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Arab Countries in Transition
Economic Outlook, Key Challenges, Fund Engagement
London School of Economics
June 28, 2013
The bottom line
The problems
Weak global
environment
Political and social
pressures
Economic
challenges at home
Need for policy package
Declining fiscal and
foreign exchange
buffers
Short-term
stabilization
Growth that is too
low to reduce
unemployment
Medium-term plan
for jobs and growth
Need for support from international community
2
Weak global environment
Recession in the Euro area....
(Real GDP growth, percent)
...and continuation of high commodity prices
(Index; 2005=100)
300
2012
2013
World
Euro Area
MENA
3.2
-0.6
4.8
3.3
-0.3
3.1
Food
Crude oil
250
200
150
100
2014
4.0
1.1
3.7
50
2005
Sources: IMF, World Economic Outlook (April 2013).
3
2007
2009
2011
2013
2014
Political and social pressures
Government stability is low...
...and uncertainties persist
12
EGY
JOR
LBY
MAR
TUN
YMN
2013
Jan-13
Jul-12
Nov-11 Oct-13
Feb-14
<9
months
4
years
<2
years
11
Elections
10
9
8
Higher risk
Horizon of
current
government
Egypt
Morocco
Planned
constitutional
reforms
7
6
5
2007
08
Jordan
Tunisia
09
Libya
Yemen
10
11
12
Source: The PRS Group, International.
4
✔
4
years
<9
months
<1
year
✔
✔
Economic challenges at home
...and low levels of confidence¹
Spillovers from Syria...
150
Turkey:
325K
Lebanon:
456K
(Index, cross-country averages; 2008:Q4=100)
Iraq:
142K
Syria
125
Bond and loan issuance
Net foreign direct investment
Tourist arrivals
100
75
Jordan:
448K
Egypt:
62K
Total outside Syria:
1.4 million
Internally Displaced:
about 4 million
50
25
0
Dec-08
Dec-09
Dec-10
Sources: Dealogic; Haver Analytics; UNHCR, Internal Displacement Monitoring Centre; and UNWTO, World Tourism Barometer.
¹Includes Egypt, Jordan, and Tunisia.
5
Dec-11
Dec-12
Declining fiscal and foreign exchange buffers
High and increasing fiscal deficit and debt...
...and low and declining foreign reserves
(2010 vs. April 2013, or latest available)
(Percent of GDP, 2010 vs. 2012)
12
50
Fiscal deficit
Billions of U.S. dollars
Egypt
9
6
Yemen
Morocco
3
0
Jordan
40
50
30
Morocco
20
Jordan
Tunisia
10
Yemen
Tunisia
30
Egypt
40
0
60
70
80
90
Total government debt
2
3
4
5
Months of imports
Sources: National authorities; and IMF staff calculations.
6
6
7
Growth that is too low to reduce unemployment
... but very high levels of (youth) unemployment
Modest GDP growth...
(Latest available date, percent)
6
35
Youth unemployment (percent)
ACTs (excl. Libya), in percent
5
4
3
2
1
0
2010
Jordan
30
25
2012
2013
2014
Central and SouthEastern Europe
(non-CIS) and CIS
20 South-East Asia
15
and
the Pacific
Egypt
ACTs
Developed economies and EU
Morocco
Latin America and the Caribbean
Yemen
Sub-Saharan Africa
World
10
East Asia
5
2011
Tunisia
Libya
4
6
8
10
12
14
Total unemployment rate (percent)
Sources: ILO, national authorities; and IMF staff calculations.
7
16
The policy packages: short-term stabilization...
Need for fiscal consolidation...
...means subsidy and safety net reforms
ACTs: Already agreed reforms*
Fiscal deficit
7
(Percent of GDP)
12
6
10
2012
1.6
2013
5
8
4
6
6.1
2
4
0.5
Net savings:
1.1% of GDP
5.0
1
2
0
(Impact on subsidy levels, percent of GDP, cross-country averages)
0
EGY
JOR¹
MAR
TUN
Before
reforms
YMN
Sources: National authorities; and IMF staff calculations.
¹Includes transfers to the electricity company.
*Excluding Libya.
8
Reform
effort
Compensatory
measures
After
reforms
...and medium-term plan for jobs and growth
Financial sector
soundness
1.1 million more
people unemployed
than in 2010
1.3 million new
entrants into job
market since 2010
Fiscal policy
Strengthen statistical base
Monetary policy
Business climate/
governance
Labor market/ education
Access to
finance
9
Better safety
nets
Socially inclusive
growth and jobs
Trade
integration
Need for support from international community
Four priorities...
... and IMF involvement
Trade access / FDI
Calling on MENA’s partners to improve trade
access and encourage FDI
Financial support*
(2013 gap ~ $42 billion)
3 programs in place; negotiations with Egypt
and Yemen
Policy advice
Policy advice and outreach across the region
Capacity building, including on public financial
management, banking supervision, statistics
Capacity building support
* Total official disbursements between January 2011 - February 2013 were $31 billion, of which 39% came from the GCC and 21% from IFIs.
10
The bottom line
The problems
Weak global
environment
Political and social
pressures
Economic
challenges at home
Need for policy package
Declining fiscal and
foreign exchange
buffers
Short-term
stabilization
Growth that is too
low to reduce
unemployment
Medium-term plan
for jobs and growth
Need for support from international community
11