Middle East and North Africa
Regional Economic Outlook
October 2015
Roadmap
Global Environment
Regional Themes
MENAP Oil Exporters and Importers
3
Near-term Global Outlook Is for Moderate and Uneven
Growth
World U.S.Euro
Area
Emerging
marketsChina
2014 3.4 2.4 0.9 4.6 7.3
2015 3.1 2.6 1.5 4.0 6.8
2016 3.6 2.8 1.6 4.5 6.3
Global Risks Are Tilted to the Downside, Rising in
Emerging Markets
4
Roadmap
Global Environment
Regional Themes
MENAP Oil Exporters and Importers
5
Oil and Conflicts Are the Key Factors Shaping the
Economic Outlook for MENAP
ConflictsOil
6
7
The Slump in Oil Prices Is Expected To Persist
0
20
40
60
80
100
120
140
160
2014 2015 2016 2017 2018 2019
95% confidence interval 86% confidence interval
68% confidence interval Brent spot price
Brent futures
Brent Crude Oil Price 1
(U.S. dollars per barrel)
Sources: Bloomberg; and IMF staff calculations.1 As of August 20, 2015.2 Average of WTI, Brent, and the Dubai Fateh prices.
WEO Baseline Average Oil Price2
2015: $51.6
2016: $50.4
8
Conflicts Are Spreading and Deepening, Putting a Heavy
Toll on the Region and Spilling Across Borders
16 million
refugees and
internally
displaced
Afgha-
nistan 3.4
Iraq 2.4
Libya 0.1
Syria 9.6
Yemen 0.3
Refugees account for 25 percent of population in
Lebanon and 20 percent in Jordan
9
Conflicts Have Caused Collapse in Economic Activity
and Mounting Fiscal Pressures in Iraq, Libya, Yemen
-2.1
-24.0
-0.2
0.0
-6.1
-28.1
7.1
2.0
11.6
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
Iraq Libya Yemen
2014 2015 2016
Economic Growth in Conflict Countries
(Percent of GDP)
-5.8 -4.0-6.9
-23.1
-79.1
-8.5
-17.7
-63.4
-9.2
-90
-80
-70
-60
-50
-40
-30
-20
-10
0
Iraq Libya Yemen
2013 2015 2016
Fiscal Balance
(Percent of GDP)
10
Conflict Countries and Iran Developments Drive Changes
in Oil Exporters’ Growth
Oil Exporters
(Percent)
2.6
1.8
3.8
-1
0
1
2
3
4
5
2014 2015 2016
GCC and Algeria Iran Conflict countries MENAP oil exporters
Roadmap
Global Environment
Regional Themes
MENAP Oil Exporters and Importers
11
12
Growth Slowdown Will be Gradual Because of Buffers
GCC growth to slow from 6 percent in 2000-07
to 3 percent in 2015-20
0
1
2
3
4
5
2014 2015 2016
Oman Qatar
Saudi Arabia UAE
0
1
2
3
4
5
2014 2015 2016
Algeria Bahrain Kuwait
Real GDP Growth(Percent)
13
Low Oil Prices Lead to Persistent Fiscal Pressures for Oil
Exporters
10.6
-1.5 -2.2
-13.2 -13.9
-2.9
-7.9
-4.1
-0.5
-20
-15
-10
-5
0
5
10
15
GCC Algeria Iran
2013 2015 2020
Fiscal Balance(Percent of GDP) Fiscal deficits around 13 percent of GDP in
MENAP oil exporters in 2015
14
Dwindling Fiscal Space Underscores Need for Fiscal
Action
Most MENAP oil exporters will exhaust their
financial buffers in less than 5 years.
Financing needs to reach $1 trillion over 5 years.
0
20
40
60
80
100
120
QAT KWT UAE IRQ IRN OMN ALG SAU BHR
Breakeven Oil Prices, 2015 (U.S. dollars per barrel)
WEO Oil Price
Baseline
2015-2016
15
Some Countries Have Started To Tighten the Public
Purse, But Credible Medium-Term Consolidation Needed
-10
-5
0
5
10
15
20
25
30
ALG BHR IRN KWT OMN QAT SAU UAE
2014-2015
2014-2020
Change in Non-Oil Primary Balances(Percentage points of non-oil GDP)
16
How to Create Jobs while Controlling Public Spending
Labor force will grow by 10 million in MENAP oil exporters by 2020,
of which almost 3 million will be unemployed on current trends.
0.0
0.5
1.0
1.5
2.0
2.5
2015 2016 2017 2018 2019 2020
Gap (add to unemployed) Private sector jobs Public sector jobs
Employment Outlook in the GCC
(Millions of new labor market entrants, cumulative)
2 million new entrants
into labor force between
2014 and 2020, of which
570,000 unemployed
Sources: National authorities; and IMF staff calculations.1 Note: Data for U.A.E. not included. Public sector jobs are projected based on wage bill forecasts. Private sector jobs
are projected by using historical employment-non-oil growth elasticities and non-oil growth forecasts (see Behar, 2015).
17
Private Enterprises Need To Take Over As Engine of
Growth, Driving Diversification
0
20
40
60
80
100
Oil & Oil-RelatedExports/
Total Exports
Oil Revenues/Total
GovernmentRevenues
Public Spending/Non-Oil GDP
Oil/GDP
GCC Non-GCC
Diversification
(Higher is less diverse)
Sources: WTO; UN Comtrade; national authorities; and IMF staff calculations.
*Calculated using three-year averages ending in the specified year, or latest three year period for which data are available.
