Middle East and North Africa Regional Economic Outlook. November 12, 2013

Transcription

1 Middle East and North Africa Regional Economic Outlook November 12, 213

2 Outline Global Outlook MENAP: Recent Developments, Outlook, and Risks Oil Exporters Oil Importers Key Takeaways 2 Global Outlook

3 Global growth remains subdued, and its underlying dynamics are changing WEO Real GDP Growth Projections (percent change from a year earlier) World U.S. Euro Area Emerging markets China India Source: IMF, World Economic Outlook. Global Outlook 3 8

4 Risk of slower-than-expected growth in emerging markets GDP Impact (First Year, Percent change relative to baseline) BRICS World Oil Exporters Oil Importers % 2% Source: IMF, World Economic Outlook; and Staff calculations. 4 Global Outlook

5 Financial conditions remain tighter following recent market volatility EPFR Cumulative Funds Flows¹ (Bonds and Equities, Jan 211=, in US$ billions) EM Asia EM LAT EM Europe EM MENA, right scale 3 May 22 Sep Bond Yields (Percent, Aug 2, 212 Oct 22, 213) EM (JPMorgan EMBIG) MENAP oil importers HSBC/Nasdaq Dubai GCC Conventional Chairman Bernanke's testimony to Congress Announcement by the Fed not to taper -2-1 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Sources: IMF, World Economic Outlook; and Bloomberg LP. 5 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Global Outlook

6 Food and fuel prices remain elevated Food and Fuel Price Developments 1 (Index; 25 = 1) 3 25 Food Fuel Dec-7 Dec-8 Dec-9 Dec-1 Dec-11 Dec-12 Dec-13 Dec-14 Sources: IMF, Primary Commodity Price System; and IMF staff calculations. 1 Commodity food price index includes cereals, fruit and vegetables, and protein price indices. 6 Global Outlook

7 Recent developments, outlook, and risks MENAP oil exporters Iraq Algeria Libya Iran Kuwait Saudi Arabia Bahrain Qatar Oman Yemen 7 United Arab Emirates

8 Non-oil GDP growth steady in most countries 1 Non-oil Real GDP Growth (Annual percent change) Sources: National authorities; and IMF staff calculations. 8 MENAP oil exporters

9 Headline growth in 213 will be lower because of a decline in oil production MENAP oil exporters: GDP and crude oil production (Percent change) Real GDP (left scale) Crude oil production Change in oil exports between (Millions of barrels per day) May 213 Forecast Fall 213 Forecast Iran Iraq Libya Saudi Arabia Sources: National authorities; and IMF staff calculations. 9 MENAP oil exporters

10 Strong economic performance but challenges over the medium term Oil production and price volatility Large government spending increases Segmented labor markets Low or falling productivity Risks to growth Rising fiscal vulnerabilities Insufficient private-sector job creation for nationals 1 MENAP oil exporters

11 Risks to oil prices and production are significant Oil price uncertainty 1 (U.S. dollars per barrel) Ample medium-term capacity (Millions of barrels per day, ) % confidence interval 86% confidence interval 68% confidence interval Futures Sources: IEA Medium Term Oil Market Report (213); IMF, Primary Commodity Price System; and IMF staff calculations. 1 Derived from prices of futures and options on Sep. 12, Change in OPEC spare capacity (cumulative change since 212) World demand growth (annual percent change) World supply capacity growth (annual percent change) MENAP oil exporters

12 Government budgets are increasingly vulnerable to a decline in oil prices Fiscal Breakeven Prices (U.S. dollars per barrel) 1 Fiscal breakeven price, Change in WEO oil price, : US$4 Saudi Arabia United Arab Emirates Kuwait Algeria Bahrain Iraq Oman Qatar Iran Libya Change in fiscal breakeven price, Sources: National authorities; and IMF staff calculations. 1 Yemen fiscal breakeven, 213: US$215 per barrel. 2 Simple average of UK Brent, Dubai, and West Texas Intermediate Spot Prices. WEO oil price, 2 214: US$ MENAP oil exporters

13 Fiscal and external buffers are declining Fiscal Balances (Percent of GDP) Current Account Balances (Percent of GDP) Baseline BRICS Slowdown Scenario GCC 214: $322 billion Non-GCC 214: $15 billion GCC 218: $216 billion Non-GCC 218: $ -6 billion Sources: National authorities; and IMF staff calculations. 13 MENAP oil exporters

14 Can the current economic model deliver sustainable growth? Non-oil Total Factor Productivity Growth (Percent change, 2-12) BHR OMN UAE KWT QAT SAU ALG Sources: National authorities; and IMF staff calculations. 14 MENAP oil exporters

15 A 1 million jobs deficit? GCC Nationals (Millions, ) Labor force entrants (cumulative since 212) Private-sector jobs creation (cumulative since 212) 1 million 15 MENAP oil exporters

16 Comprehensive reforms to increase privatesector growth and employment are needed Selective capital investments (GCC); basic infrastructure (non-gcc) Access to finance for SMEs Security and business environment (non- GCC) Private sector labor market interventions (subsidies, quotas) Education and on-thejob training Limit public-sector wages and employment 16 MENAP oil exporters

17 Recent developments, outlook, and risks MENAP oil importers Tunisia Morocco Lebanon Syria Afghanistan Jordan Egypt Mauritania Sudan Djibouti Somalia 17 Pakistan

18 Delayed recovery, weak medium-term prospects Real GDP Growth (Percent ) Sources: National authorities; and IMF staff calculations. 18 MENAP oil importers

