## menap0517

## Source details

**Canonical URL:** [menap0517](https://www.imf.org/-/media/files/publications/reo/mcd-cca/2017/may/pdf/menap0517.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/reo/mcd-cca/2017/may/pdf/menap0517.pdf.md)
- [Structured JSON version](/-/media/files/publications/reo/mcd-cca/2017/may/pdf/menap0517.pdf.json)

---

### Liquidity management and central bank operations
- Central banks will need to become more active liquidity managers, requiring improvements in the institutional framework in some countries.
- Example actions:
  - Introduction of longer-term repos (Saudi Arabia).
  - Tailoring programs of Treasury bill auctions to liquidity conditions (Qatar).
  - Reintroduction of refinancing instruments (Algeria).
- Continued efforts to improve private sector access to finance are needed to support successful diversification.

### Structural reforms: from design to implementation
- Persistently lower hydrocarbon revenues make the redistribution-based development model unsustainable.
- Policy challenge: develop a new model of economic growth that is both resilient and inclusive and reduces dependence on oil while generating private sector jobs for a rapidly growing labor force.
- Recent developments:
  - Design of ambitious strategic development plans occurred last year, but countries must maintain focus on implementation.
  - Efforts to encourage greater foreign investment:
    - New investment laws in Algeria (passed by Parliament) and Oman (under consideration).
    - Allowing foreign ownership outside free economic zones in the United Arab Emirates.
    - Saudi Arabia introduced reforms to its equity and bond markets, including easing restrictions on foreign investment.
- Business environment progress:
  - Kuwait opened the Kuwait Business Center (a business-facilitating one-stop window).
  - Algeria and the United Arab Emirates improved their World Bank Doing Business rankings by seven and eight places, respectively.
  - On average, MENAP oil exporters gained only one place in Doing Business rankings.
  - MENAP oil exporters not affected by conflict lost three places, on average, in the World Economic Forum’s competitiveness rankings.
- Labor market and human capital:
  - Public sector employment growth will be much more limited; private sector jobs will be needed for the 6.5 million labor force entrants expected by 2022 in Algeria, Iran, and the GCC.
  - Labor market reform, including measures to improve the broader business environment, will be key.
  - Saudi Arabia plans to increase fees on expatriate labor; these fee increases need to be part of a broader package of labor market reforms to encourage increased employment of Saudi nationals in the private sector.
  - Enhancing human capital is critical to boost productivity and create jobs for young jobseekers.
    - MENAP oil exporters need to improve the quality of their education to catch up with emerging markets such as Kazakhstan and Turkey, which score better in the Trends in International Mathematics and Science Study (TIMSS).
  - In conflict countries, stabilization of the security situation is the key prerequisite; school dropout rates exceeded 50 percent in Syria in 2013 (most recent available data).

### Pre-tax energy subsidy reform (Box 1.1) — findings and recommendations
- Findings:
  - MENAP oil exporters still maintain by far the lowest energy prices in the world.
  - As a group, MENAP oil exporters accounted for more than one-fifth of global energy subsidies in 2015, estimated at $115 billion (or just over 5 percent of their GDP) out of $436 billion total worldwide.
  - MENAP oil exporters have the largest energy subsidy bill in the world.
  - Energy subsidies in MENAP oil exporters dropped from $190 billion in 2014 to an estimated $86 billion in 2016.
  - Reductions in subsidies were driven largely by the decline in international prices.
  - Countries that adopted a formula-based pricing regime experienced relatively greater reductions in subsidies:
    - Subsidies in Oman, Qatar, and the United Arab Emirates dropped by 61 percent on average between 2014 and 2016.
    - The average decline across the remaining MENAP oil-exporting countries was 54 percent.
  - Price regulation leaves countries vulnerable to higher subsidies if international prices rise, although less so in countries with a formula-based pricing approach.
- Policy recommendations and implementation guidance:
  - Successful elimination of price gaps and subsidies calls for a well-developed strategy and sustained policymaker commitment.
  - Involve stakeholders from the start and clearly communicate goals and objectives to the public.
  - Disclose opportunity costs of energy subsidies (for example, crowding out investment and other critical expenditures).
  - Depoliticize reforms and move toward market-based or formula-based adjustments.
  - Adjustments could be gradual to allow households and industries to adapt, including moving toward more energy-efficient technologies.
  - Because subsidy removal is likely to disproportionately hurt the poor, properly designed safety nets are essential to shield the most vulnerable.
  - Other compensatory measures, preferably front-loaded and temporary, may be needed to ease the adjustment.
  - With subsidies currently relatively low, the recommended timing for further energy pricing reforms is now to preserve savings if global oil prices rise again.

