Regional Economic Outlook Morocco Algeria Tunisia Libya Lebanon Egypt Syria Iraq Iran Jordan Saudi Kuwait Arabia Bahrain Afghanistan Pakistan Mauritania Sudan Djibouti Qatar Yemen Oman United Arab Emirates Oil Importers Oil Exporters Masood Ahmed, Director Middle East and Central Asia Department International Monetary Fund November 212
Overview Global outlook MENAP oil exporters MENAP oil importers 2
Slower and uneven recovery in 212 3 Global outlook
Growth prospects have been downgraded WEO Real GDP Growth Projections (Percent change from a year earlier) 212 (Oct 212) World U.S. Euro Area Advanced Economies Emerging Economies MENA 3.3 2.2 -.4 1.3 5.3 5.3 (April 212) 3.5 2.1 -.3 1.4 5.7 4.2 213 (Oct 212) (April 212) 3.6 2.1.2 1.5 5.6 3.6 4.1 2.4.9 2. 6. 3.7 Source: IMF, World Economic Outlook. 4 Global outlook
Emerging market economies: End of a boom Real Credit Growth (Percent change from one year ago) Real GDP Growth (Percent change from one year ago) Turkey Brazil India China 4 Turkey Brazil India China 16 35 14 3 12 25 1 2 8 15 6 1 4 21 211 212 June 12 5 21 211 212 12:Q2 2 Sources: Haver Analytics; IMF, World Economic Outlook; and IMF staff calculations. 5 Global outlook
Global downside risks have increased Prospects For World GDP Growth (Percent change) Downside risks: More stress in euro area U.S. fiscal cliff, debt ceiling Higher oil prices Medium-term risks: high advanced economy debt; lower emerging market growth 9 percent confidence interval 9 percent confidence interval (April 212 WEO) Baseline 7 6 5 4 3 2 1-1 29 21 211 212 213 Source: IMF, World Economic Outlook. 6 Global outlook
MENAP oil exporters Iraq Iran Algeria Libya Saudi Arabia Bahrain Kuwait Qatar Yemen Oman United Arab Emirates 7
Increase resilience and create private-sector jobs Accommodative fiscal and monetary policy Large government wage bill increases High oil prices, but sensitive to global economic developments Recovery in Libya orobust GDP growth olarge current account surpluses oincreasing fiscal vulnerability to oil price Gradually save more and reduce spending rigidities Develop alternatives to public-sector hiring 8 MENAP oil exporters
Non-oil GDP growth strong; current accounts buoyant Real GDP (Annual percent growth) Current Account Balances (Billions of U.S. dollars and percent of GDP) 1 8 Non-oil GDP Oil GDP 4 35 24% 24% 21% 13 12 6 3 11 4 25 1 2 2 9 15 14% 8-2 1 1% 7-4 5 6% 5% 4% 6-6 27 28 29 21 211 212 213 Sources: National authorities; and IMF staff calculations. 21 211 212 213 GCC Non-GCC Crude oil price, U.S. dollars per barrel (right scale) 5 9 MENAP oil exporters
GCC: Accommodative policies support non-oil GDP; oil GDP slowing Non-Oil Real GDP (Annual percent growth) Oil Real GDP (Annual percent growth) 1 212 1 212 9 8 7 213 GCC average (212) 8 6 213 GCC average (212) 6 4 5 2 4 3 2-2 1-4 QAT SAU OMN KWT UAE BHR -6 BHR KWT OMN QAT SAU UAE Sources: National authorities; and IMF staff calculations. 1 MENAP oil exporters
Higher government wage bills weaken public finances 8 Government Wage Bill Growth, 21 13 (Percent, deflated by CPI) 3 Fiscal Balances Have Deteriorated (Percent of GDP) 7 2 6 1 5 4-1 3-2 2-3 1-4 -5-1 IRN YMN SAU ALG IRQ UAE BHR OMN KWT QAT LBY Sources: National authorities; and IMF staff calculations. -6 27 28 29 21 211 212 213 GCC overall balance Non-GCC overall balance MENAP oil exporters non-oil balance (percent of non-oil GDP) 11 MENAP oil exporters
Fiscal vulnerability to a lower oil price has increased Fiscal Breakeven Prices (U.S. dollars per barrel) 1 GCC Fiscal Balances (Percent of GDP) Fiscal breakeven price, 212 16 14 12 1 8 6 4 2 Iraq Change in WEO oil price, 28-12: US$9 Kuwait Qatar Oman Bahrain Algeria Libya Saudi Arabia Iran WEO oil price, 212: US$16 United Arab Emirates 25 2 15 1 5-5.1 19. 1.9 1 2 3 4 5 6 7 Change in fiscal breakeven price, 28-12 -1 2 22 24 26 28 21 212 214 216-8.8 Sources: National authorities; and IMF staff calculations. 1 Yemen fiscal breakeven, 212: US$237 per barrel. Note: Shaded area shows the fiscal balance for an oil price up to US$28 per barrel (one standard deviation) higher or lower than the forecast oil price for 213 to 217. 12 MENAP oil exporters
