Competitiveness and Job Creation in MENA · Competitiveness will need to improve Source: World Economic Forum, Global Competitiveness Report, 2010–11. Competitiveness Rankings,

Ratna Sahay Deputy Director Cairo University Middle East and Central Asia Department January 23, 2011 International Monetary Fund

Afghanistan

Pakistan

Iran Iraq

Saudi Arabia

Yemen

Oman United Arab Emirates Qatar

Bahrain

Kuwait

Sudan

Libya Algeria

Morocco

Mauritania

Lebanon Syria

Jordan

Egypt

Tunisia

Djibouti

Competitiveness and Job Creation in MENA

1

Global outlook: Two-speed recovery in motion

Real GDP Growth (percent change from a year earlier)

Advanced economies

-6

-4

-2

0

2

4

6

8

10

12

2000 02 04 06 08 10P

Sources: IMF, World Economic Outlook, Fall 2010.

Emerging economies

Advanced economies

World Egypt

Global Outlook 2

Note: Egypt number is financial year basis.

2009 2010 2011

World -0.6 4.8 4.2

Advanced economies -3.2 2.7 2.2

Emerging economies 2.5 7.1 6.4

MENA 2.0 4.1 5.1

Egypt 4.7 5.1 5.8

Oil price (in US$) 61.8 76.2 78.8

(Percent change, unless otherwise indicated)

Projection

Global food prices are rising rapidly

Source: IMF, Commodity Price System. ¹ U.S. dollar price index rebased at 2005=100

Global Outlook

80

100

120

140

160

180

200

Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10

IMF Food Price Index (2005-10)¹

50

100

150

200

250

300


Cereals

Meat

Seafood

Vegetable oils

IMF Food Price Index Groups (2005-10)¹

3

4

Inflation has picked up from low levels

Sources: Haver Analytics; and IMF, World Economic Outlook.

Global Outlook

3.3

0.9

1.7

9.6

0

5

10

15

20

25


Emerging economies

Advanced economies

World

Egypt

Core Inflation 12-month growth, percent

-20

-15

-10

-5

0

5

10

15

20

25

Dec-06 Dec-07 Dec-08 Dec-09 Dec-10

Lehman Collapse

Net Monthly Flows to Emerging Market Equity Funds (billions of U.S. dollars)

-8

-6

-4

-2

0

2

4

6

Dec-06 Dec-07 Dec-08 Dec-09 Dec-10

Lehman Collapse

Net Monthly Flows to Emerging Market Bond Funds (billions of U.S. dollars)

9

Capital flows are recovering

Sources: IMF, World Economic Outlook. Global Outlook

5

-4

-2

0

2

4

6

8

2007 08 09 10 11

90% Confidence interval



Central forecast

World GDP Growth (percent change)

Risks to the global recovery tilted down

• Risks tilted to downside— but double-dip unlikely

• Advanced country banking systems still vulnerable

• Internal and external rebalancing needed

Sources: IMF, World Economic Outlook.

Global Outlook 6

Oil Exporters

Iran Iraq

Saudi Arabia

Yemen

Oman United Arab Emirates Qatar

Bahrain

Kuwait

Sudan

Libya Algeria

MENAP Oil Exporters 7

Global demand recovers, boosts activity in oil exporters

Sources: National authorities; and IMF staff estimates.

50

55

60

65

70

75

80

85

90

95

100

-6

-4

-2

0

2

4

6

8

10

2005 2006 2007 2008 2009 2010 2011

Oil GDP

Non-oil GDP

Oil prices (rhs)

MENAP Oil Exporters Real Growth (in percent)

4.6

4.3

78.8

MENAP Oil Exporters 8

Attracts large outward migration from oil importers

Source: World Bank.