### MENAP oil-importing countries: recovery and vulnerabilities
- Context:
  - Underpinned by past reforms, improved confidence, and increasing external demand, output growth in most MENAP oil importers is gradually recovering.
  - Unemployment remains high, especially among youth; conflicts and refugee pressures weigh on the regional outlook; vulnerabilities remain elevated.
- Outlook:
  - Regional growth is expected to increase from 3.7 percent in 2016 to 4 percent in 2017.
- Policy emphasis:
  - To strengthen resilience and promote inclusive growth, oil importers need to continue fiscal consolidation while protecting social spending and public investment.
  - Broad-based, job-rich growth requires implementation of structural reforms that improve the business climate and boost productivity.

### Growth Outlook and Drivers
- Regional growth rebound to "4.4 percent in 2018."
- Factors supporting the rebound:
  - Fading of idiosyncratic shocks from 2016 (drought in Morocco, weak cotton harvest in Pakistan).
  - Continued dividends from past reforms that have reduced fiscal deficits and improved the business climate (Morocco, Pakistan).
  - Scaling up in public investment (Pakistan).
  - Broader global recovery expected to boost demand from the region’s main export markets.
- Country variation:
  - Particularly robust growth: Djibouti (foreign-financed infrastructure spending), Pakistan (China-Pakistan Economic Corridor implementation).
  - Modest growth: Jordan and Lebanon (ongoing impact of regional conflicts on tourism, confidence, and investment).
  - Tunisia: near-term recovery revised down slightly due to continued uncertainty and weak tourism.

### Inflation Outlook
- Average regional inflation trajectory:
  - Rise in 2017, "reaching almost 13 percent."
  - Egypt: inflation pushed "above 25 percent" following move to a flexible exchange rate regime and sharp depreciation of the pound.
- Drivers of rising inflation in 2017:
  - Higher international oil prices.
  - Reductions in energy subsidies (Egypt, Sudan).
  - Implementation of a value-added tax (Egypt).
  - Removal of tax exemptions (Jordan).
  - Rising food prices (Djibouti, Egypt, Somalia).
  - Pass-through of recent exchange rate depreciations (Egypt, Sudan).
- Medium-term expectation: as one-off factors fade and with prudent fiscal and monetary policy, inflation is expected to moderate.

### Fiscal Position, Risks, and Recent Trends
- High public debt: exceeds "90 percent of GDP" for several MENAP oil importers (Egypt, Jordan, Lebanon).
- Debt-service burden:
  - In 2016, absorbed "between 28 and 48 percent of revenues" in Egypt, Lebanon, and Pakistan.
- Regional fiscal trends:
  - Average fiscal deficit fell from a peak of "9¼ percent of GDP in 2013" to "about 7 percent of GDP in 2016."
  - Improvement driven by reduced fuel subsidies (Egypt, Morocco, Sudan), lower transfers to energy-related state-owned enterprises (Jordan, Lebanon), and efforts to increase revenue (Pakistan).
- 2016 revenue weaknesses relative to October 2016 REO due to:
  - Weaker tax collection (Morocco, Tunisia).
  - Delayed reforms (Tunisia).
  - Subdued growth (Jordan, Morocco, Tunisia).
- Fiscal policy challenges ahead:
  - Maintaining infrastructure, health care, education, and social services spending may be difficult as oil prices rise.
  - Need to complete subsidy reforms (Egypt, Sudan, Tunisia).
  - Contain losses from state-owned enterprises, including through automatic tariff mechanisms for energy companies (Jordan, Lebanon, Tunisia).
- Revenue mobilization priorities:
  - Broaden tax base by rationalizing multiple VAT rates (Morocco, Tunisia).
  - Simplify tax rate structure and eliminate exemptions (Djibouti, Egypt, Jordan, Lebanon, Morocco, Pakistan, Sudan, Tunisia).
  - Strengthen tax administration (Afghanistan, Mauritania, Morocco, Pakistan, Somalia, Sudan, Tunisia).
  - IMF technical assistance aiding revenue administration in conflict-affected countries (Afghanistan, Iraq).

