Regional Economic Outlook Fall 2010 Tunisia Lebanon Morocco

Regional Economic Outlook Fall 2010 Tunisia Lebanon Morocco Syria Iran Iraq Jordan Algeria Libya Egypt Saudi Arabia Bahrain Kuwait Qatar Mauritania Yemen Sudan Djibouti Afghanistan Pakistan United Arab Emirates Oman

Global outlook: Two-speed recovery in motion Real GDP Growth (percent change from a year earlier) Emerging economies Temporary slow-down 2010: H 2 — 2011: H 1 World Advanced economies 2000 02 04 06 08 10

A closer look at the two-speed recovery Real GDP Growth (percent change from a year earlier) 3

Rebalancing is needed along two dimensions Demand from external surplus economies Demand from external deficit economies Private demand Public demand 4

Downside risks remain, but global double-dip unlikely Prospects for World GDP Growth (percent change) 5

Inflationary pressures are forecast to remain subdued Core Inflation (Twelve-month change in the core CPI) For countries with a peg to the USD or euro, this means that higher inflation rates may lead to real appreciation. 2002 04 06 08 Jul. 10 6

Oil demand is accelerating with the broadening of the global recovery but supply buffers are still substantial Oil Demand Growth (contributions to y-o-y growth in percent) Total demand 7

Temporary Wheat Supply Shock, Limited Spillovers Major Food Crops, Nearest Futures Prices (index, Jul. 1, 2010 = 100) Wheat Corn 8

Capital Flows, Reserves, Appreciation Net Monthly Flows to Emerging Market Equity Funds (billions of U. S. dollars) Net Monthly Flows to Emerging Market Bond Funds (billions of U. S. dollars) Sep. 10 9

MENAP Oil Exporters Iran Iraq Algeria Saudi Arabia Bahrain Libya Kuwait Qatar Sudan Yemen United Arab Emirates Oman

Overview — Oil Exporters Recovery continues Risks/medium term challenges • Oil production picks up, fiscal/external balances improve • But private sector is lagging • Fiscal space allowing continued stimulus in some countries • Keep eye on inflation • Financial sector development and stability • Reorienting spending, reducing reliance on oil revenues

Global demand recovers, boosts activity Sources: National authorities; and IMF staff estimates. MENAP Oil Exporters

…and external balances rebound $257 $107 $124 $101 $75 $31 $23 $5 -$7 -$6 -$7 -$10 Sources: National authorities; and IMF staff estimates. MENAP Oil Exporters

…as do fiscal balances Sources: National authorities; and IMF staff estimates. MENAP Oil Exporters

Many countries approaching break-even prices Average oil price in 2010 Sources: National authorities; and IMF staff estimates. MENAP Oil Exporters

Some countries continue to provide stimulus Percent change in total government expenditures in U. S. dollars (From 2008 to 2011) Sources: National authorities; and IMF staff estimates. MENAP Oil Exporters

Keep an eye on inflation Source: National authorities. 1 Algeria, Bahrain, Iraq, Kuwait, Libya, and Oman MENAP Oil Exporters

Financial sectors after the crisis (December 2009) Source: National authorities. 1 December 2008 MENAP Oil Exporters

Policy priorities Diversification Financial market development Managing international financial linkages MENAP Oil Exporters

MENAP Oil Importers Tunisia Morocco Lebanon Syria Jordan Egypt Mauritania Djibouti Afghanistan Pakistan

Overview — Oil Importers • Growth picking up Recovery Policy adjustment Medium term challenges • Can start consolidating fiscal positions • In most cases, inflation not an immediate concern • More than 18 million new jobs required by 2020 • Need to improve competitiveness and reorient trade

Trade recovery is moving ahead Annual percent change of U. S. dollar value, 3 -month moving average Region’s exports are again growing steadily Sources: National authorities; IMF Direction of Trade Statistics; and Haver Analytics. ¹ Egypt, Jordan, Lebanon, Morocco, Pakistan, and Tunisia. MENAP Oil Importers

Real GDP picking up across region Annual percentage change 2011 Source: National Authorities; and IMF staff estimates. MENAP Oil Importers

Progress in fiscal consolidation Source: National Authorities; and IMF staff estimates and projections. MENAP Oil Importers

Most can maintain current monetary stance Consumer Prices; annual percentage change 6 5 AFG 4 DJI TUN 3 JOR LBN 2 1 MAR 0 Aug-10 Sources: Haver Analytics; and national authorities. MENAP Oil Importers

More than 18 million jobs needed 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. ” 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. ) MENAP Oil Importers

High unemployment a long-standing issue Sources: National authorities; IMF, World Economic Outlook; staff estimates; and International Labor Organization. Note: MENA 6 refers to Egypt, Jordan, Lebanon, Morocco, Syria, and Tunisia. Youth unemployment estimate for MENA 6 excludes Jordan. Data refers to 2008 or latest available year. MENAP Oil Importers

Growth and export gaps: getting bigger Goods exports (in percent of GDP) Source: IMF, World Economic Outlook. MENAP Oil Importers

Competitiveness will need to improve Competitiveness Rankings, 2010– 11¹ Source: World Economic Forum, Global Competitiveness Report, 2010– 11. 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. MENAP Oil Importers

Broader Partnerships Real GDP trends, annual percent change Asia Latin America Advanced economies 1980 85 90 95 2000 05 10 15 Source: IMF, World Economic Outlook database. Note: 1980 -2015 real GDP growth data are de-trended as 10 -year backward rolling averages. MENAP Oil Importers

Policy priorities Labor market flexibility Education Jobs and Growth Competitiveness Reorient exports toward new growth engines MENAP Oil Importers