Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Securing Economic Resilience under the New Oil Order: The Need for Reform

509 views

Published on

Allison Holland - International Monetary Fund
ERF Conference on “Arab Oil Exporters: Coping with a New Global Oil Order”

Kuwait, November 26-27, 2017
www.erf.org.eg

Published in: Government & Nonprofit
  • Be the first to comment

  • Be the first to like this

Securing Economic Resilience under the New Oil Order: The Need for Reform

  1. 1. 1 ERF / AFESD Policy Conference Arab Oil Exporters: Coping with a New Global Oil Order Securing Economic Resilience under the New Oil Order: The Need for Reform Allison Holland Middle East and Central Asia Department International Monetary Fund Kuwait, Nov 26-27, 2017
  2. 2. 2 Roadmap Economic Outlook The Case for Reform Takeaways
  3. 3. 3 Low oil prices weigh on the growth outlook 3 Overall, Oil, and Non-Oil Real GDP Growth (Percent) Sources: National authorities and IMF staff calculations. Notes: Regional aggregates are calculated using PPPGDP weights. Averages across years are calculated using simple averages. Oil Price Assumptions (APSP¹, U.S. dollars a barrel) 40 50 60 70 80 90 100 2012 13 14 15 16 17 18 19 20 21 22 May 2017 REO Update October 2016 REO October 2017 REO -4 -2 0 2 4 6 8 10 2000-15 16 17 18 19-22 2000-15 16 17 18 19-22 GCC Algeria Overall Real GDP Growth Oil Real GDP Growth Non-Oil Real GDP Growth
  4. 4. 4 Reflecting necessary fiscal consolidation –6 –5 –4 –3 –2 –1 0 1 2 2014—16 17 18 19—22 Capital Wages Other current Non-oil revenues Change in Expenditure and Non-oil Revenue (Percent of non-oil GDP, change from prior year, simple average across countries) BHR KWT OMN QAT SAU UAE ALG IRQ YMN –10 –9 –8 –7 –6 –5 –4 –3 –2 –1 0 0 5 10 15 20 25 30 Changeinnon-oilGDPgrowth (percentagepointsofnon-oilGDP, projectedaverage2016—17minus2013—14) Change in non-oil Primary Balance (percentage points of non-oil GDP, projected average 2016-17 minus average 2013—14) Impact of Change in Non-oil Primary Balance on Growth Source: IMF staff calculations. Note: The removal of subsidies may not be fully captured in the non-oil primary balance for Bahrain. Country abbreviations are International Organization for Standardization (ISO) country codes.
  5. 5. 5 Continued—and in some cases accelerated—fiscal consolidation is important to maintain sustainability -20 -15 -10 -5 0 5 10 15 2011 13 15 17 19 21 GCC Iraq + Algeria ■ 2010 ■ 2016 ■ 2022 — Median □ Inter-quartile range Public Debt and Interest (Percent of GDP and percent of non-oil revenues) Overall Fiscal Balance (Percent of GDP) T Range ○ Outlier
  6. 6. 6 Roadmap Economic Outlook The Case for Reform Takeaways
  7. 7. 7 Stronger growth needed to meet employment challenges Projected Labor Force Increase (Millions of people, cumulative) Youth Unemployment Rate (Percent) Sources: ILO.Sources: 2016 International Labor Organization; World Bank; and IMF staff estimates. EGY JOR LBN MRT MAR SDN SYR TUN DZA BHR IRQ KWT LBY OMN QAT SAU ARE YEM MENAP 0 10 20 30 40 50 60 0 10 20 30 Youthunemploymentrate(ages15–24) Total unemployment rate Trendline for all countries •Arab Oil Importers •Arab Oil Exporters 0 2 4 6 8 10 12 14 16 2018 2019 2020 2021 2022 GCC Other Arab Oil Exporters Arab Oil Importers Labor Force in 2017 (estimate): GCC: 26.3 million Other Arab Oil Exporters: 33.4 million Arab Oil Importers: 71.5 million
  8. 8. 8 Multiple policy levers are needed to spur higher and more inclusive growth Five Pillars of Inclusive Growth
  9. 9. 0 10 20 30 40 50 60 70 80 90 100 Governance and Corruption Doing Business (Distance to Frontier) Global Competitiveness 9 Structural reforms need to be accelerated Source: World Bank Doing Business Indicators and World Governance Indicators. World Economic Forum Global Competitiveness Index Structural Indicators (Percentile rank, 100=best) 2010 2016 GCC period average EM period average AE period average