### Structural Reform Needs
- Growth rates too low to reduce unemployment or provide broad-based income improvements; fiscal constraints limit role for public spending alone.
- Priority reforms to promote private sector activity and productivity:
  - Examples of progress: upgraded investor protection and regulations (Jordan, Mauritania, Morocco, Tunisia); easing infrastructure bottlenecks, such as energy supply (Egypt, Jordan, Pakistan).
  - Further needs: promote competition (Egypt, Jordan, Morocco); reduce infrastructure gap (Lebanon); address skills mismatch (Djibouti, Egypt, Jordan, Morocco, Tunisia).
  - Labor market reforms to increase female labor force participation (Egypt, Jordan, Morocco).
- Competitiveness concerns:
  - Decline in export shares noted since October 2016 REO; potential causes include regional security concerns and fewer tourists (Egypt, Jordan, Lebanon, Tunisia), breakdown in traditional trade routes (Jordan, Lebanon), strengthening of the U.S. dollar boosting real exchange rates for countries with rigid exchange rate arrangements.
  - Structural reforms combined with exchange rate flexibility (where appropriate) recommended to improve competitiveness.

### Financial Sector Stability
- Banks generally stable, liquid, and adequately capitalized, but face challenges from five consecutive years of subdued growth and high nonperforming loan ratios.
- Credit growth remains moderate; developments largely unchanged compared with the October 2016 REO (exception: Egypt, where tighter monetary policy could weigh on lending growth in 2017).
- Recommended policy actions:
  - Strengthen regulatory and supervisory frameworks (Djibouti, Mauritania, Tunisia).
  - Improve insolvency and bankruptcy regimes.
  - Enhance deposit insurance arrangements where needed (Egypt, Jordan, Pakistan, Tunisia).

### Risks to Outlook
- Downside risks:
  - Oil price path: near-term path "about $5 a barrel higher" than October 2016 REO; "Oil import prices in 2017, therefore, will be almost 30 percent higher than last year."
    - Further oil price increases could undermine consumption, increase fiscal risks, and worsen external imbalances.
    - Partly offset by higher remittances and other foreign support from oil-exporting countries, principally benefiting Egypt, Jordan, Lebanon, and Pakistan.
  - Global policy uncertainty and potential increase in protectionism could weaken demand for MENAP oil-importer exports, particularly affecting countries with strong links to global trade and shipping (Djibouti).
  - Changes in global financial conditions: U.S. interest rates have risen; tighter and more volatile global conditions could increase borrowing costs and weigh on bank balance sheets and private sector activity, especially for Egypt, Jordan, Lebanon, Pakistan, and Tunisia.
  - External imbalances: current account deficits expected to narrow slightly from "more than 4.8 percent of GDP in 2016 to 4.3 percent by 2018," but remain sizable for Djibouti, Egypt, Jordan, Lebanon, Mauritania, Tunisia.
  - Security or social tensions, slower reform implementation, and spillovers from regional conflicts could derail policy implementation and weaken activity (Afghanistan, Egypt, Jordan, Lebanon, Mauritania, Morocco, Pakistan, Somalia, Sudan, Tunisia).
- Upside risks:
  - Sudan: recent easing of U.S. sanctions could boost investment.
  - Lebanon: initiation of a series of reforms after a political impasse may increase confidence, strengthen capital inflows, and accelerate growth.

