Growth for countries in the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region has weakened but remains broadly stable in the Caucasus and Central Asia (CCA). Volatile oil prices, restrained oil production, and tighter domestic monetary conditions in most oil exporters add to headwinds from slowing global growth. Elevated public debt in oil importers limits capacity to address critical infrastructure and social needs, restrains growth, and leaves economies vulnerable to external shocks. A more challenging external environment increases the urgency across all regions of further growth-friendly fiscal consolidation and structural reform efforts to enhance resilience and deliver higher and more inclusive private-sector-led growth.

1. IMF | Middle East and Central Asia Department
1
Middle East and North Africa
Regional Economic Outlook
APRIL 29, 2019
Jihad Azour
Director
Middle East and Central Asia Department

2. IMF | Middle East and Central Asia Department
2
REO Themes
Global trends make policy efforts more urgent and more challenging
▪ Fiscal space is shrinking
Lower growth and oil prices, high debt, and rising interest rates constrain policy space
▪ Monetary and exchange rate policies can be supportive
Underdeveloped policy frameworks and weak communication hinder effectiveness
▪ Structural reforms are more urgent
Private sector development and improved governance are critical for higher inclusive growth

3. IMF | Middle East and Central Asia Department
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Global Trends
“A delicate moment for global economy”

4. IMF | Middle East and Central Asia Department
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Global trends
Global growth has slowed
Oil prices are lower and more volatile
3
4
5
2017 18 19 20 21 22
Apr-2019 Apr-18
Global Growth
(Percent)
Global financial conditions are uncertain
External demand is lower
-6
-5
-4
-3
-2
-1
0
1
2
2018 19 20 21 22 23
MENAP OE MENAP OI CCA
Top 10 Trading Partners: Revisions to Import Growth
(Percentage points)
0
2
4
6
8
10
12
14
0
10
20
30
40
50
60
70
80
90
Jan-14 Nov-14 Sep-15 Jul-16 May-17 Mar-18 Jan-19
CBOE crude oil volatility index APSP oil price volatility (RHS)
APSP Oil Price Volatility and CBOE Crude Oil Volatility
2
3
4
2018 2019 2020 2021 Longer run
Central tendency lower level
Central tendency (March 2019)
Central tendency (December 2018)
Federal Reserve Funds Rate

5. IMF | Middle East and Central Asia Department
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Ongoing uncertainty in oil markets
Oil prices have recovered recently… … but are projected to trend lower
0
10
20
30
40
50
60
70
80
90
100
110
120
130
APSP¹ Crude Oil
(US dollars per barrel)
APSP spot price
Sources: Haver Analytics; and IMF staff calculations..
¹ The average of UK Brent, Dubai Fateh, and West Texas Intermediate crude oil prices.
50
52
54
56
58
60
62
64
66
68
70
2019 2020 2021 2022 2023
APSP¹ Crude Oil Projections
(US dollars per barrel)
Spot price, Q1 2019
WEO current APSP projection
WEO Oct 18 APSP projection
WEO Apr 18 APSP projection
Sources: Haver Analytics; and IMF staff calculations.
Note: APSP = average price of spot prices;
¹ The average of UK Brent, Dubai Fateh, and West Texas Intermediate crude oil prices.
Spot price,
Q1 2019

6. IMF | Middle East and Central Asia Department
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Pressure for change
Slow progress since 2011 … … has fueled rising discontent
6
7
8
9
10
11
12
2010 11 12 13 14 15 16 17 18 19 20
Unemployment Rates
(Percent)
MENAP OI MENAP OE CCA EMDC
Sources: ILO: Key Indicators of the Labour Market (KILM); and IMF staff calculations.
40
60
80
100
120
140
160
2015 16 17 18 19
Simple average across seven countries
Sources: Factiva; and IMF staff calculations.
Last observation, February 2019
Reported Social Unrest Index
(Index, 12-month moving average, 2015-2019 = 100)

