Middle East and North Africa 2007 Economic Developments and Prospects Job Creation in an Era of High...
-
Upload
lucas-lancaster -
Category
Documents
-
view
214 -
download
1
Transcript of Middle East and North Africa 2007 Economic Developments and Prospects Job Creation in an Era of High...
Middle East and North Africa
2007 Economic Developments and Prospects
Job Creation in an Era of High Growth? Challenges and Opportunities
Mustapa K. NabliChief Economist
Middle East and North Africa RegionWorld Bank
Cairo, May 31, 2007
2006 was another year of robust economic growth in MENA
• Strong economic growth in MENA for the fourth year in a row
• Growth driven by oil revenues, ongoing recovery in Europe and policies broadly in the right direction
• GDP in MENA (exc. Iraq) increased by 6.3 percent up from 4.6 percent in early 2000s
But significant differences among sub-groups and countries
• Resource poor labor abundant grew by 5.6 percent
• Resource rich labor abundant grew by 4.3 percent
• Resource rich labor importing grew by 7.5 percent
Regional growth steps up to 6.3% in 2006
2
4
6
8
1996-1999 2000-2003 2004 2005 2006
RPLA
RRLA
RRLI
MENA excl IRQ
Source: National Agencies and World Bank.
real GDP growth, percent
Diverse outcomes across resource poor economies in 2006real GDP growth, percent
-6 -3 0 3 6 9
Morocco
Egypt
Jordan
RPLA
Tunisia
Djibuti
Lebanon
WB/Gaza
20052006
Source: National agencies and World Bank estimates.
-12%
General step-up in growth for MENA oil exporters in 2006
real GDP growth, percent
0 3 6 9 12
IranSyria
RRLAYemenAlgeria
QatarUAE
LibyaRRLI
BahrainOman
KuwaitSaudi
20052006
Source: National agencies and World Bank estimates.
On a per-capita basis much better performance than in the past
• Per-capita growth was 4.2 percent, the highest level recorded in at least two decades, up from 1.7 percent in 1990s
• MENA’s per-capital income is now growing at 75 percent of the rate attained by other developing regions, up from 61 percent in the 1990s.
Surge in oil revenues underpins growth of MENA exporters crude oil and product revenues $bn [left];
oil price, WB $/bbl [right]
50
100
150
200
250
300
350
400
450
500
550
2002 2003 2004 2005 2006
25
30
35
40
45
50
55
60
65RRLA revenues
RRLI revenues
Oil Price
Source: UN Comtrade, IMF, IEA, World Bank.
There is a shift in domestic demand in favor of investment
• The contribution of gross investment to growth almost doubled in 2006 to 4.1 GDP growth points
• Private investment as a share of GDP reached almost 16 percent and is increasing for all sub-groups
• FDI is low but growing particularly in resource poor countries• Imports of capital goods significant
Private investment as a share of GDP
10
11
12
13
14
15
16
2000 2001 2002 2003 2004 2005 2006
Source: National Agencies and World Bank.
RPLA
RRLA
RRLI
MENA
Fiscal balances improved but not everywhere
• Fiscal deficits for resource poor countries declined from 6.7 percent of GDP in 2005 to 6 percent of GDP in 2006. Lebanon, WBG and Djibouti deficits expanded.
• Fiscal surpluses for resource rich labor importing countries improved to 25. 8 percent of GDP. All improved but UAE
• But for resource rich labor abundant countries they declined to 3.1 percent of GDP.
-10
0
10
20
30
40
50
Kuwait UAE RRLI Saudi Oman Algeria RRLA Iran
2005
2006
Source: National Agencies and World Bank. *selected economies.
RRLI fiscal surplus continues at high levels
fiscal balance as a share of GDP %
Labor markets are more dynamic
• High economic growth has gone together with:
– Strong employment creation– Declining unemployment rates– Strong labor force growth– Increasing labor force participation rates,
particularly among women
Summing up MENA’s labor market story, 2000-2005
Includes: Algeria, Bahrain, Egypt, Iran, Jordan, Kuwait, Morocco, Qatar, Saudi Arabia, Tunisia, United Arab Emirates, West Bank and Gaza.
2.8
3.6
4.55.1
0.0
1.0
2.0
3.0
4.0
5.0
6.0
WAP LF JOBS GDP
Unemployment declining
• Between 2000-05 MENA’s aggregate unemployment fell from 14.3 to 10.8 percent (for the 12 countries in the sample)
• This took place at the same time that the region is experiencing the crest of the labor force growth path
Most progress in the largest countries
0
5
10
15
20
25
30
35B
HR
QT
R
SA
U
EG
Y
MO
R
IRN
TU
N
ALG
KW
T
UA
E
JOR
WB
G
LBN
YM
N
IRQ
2000 2005
Falling unemployment rates
Increasing unemployment rates
What kind of new jobs?
