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Regional Economic OutlookFall 2010

Afghanistan

Pakistan

IranIraq

Saudi Arabia

Yemen

Oman

United Arab EmiratesQatar

Bahrain

Kuwait

Sudan

LibyaAlgeria

Morocco

Mauritania

LebanonSyria

Jordan

Egypt

Tunisia

Djibouti

Global outlook: Two-speed recovery in motion

-6

-4

-2

0

2

4

6

8

10

12

Real GDP Growth(percent change from a year earlier)

2000 02 04

World

Emerging economies

Advanced economies

1006 08

Temporary slow-down2010:H2 — 2011:H1

3

A closer look at the two-speed recovery

2009 2010 2011-6

-4

-2

0

2

4

6World

United States

Europe

Emerging Markets excluding India and China

Real GDP Growth(percent change from a year earlier)

4

Prospects for World GDP Growth(percent change)

2007 8 9 10 11-4

-2

0

2

4

6

8

0.25 0.15 0.05 Central forecast

Downside risks remain, but global double-dip unlikely

Rebalancing is needed along two dimensions

Demand from external surplus economies

5

Demand from external deficit economies

Private demand

Publicdemand

6

Inflationary pressures are forecast to remain subdued

0

1

2

3

4

Advanced economies

Emerging economies excluding India

Core Inflation(Twelve-month change in the core CPI)

062002 04 Jul.10

08

For countries with a peg to the USD or euro, this means that higher inflation rates may lead to real appreciation.

7

2008Q1 08Q2 08Q3 08Q4 09Q1 09Q2 09Q3 09Q4 10Q1 10Q2-8

-6

-4

-2

0

2

4

6

8

0

1

2

3

4

5

6

7

8U.S.Other Industrial CountriesChinaEmerging and Developing EconomiesOPEC spare capacity (million barrels a day), right scale

10Q2

Oil Demand Growth(contributions to y-o-y growth in percent)

Oil demand is accelerating with the broadening of the global recovery but supply buffers are still substantial

Total demand

80

100

120

140

160

Soybeans

Rice

8

Major Food Crops, Nearest Futures Prices (index, Jul. 1, 2010 = 100)

Wheat

Corn

Temporary Wheat Supply Shock, Limited Spillovers

Jan-07 Nov-07 Sep-08 Jul-09 May-10-20000

-15000

-10000

-5000

0

5000

10000

15000

20000

25000

EMEA LatAm

Asia Global

Total

Lehman Collapse

Net Monthly Flows to Emerging Market Equity Funds

(billions of U.S. dollars)

Sep. 10

Jan-07 Nov-07 Sep-08 Jul-09 May-10-8000

-6000

-4000

-2000

0

2000

4000

6000

Lehman Collapse

Net Monthly Flows to Emerging Market Bond Funds

(billions of U.S. dollars)

9

Capital flows to emerging markets pick up

Sep. 10

MENAP Oil Exporters

IranIraq

Saudi Arabia

Yemen

Oman

United Arab EmiratesQatar

Bahrain

Kuwait

Sudan

LibyaAlgeria

Overview — Oil Exporters

Recovery

continues

•Oil production picks up, fiscal/external balances improve

•But private sector is lagging

•Fiscal space allowing continued stimulus in some countries

Risks/medium term challen

ges

•Keep eye on inflation

•Financial sector development and stability

•Reorienting spending, reducing reliance on oil revenues

Global demand recovers, boosts activity

2005 2006 2007 2008 2009 2010 2011-6

-4

-2

0

2

4

6

8

10

Oil GDP Non-oil GDPReal growth; percent

Sources: National authorities; and IMF staff estimates.

MENAP Oil Exporters

…and external balances rebound

Sources: National authorities; and IMF staff estimates.

2008 2009 2010 2011-15

-10

-5

0

5

10

15

20

25

30

GCC

Algeria, Iran, Iraq, Libya

Sudan, Yemen

Current account balances; percent of GDP and billions of US dollars

MENAP Oil Exporters

$257

$75$101 $124$107

$5$23 $31

-$6

-$10

-$7-$7

…as do fiscal balances

Sources: National authorities; and IMF staff estimates.

2008 2009 2010 2011-15

-10

-5

0

5

10

15

20

25

30

GCC

Algeria, Iran, Iraq, Libya

Sudan, Yemen

Fiscal balances; percent of GDP

MENAP Oil Exporters

Some countries continue to provide stimulus

Sources: National authorities; and IMF staff estimates.

YMN IRN IRQ LBY UAE SDN BHR KWT OMN ALG SAU QAT-10

-5

0

5

10

15

20

25

30

35

40

GCC

NON-GCC

MENAP Oil Exporters

Percent change in total government expenditures in U.S. dollars(From 2008 to 2011)

Many countries approaching break-even prices

Sources: National authorities; and IMF staff estimates.

20 30 40 50 60 70 80 90 100 110 1200

20

40

60

80

100

120

140

160

YMNSDN

LBY

IRQ

IRN

ALG

UAE

SAU

QAT

OMNKWT

BHR

Break-even Price for Current account

Brea

k-ev

en P

rice

for

Fisc

al b

alan

ce

Average oil price in 2010

MENAP Oil Exporters

Aug-09 Nov-09 Feb-10 May-10 Aug-10-10

-5

0

5

10

15

20

Other oil exporters¹QATIRNSAUSDNYMN

Consumer price index; annual percentage change

Keep an eye on inflation

Source: National authorities.1Algeria, Bahrain, Iraq, Kuwait, Libya, and Oman

MENAP Oil Exporters

Financial sectors after the crisis (December 2009)

Source: National authorities.1December 2008

0 5 10 15 20 250

5

10

15

20

25

YMN

SDN

LBY

ALG

IRN¹

UAE

SAUQAT

BHR

OMN

KWT

Nonperforming loans (Percent of total loans)

