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Regional Economic Outlook
May 25, 2010
Outline
Global Outlook
MENAP
Overview
• Oil Exporters
• Oil Importers
Multi-speed recovery
Recovery
so far
Recovery ahead
• Proceeding at varying speeds
• Steep falls in activity not
followed by quick rebounds
• Subdued growth prospects for
many advanced economies
• Solid growth prospects for many
emerging economies
Global financial markets have recovered faster than expected
Global Stocks
(Morgan Stanley MSCI Stock Price Indices in U.S.
Dollars, MER Weighted; 2007 = 100)
Sovereign and Corporate Bond Spreads
(Basis points)
120
1,200
110
1,000
100
800
EMBI global
90
Advanced economies corporate¹
600
80
70
400
MSCI Global
200
60
0
50
40
Jan-07
Jan-08
Jan-09
Jan-10
-200
Jan-07
1 Averages
Jan-08
Jan-09
of BB-B US, BB-B Euro, and BBB Japan corporate bond spreads.
Jan-10
Capital flows have returned to emerging markets after sudden stop
Emerging Market External Bond and Equity Issuance
(Billions of U.S. dollars)
140
Middle East / Africa
Developing Europe
120
Latin America
Emerging Asia
100
80
60
40
20
0
6
2006-Q3
7
2007-Q3
8
2008-Q3
9
2009-Q3
10
Bank credit remains hard to come by in many countries
Private Credit Growth
(Annualized percent change of 3mma over previous 3mma)
50
50
United States
40
40
Euro Area
United Kingdom
30
30
20
20
10
10
0
0
-10
-10
-20
2002M1
2004M1
2006M1
Latin America
Emerging Asia
Eastern Europe
2008M1
2010M1
-20
2002M1
2004M1
Banks need to rebuild capital
Source: Bank of England, European Central Bank, and the Federal Reserve Board.
2006M1
2008M1
2010M1
World economy set for a further recovery at varying speeds
Real GDP Growth
(Percentage growth from previous year)
12
World
Advanced
Emerging
10
8
 Fading fiscal
stimulus
 Less inventory
restocking
6
4
will hold back growth
later in 2010 and 2011
2
0
-2
-4
-6
Mar-00
Mar-02
Mar-04
Mar-06
Mar-08
Mar-10
Global financial crisis is leaving lasting scars on output levels
Global GDP
(Index, 2006=100)
150
140
130
120
110
100
90
2006
April 2007 WEO
2007
2008
2009
2010
2011
Current WEO
2012
2013
2014
2015
Global Policy Challenges
 Devise credible exit strategies—medium-term fiscal consolidation plans
urgently needed
 Repair and reform financial systems
 Combat unemployment
 Manage capital flows
MENAP
Oil
Exporters:
Oil Exporters
Key Messages
Tunisia
Lebanon
West Bank & Gaza
Morocco
Syria
Afghanistan
Iran
Iraq
Jordan
Pakistan
Kuwait
Algeria
Libya
Egypt
Saudi Arabia
Bahrain
Qatar
United
Arab
Emirates
Oman
Mauritania
Yemen
Sudan
Djibouti
Oil Exporters: Key Messages
Recovery is underway, driven by rising oil demand and continued supportive
policies
Continue stimulus where there is fiscal room, to boost non-oil sector
activity
Barring signs of overheating, accommodative monetary policy is appropriate
to mitigate the current credit bust
Capital flows are recovering, but greater differentiation of sovereign risk can
be expected, following Dubai World and Greece events
Rising oil prices have spurred recovery in exports and local stock markets
Merchandise Trade and Crude Oil Prices
Stock Markets
(Billions of U.S. dollars unless otherwise indicated)
(Indices: August 2008 = 100)
110
160
140
Exports
100
140
Imports
90
KWT
QTR
SAU
DUB
ABU
IRN
Crude oil; Dated Brent, WTI, and
Dubai Fateh ($/barrel, right scale)
80
120
BHR
120
100
100
80
70
80
60
60
50
40
40
20
60
40
20
Dubai World
30
Dec-07
Jun-08
Dec-08
Jun-09
0
Dec-09
0
Aug-08
Nov-08
Feb-09
May-09
Aug-09
Nov-09
Greece
Feb-10
May-10
Source: IMF, Direction of Trade Statistics; IMF, International Financial Statistics.
Source: Bloomberg.
Exports are recovering from early 2009 lows
Stock markets have risen, even after Dubai
World event
Overall fiscal balances will also improve, even with continued stimulus
Government Fiscal Balance
Government Expenditure
(Percent of GDP)
(Percent of GDP)
30
40
GCC
25
GCC
Non-GCC
Non-GCC
MENAP Oil Exporters
MENAP Oil Exporters
20
30
15
20
10
5
10
0
0
-5
2008
2009
…as oil-related revenues rise
Sources: National authorities; and IMF staff estimates.
2010
2008
2009
2010
GCC Fiscal Balances
Government Fiscal Balance
Government Non-oil Fiscal Balance
(Percent of GDP)
(Percent of non-oil GDP)
10
50
40
Bahrain
Kuwait
Oman
Qatar
Saudi Arabia
U.A.E.
0
Bahrain
Qatar
Kuwait
Saudi Arabia
Oman
U.A.E.
-10
-20
30
-30
20
-40
-50
10
-60
0
-70
-80
-10
2007
2008
2009
2010
Source: National authorities; and Fund staff estimates and calculations.
2011
2007
2008
2009
2010
Source: National authorities; and Fund staff estimates and calculations.
2011
Looking to 2010, recovery will continue
Real GDP Growth
Non-oil GDP Growth
(Percent)
(Percent)