GCC: Generating private-sector jobs for nationals 12 1 8 6 4 2 GCC Unemployment Rate, Nationals (Percent) 1 Increase private-sector employment by: Maintaining fast non-oil GDP growth by continuing to diversify the economy Lowering private-sector reservation wages by reducing the proportion of nationals employed in the public sector limiting public-sector wage increases Addressing skills mismatches Encouraging firms to hire nationals without imposing undue costs of doing business Bahrain Kuwait Qatar Saudi Arabia Source: National authorities. 1 Bahrain (211); Kuwait (21, includes individuals not actively seeking employment), Qatar (29); Saudi Arabia (29). 13 MENAP oil exporters
Key messages: MENAP oil exporters Robust non-oil GDP growth (supported by accommodative fiscal policy); strong 212 growth driven by Libyan recovery Large external current account surpluses are sensitive to lower oil prices Gradually saving more and reducing spending rigidities will strengthen fiscal resilience to oil price declines Continued focus on broader structural reforms and economic diversification will help generate private-sector employment and inclusive growth 14 MENAP oil exporters
MENAP oil importers Morocco Tunisia Lebanon Syria Jordan Afghanistan Egypt Pakistan Mauritania Sudan Djibouti 15
Restore macroeconomic sustainability and accelerate growth Adverse External Influences Slow global growth; euro area recession High food and fuel prices Spillovers from Syria Domestic Uncertainty Ongoing political reforms Policy response of increased subsidies Continued large financing needs otepid growth continues in 212 opersistent high unemployment owidening fiscal and external imbalances opolicy buffers depleted Balance social pressures for spending with tightened fiscal and external constraints Lay foundation for more job-creating growth through enhanced structural reforms 16 MENAP oil importers
Growth forecasts revised downward 5 MENAP Oil Importers: Real GDP Growth 1 (Percent) 4 Oct 211 REO Apr 212 REO Nov 212 REO 3 2 1 21 211 212 213 Sources: National authorities; and IMF staff calculations. 1 Excludes Syria from 211 onwards. 17 MENAP oil importers
Recovery expected, but uncertainty weighing on activity 8 6 Real GDP Growth (Percent) 211 212 213 4 2-2 -4-11.2-6 MRT AFG DJI PAK JOR MAR TUN LBN EGY SDN Sources: National authorities; and IMF staff calculations. 18 MENAP oil importers
Tepid outlook reflects weak exports of goods, tourism Exports and Imports of Goods (Annual percentage change) International Tourist Arrivals (Index; Jan 21=1,seasonally adjusted, most recent month) 8 14 6 Exports Imports 12 4 1 2-2 -4 Jun-8 Jun-9 Jun-1 Jun-11 Jun-12 8 6 Year-over-year growth (Percent) 4 EGY 212/1 212/11-25.8 29.1 JOR -19.9-3.8 2 LBN -24.7-7.3 MAR 5.2-4.2 TUN -13.5 49.7 Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Sources: Haver Analytics; and national authorities. 19 MENAP oil importers
Vulnerable to high food prices, euro area slowdown 16 14 12 1 8 6 4 Food Imports as a Share of GDP (Percent) World average, 21 27 8 21 -.2 -.4 -.6 Responses of Output to a Negative GDP Shock in the Euro Area. (Percent change) 2 -.8 Iraq Yemen Bahrain Algeria Oman Saudi Arabia Sudan Iran Mauritania Jordan Lebanon Syria Afghanistan Morocco Egypt Tunisia Pakistan -1. GCC Maghreb Mashreq Euro area Sources: Cashin, Mohaddes, Raissi (212); and IMF staff calculations. 2 MENAP oil importers
Commodity prices likely to remain high 3 25 Global Commodity Price Developments 1 (Index; 25 = 1) Food Metals Gold (RHS) US$ per troy ounce 2,4 2, 3 25 Brent Crude Oil Price Prospects 2 (U.S. dollars per barrel) 95% confidence interval 86% confidence interval 68% confidence interval Futures 2 1,6 2 Upside price risks dominate 15 1,2 15 1 8 1 5 4 5 Jan-5 Oct-6 Jul-8 Apr-1 Jan-12 Oct-13 Jan-7 Jan-9 Jan-11 Jan-13 Jan-15 Sources: IMF, Primary Commodity Price System; and IMF staff calculations. 1 Food index derived from average price of corn, wheat, rice, and soybeans. 2 Derived from prices of futures options on October 9, 212. 21 MENAP oil importers