### IMF Engagement in Conflict-Affected Countries (Box 2.1)
- Objectives:
  - Help cope with adverse economic consequences and avoid economic collapse; support rebuilding when conflicts ease; assist neighboring countries mitigate spillovers.
- Tailored policy advice areas:
  - Building reliable macroeconomic frameworks.
  - Monetary and exchange rate policies.
  - Prioritizing spending to protect critical social spending and secure debt sustainability.
  - Fostering inclusive growth.
- Technical assistance focus (examples and countries):
  - Rebuilding and strengthening economic institutions, central banks, payment and banking systems (Afghanistan, Iraq, West Bank and Gaza).
  - Public financial management (Afghanistan, Iraq).
  - Tax policy and administration (Tunisia, Somalia).
  - Anti–money laundering and combating financing of terrorism (Libya, West Bank and Gaza).
  - Statistics preparation (Afghanistan, Iraq, West Bank and Gaza).
- IMF financing and coordination roles:
  - IMF financing support provided to Afghanistan and Iraq.
  - Help mobilize additional resources from donors and IFIs (Iraq, Jordan, Somalia).
  - Participate in donor coordination and assessment of economic developments (Libya, West Bank and Gaza).
- Refugee crisis context:
  - More than "10 million registered refugees" originated from the MENAP region (mostly Afghanistan, Somalia, Sudan, and Syria), with more than half hosted in the region (mostly Iran, Jordan, Lebanon, Pakistan).
  - IMF has advocated coordinated international support and tailored its arrangements to account for refugees and internally displaced (Iraq, Jordan).

### Key Regional Indicators (Selected projections and historical averages)
- MENAP (Average 2000–13, 2014, 2015, 2016, 2017, 2018):
  - Real GDP (annual growth): 5.0 2.8 2.7 3.9 2.6 3.4
  - Current Account Balance: 9.2 5.3 -4.1 -3.4 -1.1 -0.8
  - Overall Fiscal Balance: 2.7 -2.8 -8.6 -9.0 -5.1 -4.1
  - Inflation, p.a. (annual growth): 7.0 7.0 5.8 5.6 8.2 6.8
- MENAP oil importers:
  - Real GDP (annual growth): 4.5 3.1 3.9 3.7 4.0 4.4
  - Current Account Balance: -2.6 -4.4 -4.3 -4.8 -4.9 -4.3
  - Overall Fiscal Balance: -5.5 -7.7 -7.3 -7.2 -6.6 -5.9
  - Inflation, p.a. (annual growth): 5.8 9.4 6.6 7.7 12.8 7.6

*Middle East and Central Asia Department — REO Update, May 2017*

### introduction of longer-term repos (Saudi Arabia),

### introduction of longer-term repos (Saudi Arabia)

### Liquidity management and central bank operations
- Central banks will need to become more active liquidity managers, which will require improvements in the institutional framework in some countries.
- Example actions noted:
  - Introduction of longer-term repos (Saudi Arabia).
  - Tailoring programs of Treasury bill auctions to liquidity conditions (Qatar).
  - Reintroduction of refinancing instruments (Algeria).
- Continued efforts to improve private sector access to finance are needed to support successful diversification.

### Structural reforms: from design to implementation
- Persistently lower hydrocarbon revenues make the redistribution-based development model unsustainable.
- Policy challenge: develop a new model of economic growth that is both resilient and inclusive and reduces dependence on oil while generating private sector jobs for a rapidly growing labor force.
- Recent developments:
  - Design of ambitious strategic development plans occurred last year, but countries must maintain focus on implementation.
  - Efforts to encourage greater foreign investment:
    - New investment laws in Algeria (passed by Parliament) and Oman (under consideration).
    - Allowing foreign ownership outside free economic zones in the United Arab Emirates.
    - Saudi Arabia introduced reforms to its equity and bond markets, including easing restrictions on foreign investment.
- Business environment progress has been uneven:
  - Kuwait opened the Kuwait Business Center (a business-facilitating one-stop window).
  - Algeria and the United Arab Emirates improved their World Bank Doing Business rankings by seven and eight places, respectively.
  - On average, MENAP oil exporters gained only one place in Doing Business rankings.
  - MENAP oil exporters not affected by conflict lost three places, on average, in the World Economic Forum’s competitiveness rankings.
- Labor market and human capital issues:
  - Public sector employment growth will be much more limited; private sector jobs will be needed for the 6.5 million labor force entrants expected by 2022 in Algeria, Iran, and the GCC.
  - Labor market reform, including measures to improve the broader business environment, will be key.
  - Saudi Arabia plans to increase fees on expatriate labor; these fee increases need to be part of a broader package of labor market reforms to encourage increased employment of Saudi nationals in the private sector.
  - Enhancing human capital is critical to boost productivity and create jobs for young jobseekers.
    - MENAP oil exporters need to improve the quality of their education to catch up with emerging markets such as Kazakhstan and Turkey, which score better in the Trends in International Mathematics and Science Study (TIMSS).
  - In conflict countries, stabilization of the security situation is the key prerequisite; school dropout rates exceeded 50 percent in Syria in 2013 (most recent available data).

