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The Global Economic Outlook and Implications for the Region

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The Global Economic Outlook and Implications for the Region. Masood Ahmed ... Risk Global growth and investor sentiment weaken further ... – PowerPoint PPT presentation

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Title: The Global Economic Outlook and Implications for the Region


1
The Global Economic Outlook and Implications for
the Region
  • Masood Ahmed
  • Director, Middle East and Central Asia Department
  • Beirut, April 2009

2
Global financial strains, though subsiding,
remain elevated
Equity Markets (1/1/2007100)
Money Market Spreads (3m LIBOR minus government
paper yield)
3
and have severely affected global economic
activity
Real Growth Rates (In percent, quarter over
quarter annualized)
4
Recent data point to sustained weakness
World Trade (12-month percentage change)
Industrial Production (12-month percentage change)
1/ In SDR terms.
5
Prompting a significant downward revision to the
forecast
Overview of the World Economic Outlook
Projections (percent change unless otherwise
noted)
6
Downside risks continue to dominate for the
advanced economies
  • Intensification of the negative feedback loop
    between the real economy and the financial system
  • Deflation risks could reinforce a deeper and
    longer downturn

7
Implications for Emerging Markets Key
Transmission Channels
  • Fallout from advanced economies through weaker
    exports, investments, remittances and tourism
  • Sudden stop in cross-border financing, which
    could exacerbate corporate and banking sector
    vulnerabilities
  • Additional risks coming from possible
    protectionist measures

8
  • Developments and Outlook for the MENA region

9
The slump in global demand has led to a collapse
in commodity prices
Oil Prices (In U.S. dollars per barrel)
10
Oil exporters external and fiscal balances are
deteriorating sharply ...
Current Account and Fiscal Balances (In percent
of GDP)
11
... and growth is slowing.
Real GDP Growth, Oil-Exporting Countries (Annual
percent change)
12
For MENA oil importers, slowdown because of weak
growth prospects in partners
US -2.6
MENA Oil Importers
10
GCC 1/ 4.9
EU-15 -3.2
10
1/ January 2009 projection for non-oil GDP growth.
33
13
Exports a major transmission channel
  • Merchandise Exports, 2007
  • (In percent of GDP)

14
Remittances are another
  • Workers Remittances, 2008
  • (In percent of GDP)

15
Leading to lower growth
Real GDP Growth (Annual percent change)
16
RiskLower Oil prices
Oil Break Even Prices, 2009 (U.S. dollar per
barrel)
17
RiskGlobal growth and investor sentiment weaken
further
  • Weaker exports, tourism, and remittances
  • Sudden stops or reversal in capital flows
  • Slowdown in Europe impacts North Africa
  • Slowdown in MENA oil producers impacts the whole
    region

18
RiskAsset price corrections deepen further
Change in Stock Market Indices (Jan 01, 2008
Mar 24, 2009, in U.S. dollars)
19
Key Policy Choices
  • Oil producers Maintain fiscal spending
  • Oil importers
  • Exploit fiscal space if available
  • Apply some monetary stimulus, if possible
  • Enhance financial supervision and monitoring
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