Middle East and Central Asia Regional Economic Outlook April 2011

Transcription

1 Mauritania Morocco Algeria Tunisia Libya Lebanon Egypt Sudan Syria Iraq Iran Afghanistan Jordan Kuwait Pakistan Saudi Arabia Bahrain United Arab Emirates Qatar Oman Yemen Djibouti

2 Overview

3 Global growth: A multi-speed world WEO Real GDP Growth Projections (Percent change from a year earlier) World Advanced Economies Emerging and developing economies Upside risks: Buoyant EM activity Strong corporate balance sheets 2-2 Downside risks: Sovereign/financial risks Oil supply concerns Source: IMF, World Economic Outlook.

4 Capital flows to emerging markets have slowed Emerging Bond Funds (Billions of U.S. dollars, weekly flows) QE2 (Nov. 3) Greece crisis Emerging Equity Funds (Billions of U.S. dollars, weekly flows) EMEA LatAm Asia excl. Japan Global Total QE2 (Nov. 3) Greece crisis Ireland crisis -6 Ireland crisis -1. Jan-1 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 3/23/211-8 Jan-1 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11

5 Oil prices driven by uncertainty in the short-run Crude Oil Prices Rise Sharply (Millions of barrels per day) OPEC supply Oil price (U.S. dollars per barrel, right scale) Post Libya Global Annual Growth of Oil Demand (Percent) U.S. Other Industrial Countries China Emerging and Developing Economies World GDP Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Total demand 28Q4 9Q2 9Q4 1Q2 1Q Sources: International Energy Agency; IMF, World Economic Outlook; national authorities; and IMF staff calculations.

6 Food and non-oil commodity prices also rising Commodity Price Developments in the World (Price indices; 27=1) Beverages Food Metals BUT: Commodity exporters to benefit Aluminum: Bahrain Copper: Mauritania Cotton: Egypt, Pakistan Food: Afghanistan, Egypt, Iran, Iraq, Morocco, Pakistan, Syria 75 5 Mar-7 Sep-7 Mar-8 Sep-8 Mar-9 Sep-9 Mar-1 Sep-1 Mar-11 Gold: Djibouti, Lebanon Iron ore: Bahrain, Lebanon, Mauritania Source: IMF, World Economic Outlook.

7 MENAP oil exporters: Opportunities for reforms External environment Increased uncertainty Higher oil revenue Political events Limited impact on output for most Large fiscal responses Iraq Iran Algeria Libya Saudi Arabia Bahrain Qatar Kuwait United Arab Emirates Oman Sudan Yemen

8 External balances improving with the oil price Current Account Balances (Billions of U.S. dollars) GCC Other oil exporters¹ Oil price, APSP, U.S. dollars (right scale) Sources: National authorities; and staff calculations and projections. 1 Excludes Libya in

9 Current Account Balance (billions of U.S. dollars) Oil price volatility brings uncertainty Current Account Surpluses under Alternative Oil Price Scenarios (Billions of U.S. dollars) $88/barrel¹ $17/barrel¹ $114/barrel¹ Algeria Bahrain Iran Iraq Kuwait Oman Qatar Saudi Arabia Sudan U.A.E. Yemen Sources: National authorities; and staff calculations. ¹Minimum, maximum oil prices between January 1, March 22, 211; and baseline forecast for 211.

10 Unprecedented responsiveness across the region Percent Change in Total Government Expenditures in U.S. dollars (From 21 to 211) GCC NON-GCC BHR ALG UAE IRN KWT SDN QAT OMN IRQ YMN SAU Sources: National authorities; and IMF staff estimates.

11 Fiscal balances improve, despite higher spending Overall and Non-oil Fiscal Balances 1 (Percent of GDP ) GCC overall fiscal balance GCC non-oil fiscal balance Other oil exporters overall fiscal balance Other oil exporters non-oil fiscal balance However, break-even prices also going up Crude oil price, APSP, US$ (right scale) Sources: National authorities; and IMF staff estimates. ¹Excludes Libya in 211

12 Fiscal balance Break-even prices going up 2 Break-Even Oil Prices in in (U.S. dollars per barrel) SDN YMN KWT ALG BHR SAU IRN OMN UAE IRQ 2 QAT WEO oil price: US$ Current account

13 Growth is progressing amidst uncertainty 1 Real GDP Growth (Annual percentage change) Oil GDP Non-oil GDP Sources: National authorities; and IMF staff estimates. 1 Excludes Libya in 211.

14 Non-oil growth holding up, with few exceptions 12 Real Non-oil GDP Growth (Annual percentage change) Bahrain Kuwait Oman Qatar Saudi Arabia United Arab Emirates Algeria Iran Iraq Sudan Yemen Sources: National authorities; and IMF staff estimates.

15 Keep an eye on inflation pressures Consumer price index; annual percentage change Algeria Iran Kuwait Oman Saudi Arabia United Arab Emirates Bahrain Iraq Libya Qatar Sudan Yemen Source: National authorities; and staff calculations and projections.