### Pre-tax energy subsidy reform (Box 1.1) — findings and recommendations
- Findings:
  - MENAP oil exporters still maintain by far the lowest energy prices in the world.
  - As a group, MENAP oil exporters accounted for more than one-fifth of global energy subsidies in 2015, estimated at $115 billion (or just over 5 percent of their GDP) out of $436 billion total worldwide.
  - MENAP oil exporters have the largest energy subsidy bill in the world.
  - Energy subsidies in MENAP oil exporters dropped from $190 billion in 2014 to an estimated $86 billion in 2016.
  - Reductions in subsidies were driven largely by the decline in international prices.
  - Countries that adopted a formula-based pricing regime experienced relatively greater reductions in subsidies:
    - Subsidies in Oman, Qatar, and the United Arab Emirates dropped by 61 percent on average between 2014 and 2016.
    - The average decline across the remaining MENAP oil-exporting countries was 54 percent.
  - Price regulation leaves countries vulnerable to higher subsidies if international prices rise, although less so in countries with a formula-based pricing approach.
- Policy recommendations and implementation guidance:
  - Successful elimination of price gaps and subsidies calls for a well-developed strategy and sustained policymaker commitment.
  - Involve stakeholders from the start and clearly communicate goals and objectives to the public.
  - Disclose opportunity costs of energy subsidies (for example, crowding out investment and other critical expenditures).
  - Depoliticize reforms and move toward market-based or formula-based adjustments.
  - Adjustments could be gradual to allow households and industries to adapt, including moving toward more energy-efficient technologies.
  - Because subsidy removal is likely to disproportionately hurt the poor, properly designed safety nets are essential to shield the most vulnerable.
  - Other compensatory measures, preferably front-loaded and temporary, may be needed to ease the adjustment.
  - With subsidies currently relatively low, the recommended timing for further energy pricing reforms is now to preserve savings if global oil prices rise again.

### MENAP oil-importing countries: recovery and vulnerabilities
- Context:
  - Underpinned by past reforms, improved confidence, and increasing external demand, output growth in most MENAP oil importers is gradually recovering.
  - Unemployment remains high, especially among youth; conflicts and refugee pressures weigh on the regional outlook; vulnerabilities remain elevated.
- Outlook and figures:
  - Regional growth is expected to increase from 3.7 percent in 2016 to 4 percent in 2017.
- Policy emphasis:
  - To strengthen resilience and promote inclusive growth, oil importers need to continue fiscal consolidation while protecting social spending and public investment.
  - Broad-based, job-rich growth requires implementation of structural reforms that improve the business climate and boost productivity.

*Middle East and Central Asia Department — REO Update, May 2017*

### 4.4 percent in 2018. In part, this rebound will

### menap0517 - 4.4 percent in 2018. In part, this rebound will

### Growth Outlook and Drivers
- Regional growth rebound to "4.4 percent in 2018."
- Factors supporting the rebound:
  - Fading of idiosyncratic shocks from 2016 (drought in Morocco, weak cotton harvest in Pakistan).
  - Continued dividends from past reforms that have reduced fiscal deficits and improved the business climate (Morocco, Pakistan).
  - Scaling up in public investment (Pakistan).
  - Broader global recovery expected to boost demand from the region’s main export markets.
- Country variation:
  - Particularly robust growth: Djibouti (foreign-financed infrastructure spending), Pakistan (China-Pakistan Economic Corridor implementation).
  - Modest growth: Jordan and Lebanon (ongoing impact of regional conflicts on tourism, confidence, and investment).
  - Tunisia: near-term recovery revised down slightly due to continued uncertainty and weak tourism.

