The Economies of the Middle The Economies of the Middle East and East and North Africa:North Africa:NearNear--term Outlook and Mediumterm Outlook and Medium--term Challengesterm Challenges
The Economies of the Middle The Economies of the Middle East and East and North Africa:North Africa:NearNear--term Outlook and Mediumterm Outlook and Medium--term Challengesterm Challenges
MoroccoTunisia Lebanon
SyriaIraq I
AfghanistanMoroccoJordan
Egypt
AlgeriaLibya
Iraq
Kuwait
Qatar
Saudi Arabia
Iran
BahrainPakistan
Mauritania
QatarUnited Arab
EmiratesOman
YemenSudan
Djibouti
Oil Importers
Oil Exporters
Masood AhmedPresentation at the Canon Institute for Global Studies
Tokyo October 2012
Masood AhmedPresentation at the Canon Institute for Global Studies
Tokyo October 2012Tokyo, October 2012Tokyo, October 2012
Overview
MENAP Oil Exportersp
MENAP Oil I tMENAP Oil Importers
Middle East and North Africa, Tokyo, October 2012 2
MENAP MENAP Oil ExportersOil ExportersMENAP MENAP Oil ExportersOil ExportersppReducing vulnerability and creating privateReducing vulnerability and creating private--sector jobssector jobs
ppReducing vulnerability and creating privateReducing vulnerability and creating private--sector jobssector jobs
Accommodative fiscal and monetary policy
Large government wage bill increases
High oil prices, but sensitive to global
economic developments
Recovery in Libya
Robust GDP growthgLarge current account surpluses
Increasing fiscal vulnerability to oil priceLimited private-sector employment outlookLimited private-sector employment outlook
Gradually save more and reduce spending rigiditiesFind alternatives to public-sector hiring
Middle East and North Africa, Tokyo, October 2012 3 MENAP Oil ExportersMENAP Oil ExportersMENAP Oil ExportersMENAP Oil Exporters
Non-oil GDP growth strong, current accounts buoyant
Real GDP(A l t th)
Current Account Balances(Billi f U S d ll )
6
8
10
Non-oil GDP
Oil GDP
(Annual percentage growth) (Billions of U.S. dollars)
110
120
130
300
350
400
0
2
4
90
100
110
200
250
300
-4
-2
0
60
70
80
50
100
150
-62007 2008 2009 2010 2011 2012 2013 500
2010 2011 2012 2013
GCCNon-GCC
Sources: National authorities; and IMF staff calculations.
Non GCCCrude oil price, U.S. dollars per barrel (right scale)
Middle East and North Africa, Tokyo, October 2012 4 MENAP Oil ExportersMENAP Oil ExportersMENAP Oil ExportersMENAP Oil Exporters
Higher government wage bills increase fiscal vulnerability
Government Wage Bill Growth, 2010–13 Fiscal Breakeven Prices
70
80
g ,(Percent, deflated by CPI)
Iran140
160 Change in WEO oil price, 2008-12: US$9
Fiscal Breakeven Prices(U.S. dollars per barrel)1
40
50
60 Algeria
Iraq
LibyaOmanUnited Arab
Emirates
Bahrain
100
120
n pr
ice,
201
2
WEO oil price, 2012: US$106
10
20
30
KuwaitQatar
Saudi Arabia
40
60
80
Fisc
al b
reak
eve
-10
0
0
20
0 10 20 30 40 50 60 70
FChange in fiscal breakeven price 2008 12
Sources: National authorities; and IMF staff calculations.
Change in fiscal breakeven price, 2008-12
1Yemen fiscal breakeven, 2012: US$237
Middle East and North Africa, Tokyo, October 2012 5 MENAP Oil ExportersMENAP Oil ExportersMENAP Oil ExportersMENAP Oil Exporters
Fiscal and external balances sensitive to oil prices
GCC Fi l B l GCC C t A t B l
25 35
GCC Fiscal Balances(Percent of GDP)
GCC Current Account Balances(Percent of GDP)
19.0
10.910
15
20 30.4
22.9
20
25
30
0.10
5
10
10.7
5
10
15
-8.8-10
-5
2000 2002 2004 2006 2008 2010 2012 2014 2016
-0.2
-5
0
5
2000 2002 2004 2006 2008 2010 2012 2014 20162000 2002 2004 2006 2008 2010 2012 2014 2016
Sources: National authorities; and IMF staff calculations. Note: Shaded area shows fiscal and current account balances for an oil price up to US$28 per barrel (one standard deviation) higher or l th th f t il i f 2013 t 2017
Middle East and North Africa, Tokyo, October 2012 6
lower than the forecast oil price for 2013 to 2017.
MENAP Oil ExportersMENAP Oil ExportersMENAP Oil ExportersMENAP Oil Exporters
Public-sector employment crowds out the private sector
Public- and Private-Sector Employment Rates(Percent latest year)(Percent, latest year)
Qatar90
rce)
Iran
Lebanon
Morocco
UAEYemen
70
80
rcen
t of l
abor
for
Algeria
Egypt
JordanSyria
60
70
ate
sect
or (p
er
Algeria
500 10 20 30 40
Priv
a
Source: IMF staff calculations.
