The Global Economic Outlook and Implications for Russia
Transcript of The Global Economic Outlook and Implications for Russia
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The Global Economic Outlook
and Implications for Russiaand Implications for RussiaAssociation of Regional Banks of Russia
Xth International Banking Forum
September 6, 2012
Odd Per Brekk
Senior Resident Representative
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The Global Economic Outlook
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The Economic Recovery is Slowing…
GDP Growth (percent)
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15
Source: IMF, World Economic Outlook.
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-10
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2006 2007 2008 2009 2010 2011 2012 2013
World
Industrial countries
Emerging Economies
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… and The Baseline Outlook is
Critically Dependent on Policy Action
� Eurozone to overcome crisis
� US to deal with the “fiscal cliff”
� Emerging markets to cope with slowdown
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The Euro Area
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The Euro Area Crisis Continues …
500
600
700
800
250
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400
Post-LehmanIreland
Program
LTRO
Greece
Program/
Sovereign and Bank Spreads
(basis points)
European Financial CDS (left scale)
High Yield Euro-Area Sovereign Bond Spreads (right scale)
Source: Bloomberg
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2007 2008 2009 2010 2011 2012
Post-Lehman Program
Bear Stearns
Program/
SMP
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Three Interrelated Crises
of the Eurozone
� Fiscal crisis
� Banking crisis� Banking crisis
� Growth and competitiveness crisis
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Action to Resolve Fiscal Problems
� Fiscal adjustment in crisis countries
� Firewall to contain borrowing costs
• ESM and EFSF capacity (and IMF)
Euro Area Bonds � Euro Area Bonds
• Joint liability, for new or existing debt
� ECB financing
• Revival of Securities Market Program (SMP)?
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Elements of a Banking Union
� A single supervisor
� A common bank resolution authority� A common bank resolution authority
� A joint deposit guarantee scheme
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Implications for Russia
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Oil Prices are the Main Spillover
Channel to Russia…
160
180
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WTI Oil Price Prospects 1/
(USD per barrel)
95% confidence interval
Futures
86% confidence interval
68% confidence interval
Source: Bloomberg; IMF staff calculations.
0
20
40
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07 08 09 10 11 12 13 14 15
1/Derived from prices of futures July 25, 2012
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… but Financial Sector Spillovers Could Be
Important as well …
Source of Risk Relative Likelihood Impact if Realized
Acceleration of capital
outflows Medium/High Low
Funding freeze Medium Medium
Failure of a large bank Medium Low
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Russia: How Would it Be
Different from 2008/09?
� Positive:
• Less overheating of the economy
• Flexible exchange rate: “shock absorber”
• Banks have positive NFA overall
• The authorities have gained crisis management
experience
� Negative:
• Substantially less fiscal policy space
• Banks still repairing balance sheets, and credit
growth is high
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How Should Russia Respond to the Crisis ?
Economic Policy Priorities
� Short term―to maintain stability:• Avoid overheating and keep inflation on a downward path
• Stand ready to respond to external spilloversStand ready to respond to external spillovers
� Longer term―to realize growth potential:• Maintain macroeconomic and financial stability (fiscal
anchor; formal inflation targeting)
• Move ahead on structural reforms, including in the
financial sector
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Thank you