16 MENAP oil exporters: Opportunities for reforms External environment Increased uncertainty Higher oil revenue Political events Limited impact on output for most Large fiscal responses Iraq Iran Algeria Libya Saudi Arabia Bahrain Qatar Kuwait United Arab Emirates Oman Sudan Yemen Short-term challenge Inflation Medium-term challenges Diversification and employment Strengthen resource management Financial sector development

17 MENAP oil importers: Navigating change Before the protests Mostly growing at steady pace Persistently high unemployment Unrest and commodity price shocks Output disruptions in some countries Higher import costs Morocco Tunisia Lebanon Syria Jordan Afghanistan Pakistan Egypt Mauritania Djibouti Policy space is tight Pressure to spend on social protection Higher risk premia and rising inflation With change comes challenges, but also opportunities for more inclusive growth

18 Surge in commodity prices increases cost of imports 25 2 Impact of Higher Fuel and Food Costs (Percent of GDP) Impact of higher prices in 211¹ Total fuel and food imports, 21 Current account deficit, MRT JOR LBN MAR SYR TUN PAK EGY Sources: National Authorities; and IMF staff estimates. 1 Direct impact -- holding policies and quantities constant -- of price increases of 32 percent for fuel and 24 percent for food, as implied by WEO projection for 211 compared to 21.

19 Lebanon Spillovers from regional instability: Lower tourism and FDI, higher borrowing costs Tourism Receipts (Percent of GDP) Sovereign Spreads (Basis points) Lebanon Jordan 12.1 Morocco Egypt Syria 5.8 Tunisia 5.4 by 41 percent in Jan-Feb Morocco Egypt Bahrain Oman Jan/Feb: Tourist arrivals down 36 percent, tourist nights down 16 percent y/y Sources: IMF, World Economic Outlook; and World Travel and Tourism Council. 1 Tunisia Tunisia protests escalate Jul-1 Sep-1 Nov-1 Jan-11 Mar-11 Sources: Bloomberg; and Markit. عدد إبريل ٢٠١١ آفاق االقتصاد اإلقليمي

20 Higher government spending New Fiscal Costs (Percent of GDP) Additional fiscal measures Impact of higher fuel and food prices, holding all else constant Overall fiscal deficit, EGY JOR LBN MRT MAR PAK SYR TUN Sources: National authorities; and IMF staff calculations.

21 Net impact on growth mostly limited Real GDP Growth (Annual percentage change) AFG MRT DJI MAR JOR SYR PAK LBN TUN EGY Sources: National authorities; and IMF staff estimates.

22 Keep an eye on inflation pressures Consumer price index; annual percentage change Djibouti Egypt Jordan Lebanon Mauritania Morocco Syria Tunisia Source: National authorities; and IMF staff calculations and projections.

23 Short-term policy challenge: Ensuring social cohesion while maintaining macroeconomic stability Respond to domestic pressures Restore confidence Social Cohesion Macroeconomic Stability Create jobs Manage impact of higher food and fuel prices

24 Youth unemployment, percent Policy challenge: Unemployment 35 Unemployment Rates by Region 1,2 (28 3 ) Tunisia Morocco 3 Egypt MENA6 Jordan 25 Lebanon Syria 2 15 South-East Asia and the Pacific Latin America and the Caribbean Central and South- Eastern Europe (non- EU) and CIS South Asia 1 East Asia 5 Developed Economies and EU Sub-Saharan Africa Total unemployment rate, percent Sources: International Labor Organization; national authorities; IMF, World Economic Outlook; and IMF staff estimates. 1 MENA6 countries are Egypt, Jordan, Lebanon, Morocco, Syria, and Tunisia. 2 Total and youth unemployment rates for Morocco reflect data from Urban Labor Force Survey. 3 Or most recent earlier year for which data are available.

25 Creating jobs Creating Jobs Quick wins with long-run benefits Comprehensive job strategy Bring forward labor-intensive infrastructure projects Provide tax incentives/ credit guarantees to viable SMEs Scale up promising or introduce new well-designed training programs Foster high and inclusive growth Enhance skill formation Protect the worker and not the job

26 Heavy reliance on untargeted subsidies Price subsidies are poorly targeted Distribution of Subsidies Across Income Groups Cross country¹--fuel (21) Jordan--Fuel (25) and costly. MENAP Oil Importers: Subsidies and Deficits in 21 (Percent of GDP) Lebanon--Bread (28) Egypt--Baladi bread (28/9) 2 % 2% 4% 6% 8% 1% Subsidies General Government Bottom 4 percent Top 6 percent Deficit Sources: Jordan-The Distributional Effects of Eliminating Subsidies for Petroleum Products, R. Gillingham & M. El-Said, IMF (25), The Unequal Benefits of Fuel Subsidies: A Review of Evidence for Developing Countries, J. Del Granado, D. Coady & R. Gillingham, IMF (21), Egypt's Food Subsidies: Benefits Incidence and Leakages, September 21, World Bank. 1 Average across 21 countries.

27 Opportunity to develop a medium-term policy agenda for shared prosperity Stable macroeconomic environment Job creation Socially- Inclusive Growth Social protection for all Transparency, accountability, good governance Access to economic opportunities

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