Stock of migrants; percent of labor force, 2005

8

10

18

25

42

44

0 10 20 30 40 50

Syria

Egypt

Tunisia

Morocco

Jordan

Lebanon

MENAP Oil Importers 9

Oil Importers

Afghanistan

Pakistan

Morocco

Mauritania

Lebanon Syria

Jordan

Egypt

Tunisia

Djibouti


4.8 5.2

7.1 6.4

2.7 2.2

5.1 5.8

-4

-2

0

2

4

6

8

10

2005 2006 2007 2008 2009 2010P 2011P

MENAP oil importers (excl. AFG, LBN, and PAK)

Emerging and developing economies

Advanced economies

Egypt 1/

(Annual percentage change)

Real GDP growth picking up across the region

MENAP Oil Importers

Source: National Authorities; and IMF staff estimates.. 1/ Financial year basis.

11

But growth and exports lag other regions

Source: IMF, World Economic Outlook.

Goods exports

(in percent of GDP)

5

10

15

20

25

30

35

1990 1995 2000 2005 2010

Emerging and developing economies

MENAP oil importers EM total

EGY

JOR

LBN

MRT

MARPAK

SYR

TUN

Emerging Asia

China

India

-2

0

2

4

6

8

10

-5 0 5 10 15

Volume of exports of goods and services per capita(average annual growth rate, 1990–2009)

Real G

DP

per

cap

ita

(avera

ge a

nnual gro

wth

rate

, 1990–2009)


DJIJOR

MRT

MAR

PAK

SYR

EGY

LBN

TUN

EM average

20

40

60

80

100

120

140

-10 -8 -6 -4 -2 0

Pu

blic

de

bt (

Pe

rce

nt o

f G

DP

)

Fiscal balance (Percent of GDP)

2010

2011

Fiscal

consolidation

Fiscal consolidation in train, but may come under stress

Source: National Authorities; and IMF staff estimates and projections.


Inflation is rising, reflecting sharp increase in food prices

Source: Haver Analytics; and national authorities.

7.1

15.9

10.3

4

6

8

10

12

14

16

18

Jun-09 Dec-09 Jun-10 Dec-10

Core Food Overall CPI

Including: EGY,JOR,LBN,MAR,PAK,TUN

Oil Importers: Consumer Prices (annual percentage change)

14

10.4

15.5

3.9

-4

0

4

8

12

16

20

24

28

Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10

Egypt

Pakistan

Other MENAP oil importers¹

Consumer Prices (annual percentage change)

Monetary policy dilemma, as inflation picks up

MENAP Oil Importers

Sources: Haver Analytics; and national authorities. 1Excludes Mauritania and Syria.

15

High unemployment is a long-standing problem

Sources: National authorities; IMF, World Economic Outlook; staff estimates; and International Labor Organization.

MENAP Oil Importers

12.0

10.9

66.0

107.1

32.1

51.8

0

2

4

6

8

10

12

14

0

20

40

60

80

100

120

140

1991 1993 1995 1997 1999 2001 2003 2005 2007

Unemployment rate (Percent, rhs) Working age population (mm)

Labor force (mm)

16

Youth unemployment is even higher

8.9

12.7

8

14.7

10.9

14.2

11.6

25.4

n/a

21.6

16.5 15.2

30.3

21.8

0

5

10

15

20

25

30

35

Egypt Jordan Lebanon Morocco 2/ Syria Tunisia MENA simple avg

Total Youth 1/

Unemployment rate, 2008 (percent)

Sources: National authorities; IMF, World Economic Outlook; staff estimates; and International Labor Organization. 1/ 2008, or most recent year for which data are available. 2/ Unemployment rate reflects data from Urban Labor Force survey.


President Mubarak: The youth are “the most precious of all our resources and wealth”

Unemployment is high compared to other regions

Sources: National authorities; IMF, World Economic Outlook; staff estimates; and International Labor Organization. Note: MENA6 refers to Egypt, Jordan, Lebanon, Morocco, Syria, and Tunisia. Youth unemployment estimate for MENA6 excludes Jordan. Data refers to 2008 or latest available year.

