Epsilon Capital Management’s First Quarter Middle East/ Africa Economic Round Up

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While the Middle East and Africa (MEA) region continues to weigh the impact of the tumultuous Arab Spring uprisings, the area is facing against another challenge yet again. In addition to the existing domestic instability, a strained external environment (the Euro debt crisis) is proving to be a major threat to the region’s trade, tourism, remittances and other exports receipts. According to the World Bank’s Global Economic Prospects report, the economic recovery seen in Morocco, Jordan and Tunisia in late 2011 is likely to stall in 2012.

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Epsilon Capital Management’s First Quarter Middle East/ Africa Economic Round Up

  1. 1. EPSILON CAPITAL MANAGEMENT’S FIRST QUARTER MIDDLE EAST/ AFRICA ECONOMIC ROUND UP
  2. 2. This is Epsilon Capital Management’s 2 Part Series on theMiddle East/ Africa Economies for the first quarter of2012.In the first part of our report we will look across the region as awhole and more specifically at South Africa, one of the moreprominent economies in this area.Middle East/Africa First Quarter 2012 Economic ReviewMEA region’s lackluster growth to continue
  3. 3. While the Middle East and Africa (MEA) region continues toweigh the impact of the tumultuous Arab Spring uprisings, thearea is facing against another challenge yet again. In addition tothe existing domestic instability, a strained externalenvironment (the Euro debt crisis) is proving to be a majorthreat to the region’s trade, tourism, remittances and otherexports receipts. According to the World Bank’s GlobalEconomic Prospects report, the economic recovery seen inMorocco, Jordan and Tunisia in late 2011 is likely to stall in2012.
  4. 4. That’s more, Morocco, one of the largest importers of wheat,continues to battle ballooning imports bills. As for Jordan, disruptedgas supplies have exacerbated the Hashemite Kingdom’s energy bills.Jordan imports around 95% of its energy needs.
  5. 5. Elsewhere, the possibility of downside risks from the ongoingdisruptions in Syria spilling over to its neighboring countries loomslarge. According to a senior World Bank official, investments havebeen held off in countries including Tunisia, Libya and Egypt as theycontinue to mend their economies after the ouster of their dictators.Egypt remains beleaguered by political uncertainty while its keyindustries continue to grapple with poor demand. Adding to thewoes has also been quickly waning foreign reserves, which are acritical component of the economy.
  6. 6. Decelerating global growth mainly due to the ongoing sovereigndebt crisis in the Euro region has dented the trade environmentin South Africa and Israel. Wide budget and trade deficits, a highunemployment rate, and the threat of strikes remain SouthAfrica’s foremost concerns. On the other hand, Israel remainsupbeat about its growth prospects in the year 2012 thanks topositive domestic economic indicators.
  7. 7. According to the International Monetary Fund (IMF), growth in the MiddleEast and North Africa (MENA) region is projected to be 3.2% in 2012 beforeaccelerating to 3.6% in 2013, lagging behind both global as well as emergingmarkets growth expectations. While the emerging economies are anticipatedto expand 5.4% in 2012, the world economy is expected to grow 3.3%,according to the IMF. The IMF has cut South Africa’s growth estimates to2.5% from an earlier projection of 3.6% against the backdrop of fragilities inthe Euro region.
  8. 8. According to the SA Chamber of Commerce and Industry (SACCI) tradeactivity index (TAI), trade activity gained more momentum in February aftera slow start in January 2012. The TAI rose to 57 points in February,mirroring a gain of 9 points due to an all-round improvement in indexcomponents comprising sales volumes, inventory levels, new orders,supplier deliveries, and employment. The trade environment had sufferedconsiderable setbacks in the final quarter of 2011 before recovering to 48points on the TAI in January 2012.
  9. 9. What’s more, the SACCI’s business confidence index (BCI) gained 2.4 indexpoints to 99.5 in February, the best since June 2011. Business confidencethis year is expected to be buoyed further by measures outlined in theNational Budget for 2012 such as additional allocations for industrial andeconomic development, initiatives to enhance employment and a boost toinfrastructure spending. Yet, the SACCI has expressed concerns over theimpact of protest activities and rising oil prices, which could mar businessoptimism.

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