### Inflation Outlook
- Average regional inflation trajectory:
  - Rise in 2017, "reaching almost 13 percent."
  - Egypt: inflation pushed "above 25 percent" following move to a flexible exchange rate regime and sharp depreciation of the pound.
- Drivers of rising inflation in 2017:
  - Higher international oil prices.
  - Reductions in energy subsidies (Egypt, Sudan).
  - Implementation of a value-added tax (Egypt).
  - Removal of tax exemptions (Jordan).
  - Rising food prices (Djibouti, Egypt, Somalia).
  - Pass-through of recent exchange rate depreciations (Egypt, Sudan).
- Medium-term expectation: as one-off factors fade and with prudent fiscal and monetary policy, inflation is expected to moderate.

### Fiscal Position, Risks, and Recent Trends
- High public debt: exceeds "90 percent of GDP" for several MENAP oil importers (Egypt, Jordan, Lebanon).
- Debt-service burden:
  - In 2016, absorbed "between 28 and 48 percent of revenues" in Egypt, Lebanon, and Pakistan.
- Regional fiscal trends:
  - Average fiscal deficit fell from a peak of "9¼ percent of GDP in 2013" to "about 7 percent of GDP in 2016."
  - Improvement driven by reduced fuel subsidies (Egypt, Morocco, Sudan), lower transfers to energy-related state-owned enterprises (Jordan, Lebanon), and efforts to increase revenue (Pakistan).
- 2016 revenue weaknesses relative to October 2016 REO due to:
  - Weaker tax collection (Morocco, Tunisia).
  - Delayed reforms (Tunisia).
  - Subdued growth (Jordan, Morocco, Tunisia).
- Fiscal policy challenges ahead:
  - Maintaining infrastructure, health care, education, and social services spending may be difficult as oil prices rise.
  - Need to complete subsidy reforms (Egypt, Sudan, Tunisia).
  - Contain losses from state-owned enterprises, including through automatic tariff mechanisms for energy companies (Jordan, Lebanon, Tunisia).
- Revenue mobilization priorities:
  - Broaden tax base by rationalizing multiple VAT rates (Morocco, Tunisia).
  - Simplify tax rate structure and eliminate exemptions (Djibouti, Egypt, Jordan, Lebanon, Morocco, Pakistan, Sudan, Tunisia).
  - Strengthen tax administration (Afghanistan, Mauritania, Morocco, Pakistan, Somalia, Sudan, Tunisia).
  - IMF technical assistance aiding revenue administration in conflict-affected countries (Afghanistan, Iraq).

### Structural Reform Needs
- Growth rates too low to reduce unemployment or provide broad-based income improvements; fiscal constraints limit role for public spending alone.
- Priority reforms to promote private sector activity and productivity:
  - Examples of progress: upgraded investor protection and regulations (Jordan, Mauritania, Morocco, Tunisia); easing infrastructure bottlenecks, such as energy supply (Egypt, Jordan, Pakistan).
  - Further needs: promote competition (Egypt, Jordan, Morocco); reduce infrastructure gap (Lebanon); address skills mismatch (Djibouti, Egypt, Jordan, Morocco, Tunisia).
  - Labor market reforms to increase female labor force participation (Egypt, Jordan, Morocco).
- Competitiveness concerns:
  - Decline in export shares noted since October 2016 REO; potential causes include regional security concerns and fewer tourists (Egypt, Jordan, Lebanon, Tunisia), breakdown in traditional trade routes (Jordan, Lebanon), strengthening of the U.S. dollar boosting real exchange rates for countries with rigid exchange rate arrangements.
  - Structural reforms combined with exchange rate flexibility (where appropriate) recommended to improve competitiveness.

### Financial Sector Stability
- Banks generally stable, liquid, and adequately capitalized, but face challenges from five consecutive years of subdued growth and high nonperforming loan ratios.
- Credit growth remains moderate; developments largely unchanged compared with the October 2016 REO (exception: Egypt, where tighter monetary policy could weigh on lending growth in 2017).
- Recommended policy actions:
  - Strengthen regulatory and supervisory frameworks (Djibouti, Mauritania, Tunisia).
  - Improve insolvency and bankruptcy regimes.
  - Enhance deposit insurance arrangements where needed (Egypt, Jordan, Pakistan, Tunisia).

