Prospects and Challenges for the Global Economy and the MENA Region Ministry of Finance Cairo October 25, 2011 Andreas Bauer Division Chief, Middle East and Central Asia Department International Monetary Fund
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Prospects and Challenges for the Global Economy and the MENA Region
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1. Prospects and Challenges for the Global Economy and the MENA
Region Ministry of Finance Cairo October 25, 2011 Andreas Bauer
Division Chief, Middle East and Central Asia Department
International Monetary Fund
2. Key points: The global outlook has worsened, and downside
risks have increased For MENA oil importers, 2012 outlook is
difficult, with strains on macroeconomic stability For the MENA
region, reforms are needed now to support inclusive growth and job
creation in the medium term Middle East and Central Asia Department
2 Global outlook
3. Global outlook has weakened Revisions to GDP growth
(Percentage point change; June 2011 WEO to September 2011 WEO) 1.0
2011 2012 0.5 0.0 -0.5 -1.0 U.S. Euro area MENA Dev. Asia Latin
America Source: IMF, World Economic Outlook, September 2011. Middle
East and Central Asia Department 3 Global outlook
4. Equity markets have fallen, financial stability risks have
increased Equity markets Government bond spreads (Index; 2007=100;
national currency) (Two-year yield spreads over German bunds; basis
points) 140 450 Spain July 21, 2011 400 120 Italy 350 Belgium
France 100 300 250 80 200 60 150 DJ EURO STOXX 100 40 S&P 500
Asia 50 20 Latin America 0 May 10, 2010 0 -50 2006 08 10 Oct-11
Jan-10 Jul-10 Jan-11 Jul-11 Oct-11 Source: IMF, World Economic
Outlook, September 2011. Middle East and Central Asia Department 4
Global outlook
5. Capital flows to EM have turned negative Bond fund flows to
emerging markets Equity fund flows to emerging markets (Billions of
U.S. dollars, weekly flows) (Billions of U.S. dollars, weekly
flows) 2.0 EMEA 8 LatAm QE2 (Nov. 3) QE2 (Nov. 3) Asia excl. Japan
6 1.5 Global Total 4 1.0 2 0.5 0 -2 0.0 -4 -0.5 Greece crisis -6
Greece crisis Ireland crisis Ireland crisis -1.0 -8 Jan-10 May-10
Sep-10 Jan-11 May-11 Aug-11 Jan-10 Mar-10 Jun-10 Sep-10 Dec-10
Mar-11 May-11 Aug-11Source: EPFR Global. Middle East and Central
Asia Department 5 Global outlook
6. Commodity prices remain high Global commodity price
developments Oil price prospects (Price indices; 2007=100) (U.S.
dollars a barrel)200 Wheat180 Food160 Metals140120100 80 60 40 20 0
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11Source: IMF, World
Economic Outlook. Sources: Bloomberg; and IMF staff calculations.
Note: Derived from prices of futures options on October 17, 2011.
Middle East and Central Asia Department 6 Global outlook
7. Downside risks have increased Prospects for world GDP growth
(Annual percent change) 8 Downside risks: 7 Euro area crisis 90%
confidence interval (Sep 2011 WEO) 6 Advanced economy sovereign
risks Escalating global financial volatility 5 Oil supply concerns
(risk of higher oil 4 prices) 3 90% confidence interval 2 (Apr 2011
WEO) 1 0 -1 2008 2009 2010 2011 2012 Source: IMF, World Economic
Outlook. Middle East and Central Asia Department 7 Global
outlook
8. Key points: The global outlook has worsened, and downside
risks have increased For MENA oil importers, 2012 outlook is
difficult, with strains on macroeconomic stability For the MENA
region, reforms are needed now to support inclusive growth and job
creation in the medium term Middle East and Central Asia Department
8 MENA oil importers
9. MENA oil importers Middle East and Central Asia Department
9
10. Challenges ahead Advancing social cohesion with
macroeconomic stability Middle East and Central Asia Department 10
MENA oil importers
11. Uncertainty weighing on activity Real GDP Growth (Annual
percent change) 8 2011 2012 7 6 5 4 3 2 1 0 -1 -2 Sources: National
authorities; and IMF staff calculations. Middle East and Central
Asia Department 11 MENA oil importers
12. Growth forecasts have been revised downward Real GDP growth
(Annual percent change) 6 5 4 3 Oct 2010 REO 2 Apr 2011 REO Oct
