## Middle East and North Africa Regional Economic Outlook — OCTOBER 28, 2019

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**Canonical URL:** [Middle East and North Africa Regional Economic Outlook — OCTOBER 28, 2019](https://www.imf.org/-/media/files/publications/reo/mcd-cca/2019/october/english/menap-presentation-1019.pdf)

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### Global developments and trade partners
- Top 10 trading partners revisions to import growth shown as percentage points; comparison is "Current REO compared to October 2018."
- Crude Oil Volatility and Price:
  - Crude Oil Volatility Index tracked from Jan-17 to Jul-21.
  - Oil Price (RHS) reported in USD per barrel.
  - Notable event: "Attack on Saudi Arabia Oil Fields."
- Presentation date and author:
  - OCTOBER 28, 2019
  - Jihad Azour, Director, Middle East and Central Asia Department

### Geopolitical risks and social tensions
- Reported Social Unrest Index (12-month rolling average, 2014–present = 100) tracked from Jan-14 to Apr-19 for:
  - MENAP oil exporters
  - MENAP oil importers
- Geopolitical Risk in MENA Region (Index) shown from 2000 to 2016 with values ranging approximately from 30 to 50.

### Fragile and conflict-affected states and humanitarian pressures
- Real GDP Per Capita (Percent change) for selected countries, comparing 2012-17 to 18/19/20:
  - Afghanistan, Somalia, Sudan, Yemen, Libya shown with a range from -10 to +2 percent on the chart axis.
- UNHCR data referenced for "Migrants, 2018."

### MENAP aggregate growth and recent revisions
- Growth revisions and comparisons (sources: WEO; IMF staff estimates):
  - 2018: MENAP figures include values 0.2, 2.0, 4.3, 3.6, 4.5, 1.0 (as shown in the slide).
  - 2019: values shown -1.3, 0.7, 3.6, 3.0, 3.9, 0.1.
  - Revision from Apr. 2019 for 2019: -1.6, -1.4, 0.0, -0.3, -0.4, -0.6.
  - 2020: values 2.1, 2.5, 3.7, 3.4, 4.6, 1.7.
  - Revision from Apr. 2019 for 2020: -0.6, -0.3, -0.2, -0.2, -0.3, 0.1.
- Aggregate groups shown include: World, EMs, Oil Exporters (excl. MCD Countries), MENAP GCC, MENAP.

### MENAP oil exporters: fiscal dynamics and oil effects
- Slide title: "Limited effectiveness of fiscal easing amid rising vulnerabilities and lower oil prices."
- MEANP OE: Real GDP Growth, Non-Oil and Oil Contributions (Percent) across periods 2010–14, 15–18, 19/20:
  - Plotted contributions: Oil contribution, Non-oil contribution, Real GDP growth.
  - Note: Iran and Libya are excluded from MENAPOE and non-GCC OE.
- MENAP OE: Current and Fiscal Account Balances (In percent of GDP) for 2017/18/19/20 with comparison to Spring 2019.
- Declining productivity growth and FDI:
  - TFP, Labor, Capital contributions to potential non-oil GDP growth for GCC and Non-GCC oil exporters across 2000–09, 2010–14, 2015–18.
  - Note: Libya is excluded from non-GCC oil exporters.
- MENAP OE: FDI Inflows, 2010–18 (Percent of GDP) shown for countries including BHR, UAE, SAU, OMN, QAT, IRQ, KWT, ALGER, IRN, and "Other OE" with periods 2010–14 and 2015–18.
- Fiscal consolidation and growth:
  - Changes in Non-Oil Primary Fiscal Balances (Cumulative; Percent of non-oil GDP) for countries BH, RO, MN, QTR, IR, RNS, AU, YE, MKT, UAE, ALG, IRQ over 2014–17 and 2018–19.
  - GCC: Non-Oil Real GDP Growth and Fiscal Impulses (Percent and percent of non-oil GDP, weighted averages) across 2014–20; fiscal impulse calculated using change in non-oil primary deficit to non-oil GDP ratio.

### MENAP oil importers: debt, fiscal strains, and spending composition
- Slide title: "Elevated public debt holding down growth and creating fiscal strains."
- MENAP OI: Current and Fiscal Account Balances (In percent of GDP) shown for 2017/18/19/20 with Spring 2019 comparison.
- MENAP OI: Real GDP Growth, 2005-20 (Percent) presented for MENAP, MENA, EM and LIC (row) with time series 2005-10 avg, 2011-17 avg, 2018, 2019, 2020.
- Rising public debt (Percent of GDP) for selected countries, 2010/14/18 data points including DJI, EGY, JOR, MRT, MAR, PAK, TUN, LBN, SDN.
- MENAP OI: Annualized Contributions to Changes in Debt Ratio¹ (Percentage of GDP, per year) across periods 2003-2006, 2007-2010, 2011-2014, 2015-2018 with components:
  - Primary Deficit, Growth, FX depreciation, Other factors (inc. spreads).
  - Note: Aggregates exclude Sudan.
- Rising interest payments:
  - MENAP OI: General Government Debt and Interest (Percent) series from 2006 to 2019 showing Debt to GDP and Interest to revenue (weighted average and simple average).
- Changes in government spending (Percent of GDP, simple averages) comparing 2014–16 avg and 17/18 with components:
  - Capital, Subsidies, Other current, Wages, Interest, Total expenditure.
  - Note: Excludes Jordan, Pakistan, Sudan, and Tunisia due to limited data availability.

