Global Developments and Regional Implications
Download as PPTX, PDF0 likes34 views
This document discusses global economic conditions and policy challenges. It notes that while a global recession is not currently underway, growth prospects have weakened and risks are rising. Policy space for cyclical policies is shrinking, so implementing structural reforms is important to improve growth outcomes. Major risks include further growth setbacks, financial turbulence, and geopolitical instability. The document also outlines the World Bank Group's strategy for the Middle East and North Africa region, focusing on improving governance, regional integration, resilience to refugee shocks, and recovery/reconstruction efforts.
Global Developments and Regional Implications
- 1. Global Developments and Regional Implications Mahmoud Mohieldin, SVP0 Arab Economic Forum Beirut, Lebanon
- 2. Global Economy and Regional Implications: The Big Picture Myth A global recession underway No policy space; no longer effective Produce only long-term gains Hope Growth will accelerate Current policies will deliver Delaying is an option Reality No ongoing global recession; weaker growth; larger risks Available Space but Smaller; Unintended consequences Immediate gains; Signaling value Global Growth Cyclical Policies Structural Policies 1
- 3. 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 advanced economies weakest and the one in emerging economies losing steam 3 4 What are the main policy challenges? Shrinking space for cyclical policies; Implementation of structural reforms... What are the major risks? Further growth setbacks; Financial turbulence; Geopolitical risks; Loss of confidence in policies; Lower potential growth 2
- 4. Four Questions 1 How have global economic conditions changed since the beginning of 2016? Renewed financial market volatility; Weaker growth prospects 3
- 5. 4 GDP Growth (Percent) Source: World Bank. Global Economy: Muddling Through… -4 0 4 8 12 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 World Advanced Economies Emerging and Developing Economies
- 6. Current forecast Change from January 2016 2014 2015 2016 2017 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 East Asia and Pacific 6.8 6.5 6.3 6.2 0.0 0.0 Europe and Central Asia 1.8 -0.1 0.8 2.4 -0.8 -0.2 Latin America and Caribbean 1.0 -0.8 -1.3 1.3 -1.3 -0.8 Middle East and North Africa 2.3 2.5 3.1 3.9 -0.7 -0.5 South Asia 6.8 7.0 7.1 7.3 -0.2 -0.2 Sub-Saharan Africa 4.5 3.0 3.3 4.3 -0.9 -0.3 GDP Growth (Percent) Source: World Bank. Global and Regional Forecasts: Global and Regional Forecasts: Revised Down 5
- 7. Commodity Markets: A Historical Collapse in Prices Commodities with Lower Prices from Previous Year (Fraction of commodities, Percent) 6 0 20 40 60 80 100 2009 2010 2011 2012 2013 2014 2015 Maximum 1980-2008 Minimum 1980-2008 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. Real Commodity Prices (Cumulative change, Percent) -70 -60 -50 -40 -30 -20 -10 0 Energy Metals Agriculture Jul 2014-Mar 2016 Mar 2011-Jul 2014
- 8. Oil Production in the United States (Year-on-year change, million barrels per day) Commodity Markets: Oil Markets Searching for an Equilibrium Source: World Bank, Bloomberg, International Energy Agency. Left panel: The shaded area is IEA forecast (since April 2016). Crude Oil Price and Excess Supply (Million barrels per day) (US dollars per barrel) -1 0 1 2 3 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 The plunge begins 0 40 80 120 160 -6 -4 -2 0 2 4 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 Excess supply: Forecast Excess supply: Actual Brent (RHS) 7
- 9. 8 Commodity Markets: Low Prices; Still Above 2000 Levels 0 40 80 120 160 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 Agriculture Metals Energy Changes in real prices (%) 1986-2004 to 2015 1998 to 2015 Agriculture 23 21 Energy 87 167 Metals 21 45 Source: World Bank Note: 2016-25 figures are forecasts as of January 2016. Real Commodity Price Indices (Index, real, 2010=100)
- 10. 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
- 11. 10 World Output (Index numbers, 1960=100, per capita) 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. 100 150 200 250 300 350 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 PPP-weighted Market-weighted 1975 1982 1991 2009 Global Recessions: Contractions in World Output per Capita
- 12. 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. 80 90 100 110 120 130 -4 -3 -2 -1 0 1 2 3 4 Output (index) 80 100 120 140 -4 -3 -2 -1 0 1 2 3 4 Trade flows (index) 85 95 105 115 -4 -3 -2 -1 0 1 2 3 4 Industrial production (index) 4 5 6 7 8 -4 -3 -2 -1 0 1 2 3 4 Unemployment rate (percent) 2009 2016 Average (1975, 1982 and 1991) An Ongoing Global Recession? Not now…
- 13. 12Sources: 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). 0 2 4 6 1977-81 1984-90 1993-2008 2011-16 Output (percent) 0 2 4 6 8 1977-81 1984-90 1993-2008 2011-16 Investment (percent) Advanced Economies Emerging Market Economies 0 2 4 6 1977-81 1984-90 1993-2008 2011-16 Output (percent) 0 2 4 6 8 1977-81 1984-90 1993-2008 2011-16 Investment (percent) But Risks Rising: Recovery: Weakest for Advanced, Weakening for Emerging
