declining
Limited appetite;
Implementation challenges
Ample
High
Limited appetite;
Implementation challenges
Available
High during an
emergency
Limited appetite; Varying
cyclical positions
Structural
Policies
Policy
Coordination
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How to Improve Growth Outcomes?
Increase
infrastructure
investment
Investment
Improve
institutions and
political stability
Improve education
and health system
Institutions
Encourage R&D
Innovation
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The Sustainable Development Goals
The 2030 Agenda of Ending Poverty, Preserving the Planet,
While Leaving No One Behind
19
Progress on the MDGs in MENA
Maternal Mortality,
Undernourishment, Infant
Mortality
Water and Sanitation
95
14
90
12
10
Number of Countries
85
80
8
6
4
75
2
70
0
65
1990
2014
Improved Sanitation (% Access)
Improved Water Source (% of Rural Population)
No
Yes
20
WBG Areas for Action to Support the 2030 Agenda
DATA
Ensure availability of
household budget surveys
in 78 poorest countries
every three years; data
revolution; statistical
capacity building
FINANCING
Domestic resource
mobilization; leveraging
private sector; addressing
needs of regional and
global public goods
IMPLEMENTATION
Country engagement
model; Draw on
strength of entire WBG
to provide integrated
solutions
WBG action on the SDGs has been articulated along these three focus areas
21
New WBG Strategy for MENA
22
MENA Strategy: the First Pillar
Improving Governance and Accountability
23
MENA Strategy: the First Pillar
Regional Integration
24
MENA Strategy: the Second Pillar
Resilience to shocks of refugees and IDPs &
Recovery and Reconstruction
25
The MENA Financing Initiative
consists of two distinct and complementary financing facilities
Concessional Financing
Facility
Guarantee Facility
Objective: Support the
recovery and reconstruction
of MENA countries
Objective: Strengthen the
capacity of communities
hosting refugees to
absorb the shocks on
their economic and social
fabric
How? By leveraging donor
guarantees to provide
additional financing for
post-conflict reconstruction
and economic recovery
efforts
How? By blending grants
with MDB lending in order
to increase the provision
of concessional financing
These proposals will benefit MENA countries through:
1
More
advantageous
financing terms
Additional volumes
2
of financing
3
Greater coordination among
development and humanitarian
actors
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The MENA Financing Initiative
Initial Pledges:
Concessional Financing Facility
$140 million in grant contributions &
$1 billion in concessional loans that will
generate additional grant contributions
These initial contributions will be able to
leverage $600-800 million in
concessional financing for Jordan and
Lebanon
The objective is to raise a total of $1
billion in grants over the next five
years, which will leverage $3-4 billion
in concessional financing
Guarantee Facility
This initiative is supported by the initial financial pledges of
the following countries and organizations:
$500 million in guarantees that
will support reconstruction and
economic recovery efforts
across the MENA region
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Thank You
2
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Mahmoud Mohieldin,
SVP
Arab Economic Forum
Beirut, Lebanon