The Global Economic Outlook and Implications for Russia
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The Global Economic Outlook and Implications for Russia and Implications for Russia Association of Regional Banks of Russia Xth International Banking Forum September 6, 2012 Odd Per Brekk Senior Resident Representative
Transcript of The Global Economic Outlook and Implications for Russia
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
The Global Economic Outlook
The Economic Recovery is Slowing…
GDP Growth (percent)
0
5
10
15
Source: IMF, World Economic Outlook.
-15
-10
-5
0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2006 2007 2008 2009 2010 2011 2012 2013
World
Industrial countries
Emerging Economies
… 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
The Euro Area
The Euro Area Crisis Continues …
500
600
700
800
250
300
350
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
0
100
200
300
400
0
50
100
150
200
2007 2008 2009 2010 2011 2012
Post-Lehman Program
Bear Stearns
Program/
SMP
Three Interrelated Crises
of the Eurozone
� Fiscal crisis
� Banking crisis� Banking crisis
� Growth and competitiveness crisis
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)?
Elements of a Banking Union
� A single supervisor
� A common bank resolution authority� A common bank resolution authority
� A joint deposit guarantee scheme
Implications for Russia
Oil Prices are the Main Spillover
Channel to Russia…
160
180
200
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
60
80
100
120
140
07 08 09 10 11 12 13 14 15
1/Derived from prices of futures July 25, 2012
… 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
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
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
Thank you