12
8
QAT
6
10
4
8
2
LBY
0
SDN
6
Oil GDP
IRQ
Non-oil GDP
4
-4
YMN
OMN
BHR
MENAP OE
SAU
IRN
KWT
-6
2006
2007
Non-oil sector will
continue to be buoyed
by accommodative
macro policy
DZA
-2
2005
External environment is
projected to be
favorable to the oil
sector
2008
2009
2010
2
2011
Source: National Authorities; and IMF staff estimates.
UAE
0
Overall future growth
rates to remain lower
than precrisis, but more
sustainable
GCC Growth
Real GDP Growth
Non-oil Real GDP Growth
(Annual change, percent)
(Annual change, percent)
20
20
Bahrain
Qatar
Kuwait
Saudi Arabia
Oman
U.A.E.
15
15
10
10
5
5
0
0
-5
Bahrain
Kuwait
Oman
Qatar
Saudi Arabia
U.A.E.
-5
2007
2008
2009
2010
Source: National authorities; and Fund staff estimates and calculations.
2011
2007
2008
2009
2010
Source: National authorities; and Fund staff estimates and calculations.
2011
External balances are projected to improve
Current Account Balances
(Billions of U.S. dollars unless otherwise indicated)
400
361.6
350
300
104
GCC
Non-GCC
Oil Exporters
Crude oil, average (right scale, $/bbl)
91
78
260.0
250
65
200
52
140.3
132.8
150
39
101.6
100
26
57.0
50
53.1
0
7.5
13
0
-3.9
-50
-13
2008
2009
…as oil prices and crude oil production rise in 2010
Sources: National authorities; and IMF staff estimates.
2010
GCC External Balances
60
50
Current Account Balance
Gross International Reserves
(Percent of GDP)
(Billions of U.S. Dollars)
Bahrain
Oman
Saudi Arabia
120
Kuwait
Qatar
U.A.E.
100
Bahrain
Kuwait
Oman
Qatar
Saudi Arabia
U.A.E.
305
442
409
422
2007
2008
2009
2010
451
40
80
30
60
20
40
10
20
0
-10
2007
0
2008
2009
2010
Source: National authorities; and Fund staff estimates and calculations.
2011
Source: National authorities; and Fund staff estimates and calculations.
2011
Oil price uncertainty going forward
WTI Oil Price Prospects1
(U.S. dollars per barrel)
200
95% confidence interval
180
86% confidence interval
68% confidence interval
160
Futures
140
120
100
80
60
40
20
Jan-07
Aug-07
Mar-08
Oct-08
Sources: Bloomberg; and IMF staff calculations.
1Derived from prices of futures options on May 17, 2010.
May-09
Dec-09
Jul-10
Feb-11
Sep-11
Apr-12
0
Nov-12
Clouding the horizon: sluggish post-crisis credit growth
Credit and Deposit Growth1
Inflation
(PPP GDP weighted year-on-year growth rates, percent)
(Consumer price index, year-on-year growth, percent)
36
30
Credit to private sector
32
25
BHR
OMN
IRN
SAU
IRQ
SDN
KWT
UAE
LBY
YMN
Deposits
28
20
24
15
20
10
16
5
12
0
8
-5
4
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
-10
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Sources: National Authorities; and IMF, International Financial Statistics.
1Excludes Iran, Iraq, and Libya due to data limitations.
Sources: National authorities.
Credit growth has slowed appreciably
…and inflation generally not a concern
Jan-10
Slow credit growth is likely to persist
Real credit surrounding credit booms
(Percent change)
60%
Real credit growth (Year-on-year)
Historical median
50%
Saudi Arabia 2008 boom
40%
United Arab Emirates 2008 boom
30%
20%
10%
0%
-10%
-4
-2
0
2
4
6
8
10
12
Quarters
Historical patterns show protracted period of sluggishness following booms
Sources: IMF, International Financial Statistics; and staff calculations.
Note: Unweighted average of real credit growth around boom years identified between 1983 and 2008. Credit was deflated by the CPI index. Boom year in shaded area.
14
16
Capital inflows: boom, bust, and partial recovery
Capital Flows
International Issuance
(Percent of GDP)
(Billions of U.S. dollars)
40
30
200
Emerging markets total
(right scale)
MENAP Oil Exportrers
Equity
Inward FDI
Syndicated Loans
30
20
2008
10
2009
Change in portfolio and
other investment
liabilities
150
External Bonds
20
100
10
50
-10
MENAP oil exporters
2009
2008
2007
2006
2005
2004
2003
2007
2006
2005
2004
2003
0
Emerging and developing
economies
0
0
2003
04
05
06
07
08
09
Dubai World event led to
disruption in bond issuance
Sources: IMF, World Economic Outlook.
Large increase in inflows to the Gulf up to
2007, followed by reversal of mainly nonFDI flows…
…while international issuance has begun
to recover, concentrated in bonds and in
the Gulf
MENAP
Oil
Importers:
Oil Importers
Key Messages
Tunisia
Lebanon
West Bank & Gaza
Morocco
Syria
Afghanistan
Iran
Iraq
Jordan
Pakistan
Kuwait
Algeria
Libya
Egypt
Saudi Arabia
Bahrain
Qatar
United
Arab
Emirates
Oman
Mauritania
Yemen
Sudan
Djibouti
Oil Importers: Key Messages
The region is slowly
recovering from last
year’s slowdown
Obstacles to growth
ahead and room for
stimulus is narrowing
Policy focus will need to
shift to medium-term
structural agenda

