12 Nov 2012

MIDDLE EAST / ECONOMIC OUTLOOK

Posted at: November 12, 2012 11:04 am

Duration: 02:36

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STORY: MIDDLE EAST / ECONOMIC OUTLOOK
TRT: 2.36
SOURCE: IMF
RESTRICTIONS: NONE
LANGUAGE: ENGLISH / NATS

DATELINE: RECENT, WASHINGTON, DC

SHOTLIST:

WASHINGTON, DC – RECENT

1. Wide shot, exterior IMF headquarters
2. SOUNDBITE (English) Masood Ahmed, Director, Middle East and Central Asia Department, International Monetary Fund (IMF):
"For the oil exporting countries this is a bit of a sweet spot; they're growing at about six and a half percent this year, their trade surpluses are increasing to about $400 billion this year. As a result of that they are able to generate economic activity in their own economies and help their neighbours."

FILE – RECENT, CAIRO, EGYPT

3. Various shots, Tahir Square

WASHINGTON, DC – RECENT

4. SOUNDBITE (English) Masood Ahmed, Director, Middle East and Central Asia Department, International Monetary Fund (IMF):
"The oil importing countries, however, particularly those that have been going through a historic political and social transition are going through a more sombre economic time.  They are facing the twin shocks, first from the rest of the world including Europe where a slow growth environment is constraining their prospects for exporting, remittances, tourism; and the unfinished political transitions in their own societies have caused uncertainty in terms of economic activity and investment.  Net result: only about two percent growth for them this year, unemployment continuing to rise."

FILE – RECENT, CAIRO, EGYPT

5. Various shots, students coming out of a university

WASHINGTON, DC – RECENT

6. SOUNDBITE (English) Masood Ahmed, Director, Middle East and Central Asia Department, International Monetary Fund (IMF):
"The immediate priority for the Arab countries in transition is how to balance the expectations of an impatient population that wants a transition dividend with the growing financial and economic constraints that have come from having used up their external reserves, facing a difficult international environment, ensuring macroeconomic stability over the next 18 months is a big challenge."

FILE – RECENT, CAIRO, EGYPT

7. Wide shot, street scene

WASHINGTON, DC – RECENT

8. SOUNDBITE (English) Masood Ahmed, Director, Middle East and Central Asia Department, International Monetary Fund (IMF):
"Beyond that, however, these countries also need to lay the foundations for a new economic model which is going to be much more inclusive and job creating growth where everybody has a fair chance at participating in the gains from growth and where there are safety nets that protect the poor without wasteful subsidies on energy that are consumed mainly by the rich."
9. Wide shot, exterior IMF headquarters

STORYLINE:

The economic outlook for the Middle East and North Africa region is mixed. Most of the region's oil-exporting countries are growing at healthy rates while the oil importers face subdued economic prospects, the International Monetary Fund (IMF) says in its latest assessment.
 
The IMF's Regional Economic Outlook for the Middle East and Central Asia projects growth in the Middle East and North Africa region at 5.1 percent in 2012, up from 3.3 percent in 2011.

Owing to higher oil prices and production, the region's oil-exporting countries—Algeria, Bahrain, Iran, Iraq, Kuwait, Libya, Oman, Qatar, Saudi Arabia, the United Arab Emirates, and Yemen—are forecast to expand by 6.6 percent in 2012 before moderating in 2013.

"For the oil exporting countries this is a bit of a sweet spot; they're growing at about six and a half percent this year, their trade surpluses are increasing to about four hundred billion US dollars this year.  As a result of that they are able to generate economic activity in their own economies and help their neighbours," said Masood Ahmed, Director of the IMF's Middle East and Central Asia Department.
 
The region's oil-exporting countries are expected to post solid growth in 2012, largely on account of Libya's better-than-expected post-conflict recovery. In the countries of the Gulf Cooperation Council, growth remains robust, supported by expansionary fiscal policies and accommodative monetary conditions, but is expected to slow from seven and a half percent in 2011 to three three quarters percent in 2013 as oil production reaches a plateau.
 
The price of oil is expected to remain above a hundred US dollars per barrel in 2012–13. As a result, the oil exporters' combined current account surplus is anticipated to remain near its historic high of about four hundred billion US dollars in 2012. This has helped governments to respond to growing social demands by increasing expenditure on wages and salaries, which rose dramatically in most oil exporters in recent years.
 
Although many of the oil exporters have accumulated reserves to withstand short-run oil price volatility, a sustained drop in oil prices resulting from a further slowdown in global economic activity remains a risk to guard against. For example, a ten percent drop in oil prices would bring down the oil exporters' combined current surplus by about 150 billion US dollars. Stepped-up spending has increased the vulnerability to oil price declines in case of further deterioration in the global economy.

But faced with a difficult external environment, growth among the region's oil importers—Afghanistan, Djibouti, Egypt, Jordan, Lebanon, Mauritania, Morocco, Pakistan, Sudan, and Tunisia—will register just above two percent in 2012. In the Arab countries in transition, continued domestic disruptions are also holding back growth.

"The oil importing countries, however, particularly those that have been going through a historic political and social transition are going through a more sombre economic time.  They are facing the twin shocks, first from the rest of the world including Europe where a slow growth environment is constraining their prospects for exporting, remittances, tourism; and the unfinished political transitions in their own societies have caused uncertainty in terms of economic activity and investment.  Net result: only about two percent growth for them this year, unemployment continuing to rise," Ahmed said.

For the Arab countries in transition, ongoing political transitions also weigh on growth. With uncertainty over economic policy over the next five to seven years in many countries, investors are holding back.
 
At the same time, international food and fuel prices have continued to rise, and economic activity in trading partners—most notably in Europe, with which many oil importers have important economic links—has deteriorated. In addition, tourism arrivals are recovering only slowly from the large decline in 2011, and foreign direct investment inflows remain subdued.
 
As a result, oil-importing countries continue to face an economic slowdown in 2012, with growth of about two percent. For 2013, a recovery to about three and a quarter percent growth is foreseen—a rate far below what is required to address chronic and growing unemployment.

"The immediate priority for the Arab countries in transition is how to balance the expectations of an impatient population that wants a transition dividend with the growing financial and economic constraints that have come from having used up their external reserves, facing a difficult international environment, ensuring macroeconomic stability over the next 18 months is a big challenge," Ahmed said.
 
In response to social demands and rising food and fuel prices, governments in the Arab countries in transition have significantly expanded spending on subsidies. Budget revenues have also fallen, with the consequence that fiscal balances have deteriorated.

"Beyond that, however, these countries also need to lay the foundations for a new economic model which is going to be much more inclusive and job creating growth where everybody has a fair chance at participating in the gains from growth and where there are safety nets that protect the poor without wasteful subsidies on energy that are consumed mainly by the rich," Ahmed said.

With average public debt at more than seventy percent of GDP, fiscal vulnerabilities are high, and any significant fiscal slippages, slower-than-projected growth, or higher interest rates could put debt on an unsustainable path. At the same time, external current account deficits have widened from already high levels. Together with weak capital inflows, these have resulted in a sharp decline in official international reserves.
 
Stronger growth is urgently needed to spur job creation and provide the population with tangible benefits. To that end, it is important that governments in the Arab countries in transition embark on policies to restore macroeconomic sustainability and structural reforms aimed at improving competitiveness.