Vulnerable to spillovers from Syria Turkey: 88K Estimate of Refugee Flows From Syria Total outside Syria: 3-4 thousand Internally displaced: about 1.5 million Lebanon: 8K Syria Iraq: 29K Jordan: 15-2K Sources: UNHCR, Jordanian authorities, Internal Displacement Monitoring Centre; and IMF staff estimates as of September 27, 212. 22 MENAP oil importers
Fiscal deficits revised upward 8. MENAP Oil Importers: Overall Fiscal Deficit 1 (Percent of GDP) 7.5 7. 6.5 6. 5.5 Oct 211 REO Apr 212 REO Nov 212 REO 5. 21 211 212 213 Sources: National authorities; and IMF staff calculations. 1 Excludes Syria from 211 onwards. 23 MENAP oil importers
Policy response: higher deficits and spending, mainly on subsidies Increase in Government Expenditures (Percent of GDP, 212 versus 21) Overall Fiscal Balance (Percent of GDP) 12 2 9 6-2 -4 3-6 -3-6 Other Capital expenditures Wages and salaries Subsidies and transfers Total expenditure AFG DJI EGY JOR LBN MRT MAR PAK SDN TUN -8-1 -12 21 212 AFG DJI EGY JOR LBN MRT MAR PAK SDN TUN Sources: National authorities; and IMF staff calculations. 24 MENAP oil importers
Increased official financing, but more needed Official Financing Disbursed Since Arab Awakening 1 (Millions of U.S. dollars) Gross External Financing Needs 1 (Billions of U.S. dollars) IMF, $384 Other, $1,693 G8, $2,89 14 12 212 213 1 8 6 International financial institutions, excl. IMF, $5,42 GCC, $4,56 4 2 Egypt² Jordan Morocco Tunisia Sources: National authorities; and IMF staff calculations. 1 Received through August 212 or latest available. Includes disbursements to Egypt, Jordan, Morocco, and Tunisia. Sources: National authorities; and IMF staff calculations. 1 Calculated as the sum of current account balance (before grants) and external amortization. 2 Fiscal year (July-June). 25 MENAP oil importers
has resulted in shrinking reserve buffers Gross International Reserves (Months of imports and billions of U.S. dollars) 15 21 212 12 $3. $34.7 9 $35.2 $12.4 6 $23.6 3 $15.6 $7.4 $18.4 $13. $1.8 $9.5 $7.8 EGY JOR LBN MAR PAK TUN Sources: National authorities; and IMF staff calculations. 26 MENAP oil importers
Medium-term policy agenda for shared prosperity Fiscal Policy Implement growth-friendly consolidation Increase quality of public investment Enhance social safety nets for the poor Socially Inclusive Growth Monetary Policy Vigilance to second-round inflation effects Enhance exchange rate flexibility Expand policy toolkit in the medium term Labor Market and Education Reforms Business Regulation and Governance Access to Finance Review labor market regulations Reform education systems to enhance skill formation Establish transparent, evenhanded treatment of businesses Lower barriers to entry and exit of businesses Develop alternatives to bank finance Banking system: strengthen competition and financial infrastructure 27 MENAP oil importers
Key messages: MENAP oil importers Growth prospects for 212-13 remain modest, with economic activity below potential Largest downside risks emanate from continued political instability and spillovers from Syria, but other risks including a further deterioration of the global economy and continued high commodity prices also loom large Depletion of policy buffers calls for urgent action on growth-enhancing consolidation, while protecting the poor and vulnerable through effective safety nets Commitments from international partners for financial assistance, trade access, and capacity building are needed to smooth adjustment in 212-13 Time to start economic transitions prompt action on macroeconomic policies and reforms needed to boost competitiveness, growth, and job creation 28 MENAP oil importers
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