IMF cuts MENA’s 2013 GDP growth forecast to 2.1% on weak oil outlook and regional turmoil

By bne IntelliNews October 9, 2013

The Middle East and North Africa’s (MENA) aggregate GDP growth will brake to 2.1% in 2013 from 4.6% the year before due to subdued oil output and uncertainties arising from prolonged political transitions, the IMF said in its October World Economic Outlook. A weak external environment will also weigh on confidence in the region’s oil importers. The IMF thus again reduced its 2013 GDP forecast for MENA from 3.0% in a WEO update in July and 3.1% in April.

MENA’s GDP growth will accelerate to 3.8% in 2014 on improved global conditions and a recovery in oil production, the IMF forecasts. A sustainable and equitable growth over the medium term in MENA, however, depends on an improved socio-political environment and macroeconomic stability, better economic diversification and accelerated job creation, the IMF underscored.

Oil-Exporting Economies

Growth in MENA’s oil exporters slowed significantly in the first half of 2013, hampered by falling oil production. In a number of economies, such as Iran, Iraq, and Libya, high geopolitical tension, economic sanctions, unscheduled maintenance and worsening security have dampened the oil supply, the IMF said. The region’s hydrocarbon output will likely fall 1% in 2013, with the decline driven mainly by Libya and Iran. Saudi Arabia’s oil production will also slightly retreat in 2013 given its role in stabilizing the global oil market. It reduced production in late 2012 through early 2013 to cope with slowing global demand and rising supply from suppliers outside OPEC. Saudi Arabia, however, raised oil output later in 2013 to offset oil production disruptions elsewhere in the region, the IMF noted. The non-oil GDP, however, is holding up well in most oil-exporting countries, supported by high government spending and recovering credit growth.

Oil-Importing Economies

The economic conditions are difficult in MENA oil importers, the IMF said. There are, however, improvements in tourism, exports and foreign direct investment (FDI) in a number of countries, according to the fund. This is partially due to increased demand from the GCC economies. Still, onoging political and economic policy uncertainty continues to weigh on confidence and economic activity in MENA’s oil importers. The worsening conflict in Syria and developments in Egypt have raised concerns about wider regional destabilisation, which further complicates economic management, the IMF warned.

“In Egypt, political developments will largely determine the pace of policy reforms, confidence, and domestic activity against a backdrop of large fiscal and external imbalances,” the IMF noted. Financing from several GCC countries is reducing short-term constraints, and consequently, the Egyptian authorities have announced a fiscal stimulus package seeking to support growth and creating jobs.

In Lebanon, political spillovers and refugees from the Syrian conflict will continue to shake confidence and deter tourism and growth. The trend will strain the fiscal position and put pressure on external balances.

Political and security developments in Tunisia will continue to weigh on the economic outlook and the pace of fiscal, financial, and structural reforms, the IMF said.  Morocco’s GDP growth is expected to slow in 2014 on weak agriculture output after an exceptional harvest in 2013.

  Real GDP growth CPI inflation Current account % of GDP
  2012 2013 (F) 2014 (F) 2012 2013 (F) 2014 (F) 2012 2013 (F) 2014 (F)
MENA 4,6% 2,1% 3,8% 10,8% 12,3% 10,3% 13,2% 10,3% 9,3%
Oil exporters 5,4% 1,9% 4,0% 11,4% 13,8% 10,8% 17,4% 13,9% 12,4%
Iran -1,9% -1,5% 1,3% 30,5% 42,3% 29,0% 5,0% 3,1% 0,3%
Saudi Arabia 5,1% 3,6% 4,4% 2,9% 3,8% 3,6% 23,2% 19,3% 17,7%
Algeria 3,3% 3,1% 3,7% 8,9% 5,0% 4,5% 5,9% 1,8% 1,2%
UAE 4,4% 4,0% 3,9% 0,7% 1,5% 2,5% 17,3% 15,2% 15,6%
Qatar 6,2% 5,1% 5,0% 1,9% 3,7% 4,0% 32,4% 29,6% 25,6%
Kuwait 6,2% 0,8% 2,6% 3,2% 3,0% 3,5% 43,2% 38,7% 37,7%
Iraq 8,4% 3,7% 6,3% 6,1% 2,3% 5,0% 7,0% 0,7% 0,8%
Oil importers 2,0% 2,8% 3,1% 8,7% 7,8% 8,9% -7,7% -6,7% -4,9%
Egypt 2,2% 1,8% 2,8% 8,6% 6,9% 10,3% -3,1% -2,6% -0,9%
Morocco 2,7% 5,1% 3,8% 1,3% 2,3% 2,5% -10,0% -7,2% -6,1%
Tunisia 3,6% 3,0% 3,7% 5,6% 6,0% 4,7% -8,1% -8,0% -6,6%
Sudan -3,3% 3,9% 2,5% 35,5% 32,1% 27,4% -10,8% -11,9% -7,0%
Lebanon 1,5% 1,5% 1,5% 6,6% 6,3% 3,1% -16,2% -16,7% -16,7%
Jordan 2,8% 3,3% 3,5% 4,8% 5,9% 3,2% -18,1% -9,9% -9,1%
Source: IMF                  

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