7. IMF | Middle East and Central Asia Department
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Oil Exporters
“Acclimating to lower and more volatile oil prices”

8. IMF | Middle East and Central Asia Department
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Sluggish growth recovery
Real GDP Growth
(Weighted average, Percent)
Non-Oil Real GDP Growth
(Weighted average, Percent)
Median Interquartile RangeGCCAverage MENAP OE
Note: Excludes Libya and Yemen.
Note: Excludes Libya.
-2
0
2
4
6
2017 2018 2019 2020-23
-2
0
2
4
6
2017 2018 2019 2020-23

9. IMF | Middle East and Central Asia Department
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External Pressures
Current account balance declining… … and credit growth slowing
0
2
4
6
8
10
12
14
16
18
20
Jul-12 Jun-13 May-14 Apr-15 Mar-16 Feb-17 Jan-18 Dec-18 Nov-19
Credit to the private sector
Money Supply: M2, 1-year lead
Money Supply M2 and Credit to the Private Sector Growth
(Percent, year over year)
-3
-1
1
3
5
7
2017 2018 2019 2020-23
Current Account Balance
(Weighted average, Percent of GDP)
Median, April 2019
Weighted average, April 2019
Weighted average, October 2018

10. IMF | Middle East and Central Asia Department
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Fiscal policy challenges
Reduced impact on growth … … and spending still above affordable levels
-12
-10
-8
-6
-4
-2
0
2
4
0
2
4
6
8
10
2012 13 14 15 16 17 18 19
Non-oil real GDP growth
Fiscal impulse, right scale
GCC: Non-Oil Real GDP Growth and Fiscal Impulses
(Percent and percent of non-oil GDP, weighted averages)
40
60
80
100
120
140
IRN ALG OMN BHR SAU LBY UAE IRQ KWT QAT
Fiscal Breakeven Oil Prices
(US$ per barrel)
2019
2014
APSP oil price 2019

11. IMF | Middle East and Central Asia Department
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This Photo by Unknown Author is licensed under CC BY-SA
Policy advice: Deeper reforms needed to revive growth
Fiscal
• Resume gradual consolidation
• Requires both expenditure cuts and revenue
mobilization
• Insulate economy from oil shocks
• Anchor in credible medium-term framework
• Strengthen fiscal institutions
Structural
• Strengthen business environment and governance
• Improve SME access to finance
• Invest in human and physical capital

12. IMF | Middle East and Central Asia Department
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Oil Importers
“Managing vulnerabilities in an uncertain outlook”

13. IMF | Middle East and Central Asia Department
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0
2
4
6
2017 2018 2019 2020-23
Modest growth and elevated unemployment
Real GDP Growth
(Weighted average, Percent)
Median
Interquartile Range
MENAP OI, current
MENAP OI, October 2018
10
15
20
25
30
35
2000 02 04 06 08 10 12 14 16 18 20
MENAP OI EMDE
Advanced economies MENAP OI female
Sources: International Labour Organization: Key Indicators of the Labour Market; and IMF staff calculations.
Note: EMDE = emerging market and developing economies. MENAP OI = Middle East, North Africa,
25.9 million new entrants into
MENAP OI labor force by 2025
Youth Unemployment Rate
(Percent of labor force)
Projections

14. IMF | Middle East and Central Asia Department
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External vulnerabilities persist
Reduced current deficits from lower oil prices … … but external conditions challenging
Top 10 Trading Partners, Revisions from April 2018Current Account Balance
(Weighted average, Percent of GDP)
-12
-10
-8
-6
-4
2017 2018 2019 2020-23
-5
-4
-3
-2
-1
0
1
2017 2018 2019 2020 2021 2022 2023
MENAP OI
Growth of imports of top trading partners
GDP growth of top trading partners
Median, April 2019
Weighted average, Oct 2018
Weighted average, April 2019