19 Weak growth prevails in most countries Real GDP Growth (Annual percent change) EMDC LBN EGY TUN AFG JOR PAK SDN DJI MAR MRT Sources: National authorities; and IMF staff calculations. 19 MENAP oil importers

20 Persistently high and rising unemployment fuels social tensions Tunisia Egypt Jordan Morocco Pakistan Unemployment rates (Latest available date, percent) Sources: International Labor Organization; national authorities; and IMF staff calculations. MENAP oil importers 2 Youth unemployment Developed economies and EU LAC Asia Jordan Egypt Sudan Tunisia Morocco Central and South Eastern Europe and CIS Sub-Saharan Africa Pakistan Lebanon Syria Total unemployment

21 Slow growth and reform delays exacerbate fiscal vulnerabilities Fiscal balance (Percent of GDP) Change in Expenditure (Percent of GDP, 21 13) Wages Capital expenditures MENAPOI MENAP OI¹ Subsidies and transfers Other expenditures Sources: National authorities; and IMF staff calculations. 21 MENAP oil importers

22 Reserves buffers are low Gross International Reserves (Months of imports) Dec-21 Apr-213 (or latest available) Emerging markets and developing economies (Jun 213) PAK SDN TUN EGY MAR JOR DJI AFG MRT¹ LBN Sources: National authorities; and IMF staff calculations. ¹Reserves in months of the following year's imports excluding extractive industries imports. MENAP oil importers 22

23 Complex political transitions impede policy formulation and implementation Jordan (Parliamentary election) Lebanon (Prime Minister resigns) Egypt (Parliamentary election, delayed) Pakistan (Parliamentary election) Morocco (Coalition moving ahead) Egypt (Interim government) Tunisia (Political crisis) Mauritania (Parliamentary election) 23 Afghanistan (Presidential election) Egypt (Presidential and Parliamentary elections) Tunisia (Presidential and Parliamentary elections) Lebanon (Presidential election) Lebanon (Parliamentary election) Sudan (Presidential and Parliamentary elections) MENAP oil importers

24 11 Mounting social, political, and security tensions weigh on confidence Confidence indicators 1 (Index; Dec 29=1, seasonally adjusted) Dec-9 Jun-1 Dec-1 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Source: PRS group. 1 Average of consumer confidence indices for Egypt, Jordan, Lebanon, Morocco, Pakistan, Sudan, Syria, and and Tunisia. MENAP oil importers 24

25 Spillovers from Syria intensify social and security risks Estimate of refugee flows from Syria 1 Turkey: 494K [.7] Refugees Total outside Syria: 2.1 million Internally displaced: about 5. million Cyprus Lebanon 77K [18.9] Syria Iraq: 194K [.6] Disruptions to bilateral and transit trade Declining tourism Egypt 127K [.2] Jordan: 525K [8.] Sectarian violence Sources: UN Refugee Agency, Information Sharing portal : Syria Regional Refugee Response. 1 As of September 29, 213. Figures reflect the number of refugees registered or awaiting registration. Figures in square brackets denote the share of Syrian refugees in the host country's population. 25 MENAP oil importers

26 Downside risks are significant and can further weaken the economy and reduce jobs Real GDP Growth, 214 (Percent) Unemployment, 214 (Millions of people) Weaker Growth -1¼% Baseline +1½ million people // Sources: National authorities, ILO, Trading Economics forecasts; and IMF staff calculations. MENAP oil importers 26

27 Urgent actions needed in three areas to achieve sustainable and inclusive growth ❶ Creating jobs by orienting public spending toward investment ❷ Improving fiscal sustainability and rebuilding buffers ❸ Embarking without delay on structural reforms to raise potential growth and enhance equity 27 MENAP oil importers

28 Shoring up growth and creating jobs Increasing productive public Reorient investment spending Increase capital, health, education Bringing spending additional external Increase financing targeted safety nets Invigorating initiatives to Cut improve generalized business climate subsidies Real GDP (Annual percentage change) Growth needed for 8 percent unemployment rate MENAP oil importers

29 $1 trillion opportunity from higher female labor force participation Gender Gaps in Labor Force Participation¹, ² (Percentage points, average 2-11) Sources: World Bank, World Development Indicators; and IMF staff estimates. 1 Defined as male less female labor force participation rate. ²AE: Advanced Economies; DEA: Developing and Emerging Asia; EE: Emerging Europe; LAC: Latin America and the Caribbean. 29 MENAP oil importers

30 Achieving fiscal sustainability Reorient spending Increase capital, health, education spending Increase targeted safety nets Cut generalized subsidies Mobilize revenues Broaden tax base Raise income tax progressivity Raise excises and taxes on high value properties 3 MENAP oil importers

31 Raising potential growth and making it more inclusive through structural reforms Business climate/ governance Trade integration Labor market/ education Socially inclusive growth and jobs Access to finance Social protection Financial sector soundness 31 MENAP oil importers

32 Takeaways Oil exporters: Oil GDP growth to resume in 214 but subject to considerable oil production and price uncertainty Saving more will strengthen fiscal resilience to oil revenue shocks and arrest the deterioration in fiscal and external positions Job creation requires structural reforms supplemented with measures to encourage private sector employment for nationals Oil importers: Complex political transitions and social and security tensions thwart economic recovery under looming fiscal and external vulnerabilities Maintaining macroeconomic stability and promoting growth prospects, jobs, and better living standards: Reorient expenditures and mobilize revenues Ignite structural reforms 32

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