### Risks to Outlook
- Downside risks:
  - Oil price path: near-term path "about $5 a barrel higher" than October 2016 REO; "Oil import prices in 2017, therefore, will be almost 30 percent higher than last year."
    - Further oil price increases could undermine consumption, increase fiscal risks, and worsen external imbalances.
    - Partly offset by higher remittances and other foreign support from oil-exporting countries, principally benefiting Egypt, Jordan, Lebanon, and Pakistan.
  - Global policy uncertainty and potential increase in protectionism could weaken demand for MENAP oil-importer exports, particularly affecting countries with strong links to global trade and shipping (Djibouti).
  - Changes in global financial conditions: U.S. interest rates have risen; tighter and more volatile global conditions could increase borrowing costs and weigh on bank balance sheets and private sector activity, especially for Egypt, Jordan, Lebanon, Pakistan, and Tunisia.
  - External imbalances: current account deficits expected to narrow slightly from "more than 4.8 percent of GDP in 2016 to 4.3 percent by 2018," but remain sizable for Djibouti, Egypt, Jordan, Lebanon, Mauritania, Tunisia.
  - Security or social tensions, slower reform implementation, and spillovers from regional conflicts could derail policy implementation and weaken activity (Afghanistan, Egypt, Jordan, Lebanon, Mauritania, Morocco, Pakistan, Somalia, Sudan, Tunisia).
- Upside risks:
  - Sudan: recent easing of U.S. sanctions could boost investment.
  - Lebanon: initiation of a series of reforms after a political impasse may increase confidence, strengthen capital inflows, and accelerate growth.

### IMF Engagement in Conflict-Affected Countries (Box 2.1)
- IMF assistance objectives in conflict contexts:
  - Help cope with adverse economic consequences and avoid economic collapse; support rebuilding when conflicts ease; assist neighboring countries mitigate spillovers.
- Tailored policy advice areas:
  - Building reliable macroeconomic frameworks.
  - Monetary and exchange rate policies.
  - Prioritizing spending to protect critical social spending and secure debt sustainability.
  - Fostering inclusive growth.
- Technical assistance focus (examples and countries):
  - Rebuilding and strengthening economic institutions, central banks, payment and banking systems (Afghanistan, Iraq, West Bank and Gaza).
  - Public financial management (Afghanistan, Iraq).
  - Tax policy and administration (Tunisia, Somalia).
  - Anti–money laundering and combating financing of terrorism (Libya, West Bank and Gaza).
  - Statistics preparation (Afghanistan, Iraq, West Bank and Gaza).
- IMF financing and coordination roles:
  - IMF financing support provided to Afghanistan and Iraq.
  - Help mobilize additional resources from donors and IFIs (Iraq, Jordan, Somalia).
  - Participate in donor coordination and assessment of economic developments (Libya, West Bank and Gaza).
- Refugee crisis context:
  - More than "10 million registered refugees" originated from the MENAP region (mostly Afghanistan, Somalia, Sudan, and Syria), with more than half hosted in the region (mostly Iran, Jordan, Lebanon, Pakistan).
  - IMF has advocated coordinated international support and tailored its arrangements to account for refugees and internally displaced (Iraq, Jordan).

### Key Regional Indicators (Selected projections and historical averages)
- MENAP (Average 2000–13, 2014, 2015, 2016, 2017, 2018):
  - Real GDP (annual growth): 5.0 2.8 2.7 3.9 2.6 3.4
  - Current Account Balance: 9.2 5.3 -4.1 -3.4 -1.1 -0.8
  - Overall Fiscal Balance: 2.7 -2.8 -8.6 -9.0 -5.1 -4.1
  - Inflation, p.a. (annual growth): 7.0 7.0 5.8 5.6 8.2 6.8
- MENAP oil importers:
  - Real GDP (annual growth): 4.5 3.1 3.9 3.7 4.0 4.4
  - Current Account Balance: -2.6 -4.4 -4.3 -4.8 -4.9 -4.3
  - Overall Fiscal Balance: -5.5 -7.7 -7.3 -7.2 -6.6 -5.9
  - Inflation, p.a. (annual growth): 5.8 9.4 6.6 7.7 12.8 7.6
- MENAP oil exporters, GCC, and Non-GCC subgroups reported with their respective series for Real GDP, non-oil growth, current account balance, overall fiscal balance, and inflation in the source tables.

*Middle East and Central Asia Department — REO Update, May 2017*

---


_Source: https://www.imf.org/-/media/files/publications/reo/mcd-cca/2017/may/pdf/menap0517.pdf_