• Mostly created in the private sector as public employment demand slows down
• New jobs primarily in services and agriculture
• Productivity remains low but some promising sings of more employment within sectors with raising productivity
Most new jobs are in the private sector
Contribution to total employment growth (in percentage points)
-0.1 -0.2
2.2
2.3
3.7 3.2
1.9
4.2 3.6
0.3
0.20.4
2.5
-1
0
1
2
3
4
5
6
7
MO
R
IRN
SA
U
JOR
EG
Y
ALG
Work at HomePrivatePublic
The services sector has been leading job creation except in Morocco and IranContribution to employment growth (in percentage points)
1.9 1.91.4
-1.4
0.5
1.5
0.6
0.82.1
1.9
2.5
3.61.4
0.9
0.0
0.40.3
0.4
0.8
0.1
2.5
-2
-1
0
1
2
3
4
5
6
7
WB
G
MO
R
TU
N
IRN
EG
Y
JOR
AL
G
Agriculture Industry
Services Work at home
Is this a new era of opportunities?(1) Global prospects
• Positive prospects for oil revenues?
• Positive global growth prospects?
• Asian potential
Oil Market Conditions 2007-2009
• Oil receipts from 2004 amount to $1.25 trillion, large portion held as int’l reserves or invested
• Oil prices expected to stay elevated but after a gradual softening (~49$/B) by 2009
• However, there is substantial uncertainty about the path of oil prices, of oil supply, and of oil demand.
0
10
20
30
40
50
60
70
2000-2004
2005 2006 2007 2008 2009
World Bank avg oil price
-1
1
2
3
4
5
6
7
8
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007
Weaker but still robust prospects
Real GDP annual percent changeForecast
Developing
High-income
2009
Developing ex. China &
India
Is this a new era of opportunities?(2) Domestic country prospects
• Reforms starting to bear fruit? – Private sector investment– Exports and integration into the global
economy– Diversification of economies/exports
• Higher sustainable growth spreading beyond major oil exporters?
Table 1
Is this a new era of opportunities?(3) Regional prospects
• Potential for matching of availability of investment funds (from oil exporters) and good opportunities for investment in non-oil exporters?
• Is this the time for progress on regional integration?
Record flows of foreign direct investment to the region during 2006
$ billions
0
5
10
15
20
25
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: National agencies, IMF, UNCTAD, World Bank. Note: RPLA = resource-poor, labor-abundant (countries).
Total FDI
RPLA FDI
But an era of major challenges: (1) employment challenge: quantity
of jobs
MENA will continue to face very high labor force growth in the near future
High sustained economic growth will be needed to meet labor force growth and tackle unemployment
But the job creation challenge continues to be high
Labor force growth, MENA and other developing regions, 2000-2020.
EAP
ECA
LAC
SA
SSA
MENA
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2000-2005 2005-2010 2010-2020
% g
row
th p
er y
ear
Job creation needed to reach different goals for employment rates
68
81
99
0
20
40
60
80
100
120
Current scenario: 60 percent EU current: 64 percent EU goal: 70 percent
Employment rates by 2020
Jo
bs
ne
ed
ed
by
20
20
But an era of major challenges: (2) employment challenge:
quality of jobs
• Is there a trade-off between quantity and quality of jobs?
Labor productivity growth and job growth in
subsectors, Ireland, Tunisia, and Morocco
-4
-2
0
2
4
6
8
10
12
14
-6 -1 4 9 14
Productivity growth
Em
plo
ym
en
t g
row
th
Ireland 1995-1999: positive relationshipTunisia 1997-2001: negative relationshipMorocco 1999-2003: negative relationship
Annual employment growth vs. annual productivity growth, agricultural, industrial, and services
sectors, 2000–05
ALG SERV*EGY NON-AG
IRN AGR
ALG AGR
ALG SERV
EGY AGR
SAU SERV
SAU AGR
IRN INDJOR SERV
TUN SERVALG IND
JORD IND
JORD AGR
IRN SERV
SAU IND
MOR SERV
TUN IND
TUN AGRMOR IND
MOR AGR
WBG AGR
WBG SERV
-1.0
1.0
3.0
5.0
7.0
9.0
-15.0 -10.0 -5.0 0.0 5.0 10.0
Labor productivity growth
Em
plo
ym
en
t g
row
th
Employment grew in sectors with labor productivity growth
Employment grew in sectors where labor productivity fell
Trendline excluding WBGR2 = 0.55
But an era of major challenges: (3) risks of increased inequality?
• Inequality between countries in the region
• Inequality within countries
• Need for more modern social safety nets for those who may not be sharing in higher economic growth
• Risks for sustainability of reforms
But an era of major challenges: (4) More global competitive
environment• The emerging giants: India and China
• Risks of reversal to protection in the advanced countries
• The European Neighborhood
More capital is going to East Europe and Central Asia and to East Asia and Pacific regions
Europe & Central Asia
26%
Latin America & Caribbean
47%
East Asia & Pacific
15%
Sub-Saharan Africa
5%South Asia5%Middle East &
North Africa2%
2000 2006
Total net private capital flows to developing countries
Latin America & Caribbean
14%
Middle East & North Africa
4%
South Asia6%
Sub-Saharan Africa
6%
East Asia & Pacific
28%
Europe & Central Asia
42%
But an era of major challenges: (5) Managing the oil revenues?
• Investment vs. consumption of the windfall revenues
• Productive investment and transformation of oil wealth into other sustainable wealth
• Diversifying inside and outside the region
• Managing the financial risks: financial bubbles, real estate bubbles
• Major implications for non-oil exporters