Public sector (percent of labor force)
Middle East and North Africa, Tokyo, October 2012 7 MENAP Oil ExportersMENAP Oil ExportersMENAP Oil ExportersMENAP Oil Exporters
MENAPMENAP Oil ImportersOil ImportersMENAPMENAP Oil ImportersOil ImportersMENAP MENAP Oil ImportersOil ImportersRestore macroeconomic stability and accelerate growthMENAP MENAP Oil ImportersOil ImportersRestore macroeconomic stability and accelerate growth
Euro area recession and slowing EMs
High food and fuel prices
Political reforms in some countries
Spillovers from Syria
Policy response with subsidies
Large financing needs
D t ti i 2012
p
• Downturn continues in 2012• Policy buffers depleted
• Macroeconomic stability so far, but concerns rising
Fiscal consolidation, better target social spending, g p gGreater exchange rate flexibility
Strengthen competitiveness through structural reforms
Middle East and North Africa, Tokyo, October 2012 8 MENAP Oil ImportersMENAP Oil ImportersMENAP Oil ImportersMENAP Oil Importers
Downturn continues in 2012, weak recovery in 2013Downturn continues in 2012, weak recovery in 2013
Real GDP Growth(Percent)
6
82011 2012 2013
( )
2
4
-2
0
-6
-4
MRT AFG DJI PAK JOR MAR TUN LBN EGY SDN
-11.2
Sources: National authorities; and IMF staff calculations.
Middle East and North Africa, Tokyo, October 2012 9 MENAP Oil ImportersMENAP Oil ImportersMENAP Oil ImportersMENAP Oil Importers
Falling exports, weak recovery in tourismg p , y
Exports and Imports of Goods International Tourist Arrivals
60
80
Exports Imports 120
140(Annual percentage change) (Index; Jan 2010=100, seasonally adjusted)
40
80
100
0
20
40
60
EGY -25.8 29.12012/10 2012/11
Percent change
40
-20
0
20
40JORLBNMARTUN
-19.9-24.75.2
-13.5
-3.8-7.3-4.249.7
-40Jun-08 Jun-09 Jun-10 Jun-11 Jun-12
0Jan-10 Jul-10 Jan-11 Jul-11 Jan-12
Sources: Haver Analytics; and national authorities.
Middle East and North Africa, Tokyo, October 2012 10 MENAP Oil ImportersMENAP Oil ImportersMENAP Oil ImportersMENAP Oil Importers
Terms of trade shocks, persistent current account deficits, p
Terms of Trade Current Account Balance
6
9
Terms of Trade(Percent change; increase = improvement)
0
1
Current Account Balance(Percent of GDP)
0
3
6
2
-1
0
-3
0
-3
-2
-9
-6 2011 to 20122009 to 2012
40.4-5
-4
Sources: National authorities; and IMF staff calculations.
-12TUN EGY LBN DJI MAR MRT JOR PAK
-62002 2004 2006 2008 2010 2012
Middle East and North Africa, Tokyo, October 2012 11 MENAP Oil ImportersMENAP Oil ImportersMENAP Oil ImportersMENAP Oil Importers
Larger subsidies, shrinking reserve buffers
Gross International ReservesIncrease in Government Expenditures(Months of imports and billions of U.S. dollars)
12
p(Percent of GDP, 2012 versus 2010)
15
6
9
$30$3512
2010 2012
0
3
$35 $12
$246
9
-6
-3
AFG DJI EGY JOR LBN MRT MAR PAK SDN TUN
$13$10
$16
$7 $18
$11$8
3
Sources: National authorities; and IMF staff calculations.
AFG DJI EGY JOR LBN MRT MAR PAK SDN TUN
Other Capital expendituresWages and salaries Subsidies and transfersTotal expenditure
0EGY JOR LBN MAR PAK TUN
Middle East and North Africa, Tokyo, October 2012 12 MENAP Oil ImportersMENAP Oil ImportersMENAP Oil ImportersMENAP Oil Importers
Planned consolidation to reduce debt, but is subject to risks
Contribution of Various Factors to Debt Accumulation(Percent 2010 16)
6
8(Percent, 2010–16)
0
2
4
-4
-2
-62010 2011 2012 2013 2014 2015 2016
Stock-flow adjustment Interest-growth differentialCyclical component of primary deficit Cyclically adjusted primary deficitChange in debt-to-GDP ratio
Sources: National authorities; and IMF staff calculations.
Change in debt-to-GDP ratio
Middle East and North Africa, Tokyo, October 2012 13 MENAP Oil ImportersMENAP Oil ImportersMENAP Oil ImportersMENAP Oil Importers
Key Messagesy gOil Exporters
• Robust non oil GDP growth 2012 growth figure driven by Libyan• Robust non-oil GDP growth, 2012 growth figure driven by Libyan recovery
• Rising non-oil fiscal deficits and fiscal breakeven prices increasing fiscal g p gvulnerability
• Continue to promote diversification and private-sector employment
Oil Importers
• Downturn continues in 2012; weak recovery projected in 2013, yet not enough to tackle unemployment
• Depletion of policy buffers leading to urgency for fiscal consolidation; external financing can helpexternal financing can help
• Prompt action on macro-economic policies and reforms is needed to boost growth and job creation
Middle East and North Africa, Tokyo, October 2012 14