the macro-economic outlook: structural challenges for the ... · • the impact on the poor is...
TRANSCRIPT
Public-private dialogue on the Investment Climate
The macro-economic outlook: structural challenges for the Deauville Partnership countries
Cairo, Egypt
7 May 2012
Ania Thiemann, Senior Economist, OECD
Outline
1. The economic outlook
2. Main structural challenges
A. Job creation
B. Women’s participation in the economy
C. Integrity
3. Summary and policy recommendations
2
1. The macro-economic near-term outlook
is mixed
MENA post-crisis recovery remained behind other emerging markets
4
GDP growth, percentage change year on year, constant prices
Source: IMF, 2012. Figures for 2012 are forecasts.
-6
-4
-2
0
2
4
6
8
10
12
14
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Advanced economies Developing Asia
Latin America and the Caribbean Middle East and North Africa
Sub-Saharan Africa
Growth in MENA remained below other emerging markets in 2011
5
Source: Economist Intelligence Unit
Emerging markets will be affected by sluggish demand in OECD in 2012-13
6
Growth in 2012 in all EMs will be
constrained by sluggish OECD demand.
This will affect the Deauville Countries in
particular.
EM currencies will be sensitive to the
“risk-on”, “risk-off” trade, rallying when
investors are more tolerant of risk and
falling back when investors flock to the
US dollar.
Underlying structural factors will
increase the pressures on policy makers
as external growth from OECD will not
be a major driving force for DP export
growth.
GDP growth was constrained in 2011 by the “Arab Spring”
7
GDP growth performances were negatively affected in several economies during 2011. Tunisia and Egypt stagnated. Morocco benefited from a short-run positive effect, but structural issues remain.
-1
0
1
2
3
4
5
6
Egypt Jordan Morocco Tunisia
GDP, constant prices
2010
2011
2012
Source: IMF, 2012. Figures for 2012 are forecasts.
Government budgets are coming under strain, increasing vulnerabilities
The four Deauville Partnership countries are registering large budget deficits as a result of:
• Immediate costs of unrest in the case of Egypt, Tunisia and Jordan (economic disruptions, loss of tax revenues, security expenses, compensations)
• Increased public spending to meet demands and expectations (tax cuts, pay raises, creation of government jobs)
• High food and energy prices (subsidies)
8
-10
-8
-6
-4
-2
0
Egypt Jordan Morocco Tunisia
General Government Overall Fiscal Balance
2010
2011
2012
Source: IMF, 2012. Figures for 2012 are estimates.
FDI levels in MENA have not recovered since the international financial crisis
Start of the global financial crisis
0
100
200
300
400
500
600
700
800
900
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Bil
lio
ns
of
US
$
European Union Latin America and the Caribbean
East Asia Middle East and North Africa
9
FDI inflows to selected regions (1991-2010)
Source: UNCTAD.
FDI inflows to selected regions (1991-2010)
FDI inflows (net) 2011
10
0
2
4
6
8
10
12
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Fo
reig
n d
ire
ct
inve
stm
en
t, n
et
infl
ow
s (
cu
rre
nt
US
D, b
n)
Egypt
Jordan
Morocco
Tunisia
Libya
Financial Crisis 2008
Transition and
changes
Source: UNCTAD 2011, OECD estimates.
Political upheaval and an uncertain outlook has taken its toll on investment flows
• FDI into Egypt fell by 93% in the first nine months of 2011
(January-September), year on year.
• In Tunisia, there was a drop of almost 30% in FDI in 2011 compared to 2010
• nearly 11.000 jobs were lost in 2011 (FIPA)
• In Jordan, FDI declined by 15% in 2011 compared to 2010 according to the Central Bank of Jordan
• Morocco saw a 25% drop in FDI in the first nine months of 2011, according to l’Office des changes.
• FDI inflows to Libya were virtually nil in 2011 according to estimates.
