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

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
Roadmap
Economic Outlook
The Case for Reform
Takeaways

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
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
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
Roadmap
Economic Outlook
The Case for Reform
Takeaways

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
Multiple policy levers are needed to spur higher and
more inclusive growth
Five Pillars of Inclusive Growth

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
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
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. 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. 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. ➢ 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. ➢ 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
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