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.

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