### Policy recommendations for MENAP countries
- Fiscal:
  - Address vulnerabilities.
  - Resume gradual consolidation in OEs.
  - Ensure debt sustainability in OIs.
  - Strengthen fiscal institutions.
- Structural:
  - Generate job-rich growth across the region.
  - Improve infrastructure.
  - Increase access to finance.
  - Deepen domestic financial markets.
  - Build on recent improvements in Doing Business to promote strong business environments across the region.
- Doing Business improvements:
  - Top 10 Most Improved Scores: Doing Business 2020 — Change in score and overall ranking highlight improvements for countries including Saudi Arabia, Jordan, Bahrain, Pakistan, Kuwait, Djibouti, Qatar, Mauritania, Morocco, Egypt, Tunisia, Oman, Yemen, Syria, Algeria, Iraq, Libya, Somalia, Afghanistan, Iran, Lebanon, United Arab Emirates, Sudan.
  - Specific "Top 10 Most Improved Scores" list includes numeric score changes: 62, 75, 97, 43, 106, 108, 83, 31, 63, 131 (with country labels aligned on the slide).

### Cross-cutting analytical themes: capital flows and fiscal institutions
- Capital flows:
  - Push and pull factors for FDI and portfolio flows quantified in a chart:
    - Reduction in FDI Inflows: $50 Billion
    - Increase in Portfolio Inflows: $41 Billion
    - Growth Prospects: $9 Billion
    - Domestic Risks: $30 Billion
    - Other: $11 Billion
    - Market Volatility: $28 Billion
    - Other: $13 Billion
  - Foreign Direct Investment in MENAP Countries (Percent of GDP) time series 2008–18 for MENAP and EM excl. China.
  - Portfolio Investment in MENAP Countries (Percent of GDP) time series 2008–18 for MENAP and EM excl. China.
- Fiscal institutions:
  - Fiscal Institution Indicators for MENAP Countries (Index, 100 is best) include Open Budget Index and Procurement; indicators show MENAP OE and MENAP OI aggregates (fragile states excluded).
  - Medium-Term Fiscal Framework and PFM controls indicators indexed to 100; procurement indicator indexed where 1 is best.
  - Average Effect of Improving Open Budget Index for MENAP Countries:
    - Change in public debt (LHS) and change in procyclicality and change in volatility (RHS) displayed with axes in Percent and Percent of GDP; chart indicates changes around -16.0 to 0.0 on LHS and -14 to 0 on RHS.

### Key takeaways
- Global headwinds and MENAP vulnerabilities pose risks to growth.
- Fiscal vulnerabilities are rising:
  - Higher public spending (MENAP OE).
  - Elevated debt and interest burdens (MENAP OI).
- Potential growth is slowing across regions due to:
  - Falling capital investment.
  - Declining productivity.
  - Subdued private-sector activity.
- Policy priorities:
  - Raise growth and accelerate structural reforms across regions.
  - Attract investment, including FDI.
  - Growth-friendly fiscal consolidation.
  - Strengthen business environments.
  - Increase inclusion.

### MCD analytical and policy agenda
- Inclusive growth topics include:
  - "Effectiveness and Efficiency of Social Spending"
  - "Inclusive Growth in the CCA"
  - "Digitalization in the GCC Economies"
  - "Enhancing the Role of SMEs in the Arab World"
  - "Financial Inclusion of Small and Medium-Sized Enterprises in the Middle East and Central Asia"
  - "Opportunity for All: Promoting Growth and Inclusiveness in the Middle East and North Africa"
- Integration and Resilience topics include:
  - "The Future of Oil and Fiscal Sustainability in the GCC Region"
  - "Economic Integration in the Maghreb : An Untapped Source of Growth"
  - "Opening Up in the Caucasus and Central Asia : Policy Frameworks to Support Regional and Global Integration"
  - "Fintech, Inclusive Growth and Cyber Risks in MENAP and CCA"
  - "Capital Flows to MENAP and the CCA: Opportunities and Risks" (REO)
- Structural Reform Agenda topics include:
  - "Curbing Corruption Through better Economic Governance"
  - "Trade and Foreign Investment: Keys to Diversification and Growth in the GCC"
  - "Public Wage Bills in the Middle East and Central Asia"
  - "Fiscal Institutions and Fiscal Outcomes" (REO)
- Conflict and Fragility engagement includes:
  - Somalia’s travel to HIPC Decision Point
  - Engagement with Djibouti, Iraq, Sudan, and West Bank & Gaza
  - "Macroeconomic Policy Challenges in Conflict Countries and Fragile States: Experience from the Middle East"
  - "Conflict in the Middle East and Central Asia: Costs and Economic Policy Priorities" (REO)
  - "Estimating Subnational GDP in Afghanistan using Satellite Imagery"
  - "Assessing oil and non-oil GDP from space"

*Source: menap-presentation-1019 (IMF | Middle East and Central Asia Department, OCTOBER 28, 2019).*

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_Source: https://www.imf.org/-/media/files/publications/reo/mcd-cca/2019/october/english/menap-presentation-1019.pdf_