15. IMF | Middle East and Central Asia Department
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Elevated public debt limits fiscal space
Fiscal policy can no longer drive growth … … but a rejuvenated private sector could
0
3
6
9
12
15
18
21
EMAsia EMEurope LAC SSA MENAP OI MENAP OE
Private Investment Ratios by Regions
(2000–18 average, percent of GDP)
0
20
40
60
80
100
120
140
160
180
SDN LBN DJI JOR EGY MRT TUN PAK MAR WBG AFG
2008
2018
Benchmark for Emerging Market Economies
Gross Government Debt
(Percent of GDP)

16. IMF | Middle East and Central Asia Department
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Policy advice: Balance near-term vulnerabilities and medium-term
challenges
Fiscal
• Limited space means consolidation essential
• But must be growth-friendly
• Targeted social transfers, restructuring SOEs,
digitization
Monetary
• Limited scope for policy support
• Greater exchange rate flexibility needed
Structural
• Improve access to credit
• Improve governance and business environment
• Product and labor market reforms

17. IMF | Middle East and Central Asia Department
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Dealing with cross-cutting issues and risks
“Supporting inclusive growth in the region”

18. IMF | Middle East and Central Asia Department
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IMF Goal for the Region: Higher inclusive growth
0
1
2
3
4
5
6
7
Algeria Libya Mauritania Morocco Tunisia
2018‒23 projected growth
Trade openness
Participation in GVC
Diversification
Quality
Source: IMF 2017b; and staff calculations. Note: GVC = Global Value Chain. The growth increase is conditional on an
increase in the given trade measure equal to the best historical period-over-period improvement observed in the Middle
East and North Africa region in the past 20 years. For trade openness: 7.7 percentage points; for global value chain: 4
percentage points; for diversification: 2.4 percentage points; for quality: 1.5 percentage points.
Growth Gains from Trade Integration in the Maghreb
(Percent)
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
MENA CCA EUR APD SSA
Growth Benefits from Closing the SME Financial Inclusion Gap
(Percentage points)

19. IMF | Middle East and Central Asia Department
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IMF Policy Agenda
Inclusive growth
• “Enhancing the Role of SMEs in the Arab World”
(Forthcoming)
• “Financial Inclusion of Small and Medium-Sized
Enterprises in the Middle East and Central Asia”
(February 2019)
• “Opportunity for All: Promoting Growth and Inclusiveness
in the Middle East and North Africa” (July 2018)
Integration
• “Economic Integration in the Maghreb : An Untapped
Source of Growth” (February 2019)
• “Opening Up in the Caucasus and Central Asia : Policy
Frameworks to Support Regional and Global Integration”
(February 2019)
• “Fintech, Inclusive Growth and Cyber Risks in MENAP
and CCA” (September 2018)
Structural Reform Agenda
• “Governance and Corruption” (Forthcoming)
• “Trade and Foreign Investment: Keys to Diversification
and Growth in the GCC” (December 2018)
• “Public Wage Bills in the Middle East and Central Asia”
(January 2018)
Address “Conflicts and Fragility” Issues
• “Assessing oil and non-oil GDP from space”
(Forthcoming)
• “Macroeconomic Policy Challenges in Conflict
Countries and Fragile States: Experience from the
Middle East” (February 2019)
• “Conflict in the Middle East and Central Asia: Costs
and Economic Policy Priorities” (October 2018 REO)

20. IMF | Middle East and Central Asia Department
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REO Summary
Global trends make policy efforts more urgent and more challenging
Fiscal policy
► Lower growth increases the motive for fiscal expansion
► But low oil prices, high debt and interest rate uncertainty constrain policy space
Monetary policy
► Strengthen frameworks and enhance communication
Structural reforms
► With limited alternatives, structural reforms are essential for sustainable inclusive growth
◆MENAPOE: Better access to finance, especially for SMEs. Invest in human and public capital; better governance
◆MENAPOI: Product and labor market reforms to unleash the private sector; strengthen governance

21. IMF | Middle East and Central Asia Department
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THANK YOU