11
2. Structural challenges may
jeopardise a return to normal in the
medium term
Group GDP billion US$ (PPP)
% MENA GDP Population in millions
% MENA population
GDP per capita US$
(PPP)
Resource poor 854.1 31.8 144.0 48.1 6 701
L. A. 536.2 19.9 111.1 37.1 5 425
L. I. 1 298 48.3 44.2 14.8 34 204
MENA 2 689 100 299.3 100 19 826
A tale of three regions
Resource poor countries
Djibouti, Egypt, Jordan, Lebanon, Mauritania,
Morocco, Tunisia and the Palestinian Territories
Resource rich, labour abundant countries (LA)
Algeria, Iraq, Syria and Yemen
Resource rich, labour importing countries (LI)
Countries in Gulf Co-operation Council (GCC) (Bahrain,
Kuwait, Oman, Qatar, Saudi Arabia and the
UAE) and Libya
13
Resource poor economies are more diversified but less competitive
14
0.00
1.00
2.00
3.00
4.00
5.00
6.00 Overall score
Institutions
Infrastructure
Macroeconomic environment
Health and primary education
Higher education and training
Goods market efficiency Labour market
efficiency
Financial market development
Tech. readiness
Market size
Business sophistication
Innovation
Resource poor Resource rich, labour abundant
Resource rich, labour importing
Value added from manufacturing and services in resource poor countries is higher than in resource rich countries. However, they register lower levels of competitiveness. The overall MENA region scores particularly low in terms of innovation.
Source: WEF
Resource poor countries account for a fraction of FDI inflows to the region
• In absolute (USD) terms, this group of countries receives only 22% of FDI, compared to 70% for resource rich, labour importing countries.
15
Resource poor
Resource rich, labour abundant
Resource rich, labour importing
MENA
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Egypt 10%
Lebanon 8%
Jordan 3%
Tunisia 2%
Morocco 2%
Saudi Arabia 44%
Qatar 9%
UAE 6%
Libya 6%
Algeria 3%
Iraq 2%
Syria 2%
Others 3%
High unemployment is a pervasive challenge that affects specific sectors of the population
16
0
5
10
15
20
25
30
35
40
45
50
P. A. Tunisia Saudi Arabia
Jordan Egypt Algeria Morocco Syria UAE Kuwait Yemen
Youth Women Educated
Unemployment among youth, women, and the educated, 2009 or most recent year for which data are available
Source: World Bank
Female labour participation rate is extremely low in the Deauville countries
17 Source: World Bank, 2010.
0
10
20
30
40
50
60
70
80
Egypt Jordan Morocco Tunisia
Labour participation rate for the Deauville countries, 2010
Labor participation rate, female (% of female population ages 15+)
Labor participation rate, male (% of male population ages 15+)
Labor participation rate, total (% of total population ages 15+)
Entrepreneurship in the MENA region is far below international levels
0.58
0.63
0.77
0.79
1.31
2.26
4.21
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5
Sub-Saharan Africa
Middle East & North Africa
East Asia & Pacific
South Asia
Latin America & the Caribbean
Europe & Central Asia
High income
18
New firm entry per 100 working age population, 2004-09 averages
Source: World Bank, 2010.
There is a need to continue the fight against corruption
19
Corruption Perceptions Index, 2011 (low corruption = 10)
0
1
2
3
4
5
6
7
8
9
10 Low corruption
MENA average: 3.9
Source: Transparency International, 2011.
3. The way forward – a few suggestions for
policy reform
Summary: Main consequences of the transition process
• The “Arab Awakening” disclosed severe structural economic challenges, including low competitiveness, weak business climate, lack of job opportunities.
• Growth faltered in 2011 in many MENA countries because of a mix of cyclical and structural problems, added to political and economic uncertainty.
• High youth unemployment and unrealistic expectations on speed of transition process could aggravate the situation.
• The impact on the poor is potentially acute, mostly because of food and fuel price increases, but also because of lowered short-term economic prospects.
• Domestic and foreign investment declined in 2011 because of uncertainty. Investment deals are being cancelled, postponed or in some case, relocated to perceived safer destinations.
• The financial sector is being disrupted given its high sensitivity to instability, reducing its willingness to lend.
• Fiscal deficits have widened as a result of higher public spending, rising commodity prices and reduced economic growth.
21
Suggested reform measures
• Improving governance and business climates
• Promoting regional integration for market extension and diversification
• Support local economic development and job creation
• Policy support and advocacy to stimulate macro, fiscal and financial stability
• Employment generation programmes (public works, infrastructure investments, SME support, micro finance)
• Supporting the poor (direct support and broad-based growth in labour-intensive sectors)
22
THANK YOU FOR YOUR ATTENTION
Ania Thiemann
Senior Economist
MENA-OECD Investment Programme
23