18
Iran’s Economic Prospects To Improve With Sanctions
Relief…. but by How Much?
-8
-4
0
4
8
Iran: Real GDP Growth(Percent)
• Oil exports are projected to rise by 1.2 mbd by 2020.
• Iran’s cumulative imports over the next 5 years will be $525 billion (22
percent of GDP)
Conditions for Raising
Potential Growth
Macroeconomic stability
Financial sector reforms
Improved business
environment
19
MENAP Oil Exporters
GCC and Algeria • Good policy to use buffers to smooth growth impact of oil price
decline
• But deeper and more sustained fiscal adjustment will be needed in
most cases
• The need for a diversified private sector has become more urgent
Countries in Conflict (Iraq, Libya, Yemen)• Stabilization is a pre-requisite; growth outlook depends on oil
production and conflicts
Iran• Sanctions Relief will boost the economy but growth dividend would
be much larger if accompanied by structural reforms.
•Substantial regional and global economic spillovers through oil
markets, trade, and investment.
Roadmap
Global Environment
Regional Themes
MENAP Oil Exporters and Importers
20
21
Recovery Is Gaining Momentum But Some Countries
Still Lagging
AFG
DJI
EGY
JOR
LBN
MRT
MARPAKSDN
TUN
0
2
4
6
8
10
0 1 2 3 4 5 6 7 8 9 10
2015
-16 A
vera
ge
2010-13 Average
Real GDP Growth(Percent)
22
Three Countries Have a Large Impact on Overall Growth
Oil Importers
(Percent)
2.9
3.94.1
-1
0
1
2
3
4
5
2014 2015 2016
Others Egypt Morocco Pakistan MENAP oil importers
23
Recovery Driven by Improved External Environment
and…
MENAP Oil Importers:
External Gains from Lower Oil Prices(Percent of GDP, 2015–16 average)
-1
0
1
2
3
2013 2014 2015 2016
Euro area
Advanced Economies excluding Euro Area
Advanced Economies:
Real GDP Growth(Percent)
-1
0
1
2
3
4
5
6
24
…Subsidy Reforms Combined with Lower Oil Prices
Creating Space for Growth-Enhancing Spending
Change in Budget Expenditure Components (Percent of GDP)
Capital
Subsidies
Subsidies
-2
-1
0
1
2
3
Change 2010-13 Change 2013-16
Wages Subsidies and transfers Capital expenditures Other expenditures
Arab Oil Importers
25
Competitiveness Is Deteriorating As Currencies Follow
the Appreciating U.S. Dollar
90
95
100
105
110
115
120
125
Jan-12 Jan-13 Jan-14 Jan-15
Egypt Jordan Lebanon
Morocco Pakistan Tunisia
REER Index, Jan 2012 = 100
26
Vulnerabilities Remain Significant Despite Lower Oil
Prices, Requiring Well-Balanced Policy Choices
Public Debt(Percent of GDP)
Remittances, 2014(Percent of GDP)
0
20
40
60
80
100
120
140
1602010 2015
0
5
10
15
20
Egypt Jordan Lebanon Pakistan
Total From the GCC
27
Leap in Growth Is Needed To Raise Living Standards
and Employment
Striving for Higher Growth(PPP Income per Capita, in Constant 2012 U.S. Dollars)
0
10,000
20,000
30,000
40,000
2015 2035
28
Structural Reforms Would Help Improve Business
Climate and Functioning of Labor Market
## Lowest 20th Percentile ## 60th-80th Percentile
## 20th-40th Percentile ## Top 20th Percentile
## 40th-60th Percentile
Business Environment Labor Market
Co
rrup
tio
n
Bure
aucr
acy
Infr
a-
stru
cture
Reg
ula
tio
ns
Leg
al
Lab
or
Ed
uca
tio
n
Fin
ance
Tra
de
MENAP Oil Importers 29% 23% 30% 40% 44% 11% 37% 38% 29%
Egypt 16% 23% 30% 26% 38% 3% 14% 37% 11%
Jordan 59% 23% 51% 56% 59% 35% 66% 48% 34%
Lebanon 5% 23% 16% 50% 20% 15% 54% 38% 56%
Mauritania . . 15% 26% 17% 2% 7% 13% 11%
Morocco 42% 23% 62% 47% 51% 23% 37% 46% 50%
Pakistan 16% 23% 17% 25% 44% 9% 29% 42% 29%
Tunisia 42% 23% 45% 40% 48% 11% 46% 38% 9%
Sub-Saharan Africa16% 19% 14% 35% 36% 50% 28% 28% 32%
Latin America 16% 23% 43% 52% 38% 26% 49% 50% 38%
Emerging Europe42% 23% 50% 66% 47% 44% 54% 51% 58%
Developing Asia 42% 23% 37% 39% 47% 55% 43% 49% 42%
Advanced Economies83% 84% 87% 89% 78% 84% 82% 64% 84%
MENAP Oil Importers
29
• Growth rising with confidence and better external
environment but some countries lagging
• Large downside risks and vulnerabilities remain high
• Need for further fiscal consolidation, including more subsidy
reforms
• Channel budget savings into growth-enhancing spending and
raise exchange rate flexibility to support recovery
• Structural reforms needed for higher and more inclusive
medium-term growth
MENAP: Stable Growth in 2015, Improved Outlook for
2016
Real GDP Growth(Percent)
MENAP
MENAP Oil ExportersMENAP Oil
ImportersGCC Non-GCC
2014 2.7 3.4 1.7 2.9
2015 2.5 3.3 0.1 3.9
2016 3.9 2.8 4.9 4.1
30