MENA6

Central and South-Eastern

Europe (non-EU) and CIS

Sub-Saharan Africa

Latin America

Developed Economies

World

South-East Asia and the

Pacif ic

South Asia

East Asia

Egypt

5

10

15

20

25

30

4 6 8 10

Yo

uth

un

em

plo

ym

en

t (P

erc

en

t)

Total unemployment rate (Percent)


Create jobs

Raise

competitiveness

Preserve macro

stability

Challenges going forward


Labor Force: Unemployed and New Entrants

MENA6 Countries

Unemployed in 2008

(millions)

New Entrants (2008–2020)

(millions)

Egypt 2.3 7.1

Jordan 0.2 0.7

Lebanon 0.1 0.1

Morocco 1.7 2.3

Syria 0.8 2.0

Tunisia 0.5 0.5

Total 5.6 12.7

Source: Abdih,Yasser and Anjali Garg (2010), IMF.

Egypt

• 9.4 million jobs need to be created

• GDP growth rate needs to rise to 7 percent per annum to absorb only the new entrants

• GDP growth rate needs to rise to nearly 10 percent per annum to absorb the unemployed and new entrants

=> focus on labor- intensive growth

Competitiveness will need to improve

Source: World Economic Forum, Global Competitiveness Report, 2010–11.

Competitiveness Rankings, 2010–11¹

¹Economies are ranked from 1 to 139, with first place being the best.

MENAP oil importers is a simple average of Egypt, Jordan, Lebanon, Mauritania, Morocco, Pakistan, Syria, and Tunisia. Emerging Asia is simple

average of China, Hong Kong SAR, India, Indonesia, Korea, Malaysia, the Philippines, Singapore, Taiwan Province of China, Thailand, and Vietnam.

0

25

50

75

100

125

150Market size

Inf rastructure

Macroeconomic stability

Health and primary education

Higher education and training

Goods market ef f iciency

Labor market ef f iciency

Financial market sophistication

Innovation

Business sophistication

Technological readiness

Institutions

MENAP Oil Importers Emerging Asia Egypt

MENAP Oil Importers

Best

21

Skills mismatch?

Source: World Bank, Enterprise Survey Results.

3836

3331 31 30

21 2119 18 18

11

0

5

10

15

20

25

30

35

40

LB

N

SY

R

JO

R

MA

R

EG

Y

La

tin

Am

.&

Ca

rib

.

Wo

rld

E. A

sia

& P

acif

ic

E. E

uru

oe

& C

en

tr. A

sia

So

uth

Asia

Su

b-S

ah

ara

nA

fric

a

OE

CD

Firms identifying labor skill level as a major constraint; percent, most recent


Labor markets are rigid

Source: World Bank, Enterprise Survey Results.

Firms identifying labor regulations as a major constraint; percent, most recent

38

34

27

18

1614 14 13

12

109 9

0

5

10

15

20

25

30

35

40

LB

N

SY

R

EG

Y

La

tin A

m.

& C

ari

b.

MA

R

E. A

sia

& P

aci

fic

JOR

So

uth

Asi

a

Wo

rld

OE

CD

E. E

uru

oe

& C

en

tr. A

sia

Su

b-S

ah

ara

nA

fric

a


Egypt

• Firing cost is high (132 weeks of wages relative to 54 weeks in MENA)

• Top private sector positions filled often by relatives or friends

Source: The 7th Egyptian Competitiveness Report (2010)

0

2

4

6

8

10

Real GDP trends, annual percent change

90 1980 85 2000 10

Advanced economies

15 95 05

Source: IMF, World Economic Outlook database.

Note: 1980-2015 real GDP growth data are de-trended as 10-year backward rolling averages.

Asia

Latin America

Seek new economic partnerships


Adapt education driven by private sector demand

Reduce labor market rigidities

Support labor-intensive private

sector

Seek partnerships with dynamic

emerging markets

Jobs and Growth


Documents

Competitiveness and Job Creation in MENA · Competitiveness will need to improve Source: World Economic Forum, Global Competitiveness Report, 2010–11. Competitiveness Rankings,