Trade is rising along with the global rebound

Investment and bank credit are still subdued

Persistent weakness in EU demand and competition
from other emerging markets

Governments facing high debt will need to cut back
on fiscal expansion

High inflation in some countries

Raising growth and creating employment is again at
center stage

Developing capital markets can help revive credit and
investment

Structural reforms key to improving competitiveness
International trade is mending…
Merchandise Trade in U.S. dollars1
External Receipts
(Annual percent change of 3-month moving average)
(Billions of U.S. dollars)
100
Exports
120
80
Imports
100
2008
60
2009
2010 proj.
80
40
60
20
40
0
20
-20
-40
Dec-07
0
Jun-08
Dec-08
Jun-09
Dec-09
Export of goods
Tourist receipts¹
Remittances²
FDI
Sources: National authorities; and Haver Analytics.
¹ Egypt, Jordan, Lebanon, Morocco, Pakistan, and Tunisia.
Sources: IMF, World Economic Outlook; National authorities; and IMF staff estimates.
¹ Excludes Afghanistan, Mauritania, and Pakistan.
2Excludes Afghanistan and Djibouti.
Trade is recovering after the sharp fall
during the global crisis
But expansion will be slow, with exports
and FDI still well below 2008 levels
…and financial markets have rebounded
Stock Market Indices
Sovereign Bond Spreads
(January 1, 2007 = 100)
(Basis Points)
240
1,000
2,500
Ranges since January 1, 2007
200
Latest (16-May-10)
800
160
EGY
LBN
MAR
TUN
EMBIG
PAK (right scale)
2,000
600
1,500
400
1,000
200
500
120
80
40
0
EGY
JOR
LBN
MAR
PAK
TUN
MSCI¹
0
Jan-09
0
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Source: Bloomberg.
1Morgan Stanley Capital International Index, emerging markets.
Source: Bloomberg.
Stocks are up, but - aside from Tunisia still well below earlier highs
Bond spreads have narrowed over the
past year; little impact so far from Greece
But credit and capital inflows still sluggish
Bank Credit to the Private Sector
International Issuance
(Year-on-year growth, in percent)
(Billions of U.S. dollars)
35
12
Jun-08
200
Emerging markets total
(right scale)
MENAP Oil Importers
Feb-10
30
Equity
9
25
Syndicated Loans
150
External Bonds
20
15
6
100
3
50
10
5
0
0
-5
DJI
EGY
JOR
LBN
MAR
PAK
TUN
0
2003
04
05
06
07
08
09
Source: National Authorities and IMF staff calculations.
Source: Dealogic.
Credit growth has fallen sharply in
several countries
Capital inflows to the region have been
slow to come back and equity still lagging
Growth picking up, but falling short of other EMs
10
12
Real GDP Growth
(Percent)
10
10
China
Developing Asia
8
8
8
6
6
India
AFG
EM Total
LEB
EM Total
6
4
4
2
0
-2
2
4
MENAP Oil importers
EGY
MRT
JOR
SYR
DJI
TUN
MAR
Sub-Saharan
Africa
PAK
MENAP Oil Importers
Western Hemisphere
Emerging and developing economies
0
Advanced economies
Central & East. Europe
-4
2005
2006
2007
2008
2009
2010
Region is rebounding, but less so than comparators
Source: National Authorities; and IMF staff estimates.
2011
-2
2
Trade linkages to Europe highest in the Maghreb
Europe share of total merchandise exports, 2009
(Percent)
LBY
TUN
MAR
DZA
AZE
ARM