  10. 10. 10 Current employment model creating fiscal rigidities Government Expenditure (Percent of GDP, PPP weighted average) -1 1 3 5 7 9 11 13 15 0 5 10 15 20 25 30 35 40 45 2005 06 07 08 09 2010 11 12 13 14 15 16 Total Expenditure Wages and Salaries (RHS) 0 10 20 30 40 50 60 70 80 90 100 Public Sector Employment of Nationals (2016, as a share of total nationals' employed)
  11. 11. 11 Improving education quality and boosting productivity will be critical Lebanon Bahrain Turkey Kazakhstan Qatar Egypt Japan Russia Oman Thailand Mexi… United States Morocco South Africa Algeria Malaysia Kuwait Saudi Arabia 250 300 350 400 450 500 550 600 1 2 3 4 5 6 7 8 9 10 11 12 Averagemathandscience8thgrade TIMSSscoresfor2015 Expenditure on education (In percent of GDP) Student Performance Compared to Education Spending • GCC • Other MENAP oil exporters • MENAP oil importers • Emerging and developing economies • Advanced economies Labor Productivity (Index, 2001 Output per Worker in PPP Dollars = 100) Source: ILO, and IMF staff estimates
  12. 12. 0.0 0.2 0.4 0.6 0.8 1.0 UAE IRN QAT SAU DZA KWT JOR EGY TUN MAR PAK OtherOE OtherOI 1995 EMDE average 2014 MENAP oil importersMENAP oil exporters 12 Improving export diversity and quality would capitalize on global growth momentum and generate growth Source: IMF Diversification database; and IMF staff calculations ¹ 2014 is latest available year for the diversity index Note:; EMDE = Emerging and developing economies; Other oil importers (OI) include Bangladesh, Cambodia, Vietnam. Other oil exporters (OE) include Malaysia, Mexico, and Indonesia. Diversity index rebased to be from 0 to 1, and is equal to a Theil index of export concentration. Export Diversity Index, 2014 ¹ (0 to 1, higher is more diverse) 0 0.2 0.4 0.6 0.8 1 1.2 Food&liveanimals Beverages& tobacco Crudematerials, exceptfuels Mineralfuels Animal&veg.oils Chemicals ManufGoods Machinery& transp.equip. Productquality(1=90thpercentileinworld) SITC1 Product Category Global Quality Ladder MENAP oil importers MENAP oil exporters EMDEs Export Quality, 2014 ¹ (0 to 1.2, higher is better)
  13. 13. Access to finance remains an impediment; greater adoption of financial technology could help 13 0 2 4 6 8 10 12 14 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 Private Credit Growth (Percent, year-over-year) 0 10 20 30 40 50 60 70 Algeria MENA Kuwait Oman Qatar Bahrain SaudiArabia UAE OECDaverage Access to Credit (Distance to Frontier, WB Doing Business 2017)
  14. 14. ➢ Growth outlook remains subdued over the medium term ➢ Fiscal consolidation should continue to secure macroeconomic stability ➢ Structural reforms need to be accelerated ➢ Active labor market policies needed to support private sector job creation ➢ Business environment needs to be enhanced ➢ Scope to exploit opportunities in global trade ➢ Greater use of technology could improve access to finance Takeaways 14
  15. 15. ➢ Regional Economic Outlook: Middle East and Central Asia, IMF, October 2017 ➢ More Bang for the Buck in the GCC: Structural Reform Priorities to Power Growth in a Low Oil Price Environment, IMF, November 2016 ➢ Learning to Live with Lower Oil Prices: Policy Adjustment in Oil- Exporting Countries of the Middle East and Central Asia, IMF Departmental Paper, June 2016 ➢ Avoiding the New Mediocre: Raising Long-term Growth in the Middle East and Central Asia, IMF Departmental Paper, March 2016 ➢ Economic Diversification in the GCC: Past, Present, and Future, IMF Staff Discussion Note, December 2014 References 15

×