- 14. Four Questions 3 What are the major risks? Further growth setbacks; Financial turbulence; Geopolitical risks; Loss of confidence in policies; Lower potential growth 13
- 15. 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
- 16. 0 20 40 60 80 100 120 140 160 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Gap between market and FOMC expectations for policy rates at end 2017 (Basis points) Share of countries with rapidly rising private debt (Percent of sample countries) 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. Gap in Policy Rate Expectations; Large Stock of Debt 15 0 10 20 30 40 50 60 70 1996 2000 2004 2008 2012 AE EMDE
- 17. Four Questions 4 What are the main policy challenges? Shrinking space for cyclical policies; Implementation of structural reforms... 16
- 18. Policy: Multiple Challenges Space Shrinking Shrinking Ample Available Effectiveness Declining Declining High High during an emergency Complications Facing trade-offs Limited appetite; Implementation challenges Limited appetite; Implementation challenges Limited appetite; Varying cyclical positions Monetary Policy Fiscal Policy Structural Policies Policy Coordination 17
- 19. Increase infrastructure investment Encourage R&D Improveeducation andhealthsystem Investment Innovation Institutions How to Improve Growth Outcomes? 18 Improve institutionsand politicalstability
- 20. 19 The Sustainable Development Goals The 2030 Agenda of Ending Poverty, Preserving the Planet, While Leaving No One Behind
- 21. Progress on the MDGs in MENA 20 65 70 75 80 85 90 95 1990 2014 Water and Sanitation Improved Sanitation (% Access) Improved Water Source (% of Rural Population) 0 2 4 6 8 10 12 14 NumberofCountries Maternal Mortality, Undernourishment, Infant Mortality No Yes
- 22. 21 WBG Areas for Action to Support the 2030 Agenda IMPLEMENTATIONDATA FINANCING Country engagement model; Draw on strength of entire WBG to provide integrated solutions Domestic resource mobilization; leveraging private sector; addressing needs of regional and global public goods Ensure availability of household budget surveys in 78 poorest countries every three years; data revolution; statistical capacity building WBG action on the SDGs has been articulated along these three focus areas
- 23. New WBG Strategy for MENA 22
- 24. MENA Strategy: the First Pillar Improving Governance and Accountability 23
- 25. MENA Strategy: the First Pillar Regional Integration 24
- 26. MENA Strategy: the Second Pillar Resilience to shocks of refugees and IDPs & Recovery and Reconstruction 25
- 27. consists of two distinct and complementary financing facilities Guarantee Facility Objective: Support the recovery and reconstruction of MENA countries How? By leveraging donor guarantees to provide additional financing for post-conflict reconstruction and economic recovery efforts Concessional Financing Facility Objective: Strengthen the capacity of communities hosting refugees to absorb the shocks on their economic and social fabric How? By blending grants with MDB lending in order to increase the provision of concessional financing These proposals will benefit MENA countries through: 1 2 3 More advantageous financing terms Additional volumes of financing Greater coordination among development and humanitarian actors The MENA Financing Initiative 26
- 28. Concessional Financing Facility $140 million in grant contributions & $1 billion in concessional loans that will generate additional grant contributions Guarantee Facility $500 million in guarantees that will support reconstruction and economic recovery efforts across the MENA region These initial contributions will be able to leverage $600-800 million in concessional financing for Jordan and Lebanon This initiative is supported by the initial financial pledges of the following countries and organizations: 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 The MENA Financing Initiative Initial Pledges: 27
- 29. Thank You Mahmoud Mohieldin, SVP2 8 Arab Economic Forum Beirut, Lebanon
Editor's Notes
- #14: So, what is the big problem? The problem is that for especially advanced economies the ongoing recovery since the last global recession has been quite weak/ Whichever way you look at it this is by far the weakest recovery for the group of advanced economies. These figures show you the average growth rates during each global recovery following each of the four global recessions I just talked about. As you can see, the average growth rates for output, trade, consumption, and investment have all been the lowest after the 2009 episode relative to earlier global recoveries. What about emerging markets? They have done well especially early in the global recovery. But, the latest slowdown has been taking a toll on them. they do show weakness in terms of trade and investment relative to earlier episodes. I will go back to this theme later in my presentation…
- #24: First pillar: addressing underlying causes of conflict and violence Second pillar: mitigating urgent consequences of conflict and violence