Middle East and Central Asia
Regional Economic Outlook: Middle East and Central Asia
November 2012
©2012 International Monetary Fund
The outlook for the Middle East and North Africa region is mixed. Oil-importing countries are witnessing tepid growth, and the moderate recovery expected in 2013 is subject to heightened downside risks. For the Arab countries in transition, ongoing political transitions also weigh on growth. With policy buffers largely eroded, the need for action on macroeconomic stabilization and growth-oriented reforms is becoming increasingly urgent. Countries will need to put in place safety nets to protect the poor and build consensus for some difficult fiscal choices. The region's oil exporters are expected to post solid growth in 2012, in part due to Libya's better-than-expected postwar recovery. In the countries of the Gulf Cooperation Council, robust growth is supported by expansionary fiscal policies and accommodative monetary conditions.
In the Caucasus and Central Asia, the outlook remains favorable, reflecting high oil prices that are benefiting oil and gas exporters, supportive commodity prices and remittance inflows benefiting oil and gas importers, and, for both groups, moderate direct exposure to Europe. The positive outlook provides an opportunity to strengthen policy buffers to prepare for any downside risks.
| Contents | |
| Acknowledgments | |
| Assumptions and Conventions | |
| Country and Regional Groupings | |
| World Economic Outlook | |
| MIDDLE EAST, NORTH AFRICA, AFGHANISTAN, AND PAKISTANÂ | |
| MENAP Highlights | |
| 1. MENAP Oil Exporters: Increase Resilience and Create Private-Sector Jobs | |
| Oil GDP Growth Falling, Non-Oil GDP Growth Healthy | |
| Wage Increases Weaken Public Finances | |
| A Sustained Large Drop in Oil Prices Is a Key Risk | |
| Expenditure Restraint Would Increase Resilience | |
| Current Account Surpluses Sensitive to Oil Price | |
| Inflation Developments Mixed | |
| Renewed Bond Issuance | |
| Reforms for More Inclusive Growth | |
| Annex 1.1. The Natural Gas Market: Where Is It Heading? | |
| Natural Gas Supply Is Meeting Demand | |
| The Increasing Importance of Shale Gas | |
| Benefits of Indexation to Oil, Regional Segmentation | |
| Annex 1.2. Inward Spillovers to MENA Countries from a GDP Shock in G3 Countries | |
| Shock to Chinese GDPÂ | |
| Shock to U.S. GDPÂ | |
| Shock to Euro Area GDPÂ | |
| 2. MENAP Oil Importers: Restore Macroeconomic Sustainability and Accelerate Growth | |
| Downturn Continues in 2012, Possible Moderate Recovery in 2013Â Â Â Â | |
| Inflation Stable in Most Countries, But Concerns Rising | |
| External Deficits Widening, Reserve Buffers Diminished | |
| Need for Greater Exchange Rate Flexibility | |
| Rising Subsidies, Deteriorating Fiscal Positions | |
| Rising Debt Levels, Consolidation Necessary | |
| Financial Sector: Mixed Performance | |
| Downside Risks Are Elevated | |
| Need to Restore Macroeconomic Sustainability | |
| Minimizing the Growth & Social Impact of Fiscal Consolidation | |
| Structural Reforms Needed to Enhance Inclusive Growth | |
| Annex 2.1. MENAP & CCA Countries: Highly Vulnerable to Food Price Hikes | |
| CAUCASUS AND CENTRAL ASIA | |
| CCA Highlights | |
| 3. Caucasus & Central Asia: Economic Activity Resilient, but Uncertainty Remains | |
| Oil and Gas Exporters | |
| Oil and Gas Importers | |
| Downside Risks: Moderate Impact from Euro Area Crisis | |
| Annex 3.1. Measuring the Informal Economy in the Caucasus & Central Asia | |
| The Size of Informality | |
| What Are the Causes and Indicators of Informality? | |
| Policy Recommendations to Reduce Informal Economies | |
| Statistical Appendix | |
| References | |
| IMF Publications on the Middle East and Central Asia 2011–12 | |
| Boxes | |
| Figures | |
| Tables | |
| Statistical Appendix | |