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The impact of the global crisis on the SPECA countries

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The impact of the global crisis on the SPECA countries Jos Palac n Economic Cooperation and Integration Division UNECE Structure presentation The crisis: channels ... – PowerPoint PPT presentation

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Title: The impact of the global crisis on the SPECA countries


1
  • The impact of the global crisis on the SPECA
    countries
  • José Palacín
  • Economic Cooperation and Integration Division
  • UNECE

2
Structure presentation
  • The crisis channels of transmission and
    domestic vulnerabilities
  • Implications for SPECA countries
  • What sort of recovery?
  • Lessons from the crisis

3
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.
  • Kazakhstans 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.

4
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.

5
Implications for SPECA countries
  • Worldwide output contraction led to falling
    commodity prices- not 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.

6
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.

7
Net fuel exporters (GDP growth, percentages)
Source UNECE
8
Net fuel importers (GDP growth, percentages)
Source UNECE
9
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

10
A DRASTIC CHANGE THE END OF RUSSIAN
EXPANSION (GDP quarterly growth, year-on-year,
percentage))

Source Statistical Service of the Russian
Federation
11
CIS -Terms of trade
  • (Annual growth, percentages)

Source IMF
12
Commodities dynamics
  • (Index numbers. January 2007100)

Source World Bank, own calculations
13
Remittances have been large (Inflows as
percentage of GDP)
Source IMF
14
Remittances sharp change of trend
Source IMF, Central Bank of Russia
15
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.

16
International support (percent of GDP)
Source IMF
17
Open economies (Exports and imports as percentage
GDP, 2008, BOP basis)

Source ADB.2007 for Turkmenistan.
18
Sharp falls in trade (3-months, rolling window,
miilion)
KAZAKHSTAN
AZERBAIJAN
Source IMF, own calculations
19
Sharp falls in trade (3-months, rolling window,
miilion)
TAJIKISTAN
KYRGYZSTAN
Source IMF, own calculations
20
Sharp falls in trade (3-months, rolling window,
miilion)
UZBEKISTAN
TURKMENISTAN
Source IMF, own calculations
21
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

22
Exchange rate volatility
  • National currency per Russian rouble
  • (January 2008100)

Source CIS Stat, own calculations
23
Exchange rate regimes
  • National currency per USD dollar
  • (January 2008100)

Source CIS Stat, own calculations
24
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.

25
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

26
Improving global prospects GDP growth, percentages
Source IMF
27
Improving global prospects Emerging markets net
private capital inflows
Source Institute for International Finance
28
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 energy-importing countries
    but remittances are not returning to previous
    levels.
  • The banking sector remains fragile

29
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.

30
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
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