KAZ
GEO
EGY
MRT
SYR
TKM
IRQ
PAK
IRN
TJK
LBN
QAT
DJI
SAU
UZB
KWT
AFG
UAE
JOR
KGZ
OMN
BHR
SDN
YMN
0
10
20
30
Sources: Direction of Trade Statistics, IMF
40
50
60
70
80
Limited room for further policy stimulus
Prices
Fiscal Deficit and Public Debt, 2010
(Annual percent change)
(Percent of GDP)
15
15
50
PAK
EGY
Global Commodity Price Index (right scale)
160
MENAP Oil Importers CPI
10
13
12
20
TUN
5
10
10
JOR
0
LEB
DJI
9
-10
0
8
MAR
-20
7
-30
-5
6
-40
5
-50
2009M1
2009M5
Sources: National Authorities.
-10
140
30
Regional Average
11
Lebanon
40
AFG
2009M9
2010M1
End-2010
Inflation pressures mount in several countries,
limiting room for monetary policy
Public debt (Percent of GDP)
14
120
100
Mauritania
80
Egypt
60
Pakistan
Tunisia
40
Jordan
Morocco
EM Average
Syria
20
0
0
2
4
6
8
10
12
Fiscal deficit (Percent of GDP)
Sources: National Authorities; and IMF staff estimates.
High public debt levels constrain fiscal policy
options
14
Competitive challenges are again at the fore
Exports Per Capita
Competitiveness Indicators
(Percent of world average)
(Latest rankings)
40
0
More competitive
MENAP oil importers
35
Ease of Doing Business
(Ranking among 183 countries)
40
Emerging and developing economies
30
25
20
15
10
1990
1995
2000
2005
2010
TUN
PAK
80
EGY
JOR
120
SYR
MAR
MENAP Oil
Importers average
160
Emerging and
developing
economy average
MRT
200
140
120
100
80
60
40
20
Global Competitiveness Index
(Ranking among 134 countries)
Source: IMF, World Economic Outlook.
Note: Excludes oil exports.
Sources: World Bank; and World Economic Forum.
Exports continue to underperform
Business environment mostly lagging
0
Unemployment looms large
Unemployment and Growth1
(Percent)
High unemployment
16
8
14
7
12
6
10
5
8
4
6

Large structural component

Government jobs not the solution
3
Spillovers from a tepid
recovery in Europe
2

Weakened prospects for exports
and remittances

Impact on development aid?
Unemployment rate
4
Real GDP growth (right scale)
2
1
0
0
1990
1993
1996
1999
Sources: National Authorities; and IMF staff estimates.
1Egypt, Jordan, Morocco, and Tunisia.
2002
2005
2008
Policy Priorities
Oil Exporters
Oil Importers
Maintain fiscal and monetary
stimulus as conditions permit
Structural reforms to improve
competitiveness

Fiscal stimulus: until private-sector
activity regains momentum

Growth and job creation will have to
come from the private sector

Monetary support/regulatory policy:
balance goal of supporting credit
growth with that of financial stability

Focus on enhancing business
environment, labor market flexibility,
and education systems

Ensure smooth process of cleanup of
bank balance sheets: upfront
recognition of losses and bank
recapitalization if needed

Gear fiscal and monetary policy to
creating supportive conditions:
strengthening revenue, scaling back
subsidies, and addressing NPLs
Develop local capital markets to provide alternatives to bank credit
Please visit the IMF’s website
Full report:
http://www.imf.org/external/pubs/
ft/reo/2010/MCD/eng/mreo0510.htm
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