2011 REO 1 0 2008 2009 2010 2011 2012 Sources: National
authorities; and IMF staff calculations. Middle East and Central
Asia Department 12 MENA oil importers
13. High fuel prices and declining tourism add to external
pressures Oil imports Tourism Arrivals (Percent of GDP, 201011)
(Dec 2010May 2011, percent change over same period of previous
year)20 2010 2011 Egypt -4216 Tunisia -4212 Syria -24 8 Lebanon -19
4 Jordan -12 0 Morocco 7 -50 -40 -30 -20 -10 0 10Sources: National
authorities; World Tourism Organization (UNWTO); and IMF staff
calculations. Middle East and Central Asia Department 13 MENA oil
importers
14. External financing constrained, more costly International
issuance of bonds, equity, and loans Credit default swap spreads
(Billions of U.S. dollars) (Basis points, Jan 1 - Oct 14, 2011)12
525 S&P downgrade of the U.S. Bonds 47510 Tunisia protests
Equity 425 Loans 8 375 325 6 275 4 225 175 2 125 Egypt Lebanon
Morocco MSCI EM 0 75 2010 2011-H1 Oct Jan Apr JulSources:
Bloomberg; Dealogic; and Markit. Middle East and Central Asia
Department 14 MENA oil importers
15. The 2012 fiscal outlook has worsened Overall fiscal deficit
(Percent of GDP) 8 Oct 2010 REO Apr 2011 REO 7 Oct 2011 REO 6 5 4
2008 2009 2010 2011 2012 Sources: National authorities; and IMF
staff calculations. Middle East and Central Asia Department 15 MENA
oil importers
16. Subsidies contributing to deteriorating fiscal positions
Government expenditures and fiscal balances (Percent of GDP, 2011
versus 2010) 6 Subsidies and transfers Fiscal balance 4 2 0 -2 -6%
-4 EGY JOR LBN MAR SYR TUN Sources: National authorities; and IMF
staff calculations. Middle East and Central Asia Department 16 MENA
oil importers
17. Energy subsidies mostly benefit the wealthy Share of
benefits from energy subsidies (Share of total) Egypt Jordan
Mauritania 7% 1% 34% 13% 3% 10% 12% 41% 16% 21% 17% 65% 20% 17% 23%
Bottom quintile 2nd quintile 3rd quintile 4th quintile 5th
quintileSources: National authorities; IMF staff calculations based
on information in the 2008 household survey for Jordan and
Mauritania, and World Bank PSIA(2005) for Egypt.For Jordan, the
distribution of gains accounts for both the direct and indirect
effect of price subsidies. The latter refers to the impact of
energy price subsidieson the price of other consumed goods and
services that use energy in their production and distribution.
Middle East and Central Asia Department 17 MENA oil importers
18. The fiscal space to respond to challenges is limited Fiscal
deficit (excluding grants) Total public debt (Percent of GDP, 2011)
(Percent of GDP, 2011) Jordan Lebanon Syria Egypt Egypt Jordan
Lebanon Morocco Morocco Tunisia Tunisia Syria 4 6 8 10 12 14 20 40
60 80 100 120 140Sources: National authorities; and IMF staff
calculations. Middle East and Central Asia Department 18 MENA oil
importers
19. Key points: The global outlook has worsened, and downside
risks have increased For MENA oil importers, 2012 outlook is
difficult, with strains on macroeconomic stability For the MENA
region, reforms are needed now to support inclusive growth and job
creation in the medium term Middle East and Central Asia Department
19 MENA region
20. Short-term policy challenges Middle East and Central Asia
Department 20 MENA region
21. Opportunity to develop a medium-term policy agenda for
shared prosperity Fiscal policy: Establish a medium-term
macroeconomic Socially Monetary policy: framework Inclusive
Vigilance to second-round effects Better target universal subsidies
Growth Expand policy toolkit in the medium term Unwind tax breaks
and expenditures Access to Access to Labor Markets Government
Financial Services Services Reform Streamline Narrow gap Improve
education Develop product and between laws Create a level corporate
systems to financial market labor market and their playing field
governance and enhance skill infrastructure regulations execution
disclosure formation Middle East and Central Asia Department 21
MENA region
22. For an online version of the presentation, please visit:
http://www.imf.org/external/np/exr/countryfacts/egy/index.htmMiddle
East and Central Asia Department 22