Capi

tal a

dequ

acy

ratio

(Per

cent

of r

isk-

wei

ghte

d as

sets

)

Financial sector strength

MENAP Oil Exporters

Policy priorities

MENAP Oil Exporters

Financial market

development

Managing international

financial linkages

Diversification

MENAP Oil Importers

Afghanistan

Pakistan

Morocco

Mauritania

LebanonSyria

Jordan

Egypt

Tunisia

Djibouti

Recovery •Growth

picking up

Policy

adjustmen

t

•Can start consolidating fiscal positions

•In most cases, inflation not an immediate concern

Medium term

challenges

•More than 18 million new jobs required by 2020

•Need to improve competitiveness and reorient trade

Overview — Oil Importers

Trade recovery is moving aheadAnnual percent change of U.S. dollar value, 3-month moving average

Sources: National authorities; IMF Direction of Trade Statistics; and Haver Analytics.¹ Egypt, Jordan, Lebanon, Morocco, Pakistan, and Tunisia.

Region’s exports are again growing steadily

-40

-20

0

20

40

60

Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10

European Union: imports

MENAP oil importers:¹ exports

Emerging and devel. economies: exports

MENAP Oil Importers

2005 2006 2007 2008 2009 2010 2011-4

-2

0

2

4

6

8

10

MENAP oil importers (excl. AFG, LBN, and PAK)

Emerging and developing economies

Advanced economies

Real GDP picking up across region

Source: National Authorities; and IMF staff estimates.

0

1

2

3

4

5

6

7

8

9

10

AFG

DJILBN

JOR

EGYMRT

MAR

PAK

SYR

TUN

China

India

EM Total

Annual percentage change

MENAP Oil Importers

2011

Progress in fiscal consolidation

-10 -8 -6 -4 -2 020

30

40

50

60

70

80

90

58.8

74.2

63.0

88.5

49.9

58.7

26.9

43.0

34.9

2010 2011

Fiscal balance (Percent of GDP)

Publ

ic d

ebt

(Per

cent

of G

DP)

Fiscal consolida-tion

Source: National Authorities; and IMF staff estimates and projections.

MENAP Oil Importers

Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10-4

0

4

8

12

16

20

24

28

Egypt

Pakistan

Other MENAP oil im-porters (excl. Mauritania and Syria)

Most can maintain current monetary stance

Sources: Haver Analytics; and national authorities.

0

1

2

3

4

5

6

5.1

4.4

3.23.4

0.6

4.2

Consumer Prices; annual percentage change

MENAP Oil Importers

Aug-10

Dominique Strauss-Kahn:

“We must not underestimate the daunting prospects we face: a lost generation, disconnected from the labor market, with a progressive loss of skills and motivation.”

More than 18 million jobs needed

MENAP Oil Importers

AFP/ABDELHAK SENNA/Getty Images. Reprinted with permission. (Unemployed workers wait for a job in the Bani Makada quarter of Tangiers, Morocco on March 20, 2004.)

High unemployment a long-standing issue

Sources: National authorities; IMF, World Economic Outlook; staff estimates; and International Labor Organization.Note: MENA6 refers to Egypt, Jordan, Lebanon, Morocco, Syria, and Tunisia. Youth unemployment estimate for MENA6 excludes Jordan. Data refers to 2008 or latest available year.

MENAP Oil Importers

MENA6

Central and South-Eastern Europe (non-EU) and CIS

Sub-Saharan Africa

Latin America

Developed EconomiesWorld

South-East Asia and the

Pacific

South Asia

East Asia

5

7

9

11

13

15

17

19

21

23

4 6 8 10

Yo

uth

un

emp

loym

ent

(Per

cen

t)

Total unemployment rate (Percent)

Growth and export gaps: getting bigger

Source: IMF, World Economic Outlook.

Goods exports(in percent of GDP)

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

5

10

15

20

25

30

35Emerging and developingeconomies

MENAP oil importers

MENAP Oil Importers

EM total

EGY

JOR

LBN

MRT

MARPAK

SYR

TUN

Emerging Asia

China

India

-2

0

2

4

6

8

10

-5 0 5 10 15

Volume of exports of goods and services per capita(average annual growth rate, 1990–2009)

Rea

l GD

P p

er c

apit

a(a

vera

ge a

nnua

l gro

wth

rat

e, 1

990–

2009

)

Competitiveness will need to improve

Source: World Economic Forum, Global Competitiveness Report, 2010–11.

MENAP Oil Importers

Competitiveness Rankings, 2010–11¹

¹Economies are ranked from 1 to 139, with first place being the best. MENAP oil importers is a simple average of Egypt, Jordan, Lebanon, Mauritania, Morocco, Pakistan, Syria, and Tunisia. Emerging Asia is simple average of China, Hong Kong SAR, India, Indonesia, Korea, Malaysia, the Philippines, Singapore, Taiwan Province of China, Thailand, and Vietnam.

0

25

50

75

100Market size

Inf rastructure

Macroeconomic stability

Health and primary

education

Higher education and

training

Goods market ef f iciency

Labor market ef f iciency

Financial market

sophistication

Innovation

Business sophistication

Technological readiness

Institutions

MENAP oil importers Emerging Asia

Best

0

2

4

6

8

10

Real GDP trends, annual percent change

901980 85 2000 10

Advancedeconomies

1595 05

Source: IMF, World Economic Outlook database.

Note: 1980-2015 real GDP growth data are de-trended as 10-year backward rolling averages.

Asia

Latin America

Broader Partnerships

MENAP Oil Importers

Policy priorities

Education Labor market

flexibility

Competitiveness

Reorient exports toward

new growth engines

Jobs and Growth

MENAP Oil Importers