Regional Economic Outlook: Middle East and Central Asia

World Economic and Financial Surveys

Regional Economic Outlook:
Middle East and Central Asia

May 2010

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The May 2010 Regional Economic Outlook: Middle East and Central Asia reports on the implications for the region of global economic developments and presents key policy challenges and recommendations. A resumption of capital inflows and the rebound in crude oil prices have aided the recovery in the oil-exporting countries of the Middle East and North Africa. The group of oil-importing countries is expected to show marginal increase in growth in response to a pickup in trade, investment, and bank credit. A key challenge for these countries is to enhance competitiveness to raise growth rates and generate employment. In the Caucasus and Central Asia, exports have begun to pick up, the decline in remittances appears to be slowing or reversing, and capital inflows have turned positive. For 2010, a recovery across the region is projected as the global economy, and in particular Russia, picks up speed. Overall, prospects for the region are improving and the regional impact of the Dubai crisis and events in Greece has been limited so far. Nevertheless, a repricing of sovereign debt cannot be excluded, adding a degree of uncertainty to the outlook.

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Contents

Preface
Assumptions and Conventions
Country and Regional Groupings
 
Highlights
 
A.1. MENAP Oil Exporters: Emerging from the Crisis
 
A.2. MENAP Oil Importers: Slowly Gaining Traction
 
A.3. Reviving Bank Credit in MENA
 
A.4. Capital Flows to the MENAP Region: Going Beyond Traditional Sources
 
B.1. The Caucasus and Central Asia: Incipient Recovery
 
B.2. CCA Banking Systems during and after the Crisis
 
Statistical Appendix
 
Boxes
A.1.1  The Dubai World Crisis
A.3.1  Market Views on Bank Lending in the Middle East
B.1.1  2009: Similar Shocks, Different Growth Outcomes
B.2.1  IMF, EBRD, and National Bank of Georgia Conference Explores Ways to Revive Credit
 
Figures
A.1.1  Oil Sector Hit by the Global Crisis; Non-Oil Sector Buoyed by Stimulus
A.1.2 Exports and Imports of Goods
A.1.3 Financing Conditions before and after the Dubai World Crisis
A.1.4 External Reserves and Crude Oil Prices
A.1.5 Credit and Deposits
A.1.6 Non-GCC: External and Fiscal Balances
A.1.7 GCC: External and Fiscal Balances
A.1.8 Beginnings of Inflationary Pressures?
A.2.1 Lagging Growth
A.2.2 External Receipts on the Mend
A.2.3 Fiscal Situation
A.2.4 Stock Markets Still Far from Peak
A.2.5  Lower Risk Premiums
A.2.6 Real Exchange Rates Appreciated from Precrisis
A.2.7 Lagging Trade Performance
A.2.8 Challenging Competitive Environment
A.2.9 Unemployment Has Stayed High
A.3.1 Recent Declines in Credit Growth
A.3.2 Frequency of Credit Booms Throughout the World, 1983–2008
A.3.3 Frequency of Credit Booms over Time
A.3.4 Decomposition of the Credit Slowdown in Selected MENA Countries
A.3.5 Loan-Deposit Ratios in Selected MENA Countries
A.3.6 MENA: Credit Behavior Surrounding Booms
A.3.7 Drivers of Lending Growth in MENA Banks
A.4.1 A.4.1 Spike in Capital Flows
A.4.2 Oil Exporters in the Midst of Capital Movements
A.4.3 A.4.3 Rebound in International Issuance
A.4.4 Strong Bond Placement
A.4.5 International Bank Lending Still Subdued
A.4.6 Diverging Patterns in FDI
B.1.1 Economic Growth to Recover from the Crisis
B.1.2 Signs of Recovery
B.1.3 Fiscal Policy Stance
B.1.4 Energy Importers Have Limited Fiscal Room
B.1.5 Early Signs of Price Pressures?
B.1.6 Recent Gains in Competitiveness
B.1.7 Financial Sector Stress Building Up
B.2.1 Real Credit Growth
B.2.2 Deposit Dollarization: 2002–07
B.2.3 Precrisis Exposure to Direct and Indirect Currency Risk
B.2.4 Effects of the Crisis: Depreciations and Balance Sheet Deteriorations
 
Tables
A.1.1  Selected Economic Indicators: MENAP Oil Exporters
A.1.2 Selected Economic Indicators: MENAP Oil Importers
B.1.1  Selected Economic Indicators: CCA
B.1.2 Countercyclical Monetary Policies and Response of Lending Rates
 
Statistical Appendix Tables
1 Real GDP Growth
2 Nominal GDP
3 Oil and Non-Oil Real GDP Growth for Oil and Gas Exporters
4 Crude Oil Production and Exports
5 Consumer Price Inflation
6 Broad Money Growth
7 Central Government Fiscal Balance
8 Central Government Total Revenue, Excluding Grants
9 Oil Exporters: Central Government Non-Oil Fiscal Balance
10 Oil Exporters: Central Government Non-Oil Revenue
11 Central Government Total Expenditure and Net Lending
12 Total Government Debt
13 Exports of Goods and Services
14 Imports of Goods and Services
15 Current Account Balance (Billions of U.S. dollars)
16 Current Account Balance (Percent of GDP)
17 Gross Official Reserves
18 Total Gross External Debt
19 Capital Adequacy Ratios
20 Return on Assets
21 Nonperforming Loans