IMF projections for MENA region "too optimistic" - QNB group
According to QNB Group, with growth in the world's largest economies slowing, the IMF outlook for 2013-14 may be too optimistic and the trend of downward revisions to forecasts is likely to continue.
The Euro zone continues to languish in recession with growth contracting at an annualised rate of 0.6 per cent in Q4 2012 and expected to contract at the same rate in Q1 2013. Growth in China has been slowing consistently and Q1 2013 year-on-year growth of 7.7 per cent disappointed as it was below expectations of 8.0 per cent. After weak annualised growth of 0.4 per cent in Q4 2012, the US recovered in Q1 2013 to 3.0 per cent, driven by stronger consumer spending. The US is a prime candidate for driving acceleration in global growth in 2013-14. However, the outlook remains unclear. The strong Q1 growth figures may just be a bounce back from a weak Q4 2012 and quarterly growth figures have been volatile in recent years.
The IMF’s latest edition of the World Economic Outlook (WEO) revised down its projections for 2013 global growth by 0.2 per cent points to 3.3 per cent, yet again pushing back the expected recovery.
The IMF's forecasts for 2013 growth were revised down in each of its last three quarterly updates to the WEO, from a peak forecast of 4.1 per cent made a year ago. The IMF now does not expect the global economy to achieve 4 per cent growth until 2014.
The IMF expects the US economy to expand by 1.9 per cent in 2013 and 3.0 per cent in 2014 and the Eurozone to recover from a 0.3 per cent contraction in 2013 to growth of 1.1 per cent in 2014. As a result, Advanced Economies are expected to deliver overall growth of 1.2 per cent in 2013 and 2.2 per cent in 2014.
The outlook for Emerging Markets and Developing Economies is positive with a gradual pickup in growth from 5.1 per cent in 2012 to 5.3 per cent in 2013 and 5.7 per cent in 2014. China and India are expected to drive this acceleration. India is expected to pick up from 4.0 per cent in 2012 to 5.7 per cent in 2013 and 6.2 per cent in 2014 while China is expected to accelerate from 7.8 per cent in 2012 to 8.0 per cent and 8.2 per cent. However, the outlook for China may need to be given its disappointing Q1 2013 GDP. Recent data has heightened concerns about the downside risks to China growth, mainly related to the banking sector, which has high levels of non-performing loans and is over-exposed to the indebted real estate sector.
In 2012, nearly every region covered by the WEO experienced a slowdown in growth. The only regions with accelerating growth were MENA and the "ASEAN-5" (Indonesia, Malaysia, Philippines, Thailand and Vietnam). MENA accelerated from 4.0 per cent in 2011 to 4.8 per cent in 2012, despite political transitions in a number of countries. Meanwhile, ASEAN-5 growth accelerated from 4.5 per cent to 6.1 per cent. However, the IMF expects growth to decelerate in 2013 in both regions, dropping to 3.1 per cent in MENA and 5.9 per cent in the ASEAN-5.
Within MENA, growth in oil exporting countries has been stronger than in oil importers. However, hydrocarbon production is likely to level off in 2013, putting a cap on regional growth. Saudi Arabian crude oil production averaged 9.5m barrels per day in February 2013, down from its highs of over 10m in 2012 when production was ramped up to ensure oil markets remained well supplied. The completion of the current phase of Qatar's LNG expansion programme is another important factor in the levelling off in growth in MENA oil and gas exporters.
Despite the regional instability caused by the ongoing crisis in Syria, oil importers are bouncing back slightly from the negative impact on growth of their political transitions. Growth in this group of countries picked up from 1.4 per cent in 2011 to 1.9 per cent in 2012 and is expected to rise further, although there remains considerable downside risks associated with the uncertainties of political transition. Growth may be being helped by some positive indicators such as a recovery in tourism Tunisia and better-than-expected agricultural harvests in Sudan.
Therefore, the difference between growth rates of oil exporters and importers is likely to narrow in 2013-14. MENA oil exporters are expected to grow by 3.2 per cent in 2013 and 3.7 per cent in 2014 while oil importers are expected to grow by 2.7 per cent and 3.7 per cent. This convergence will be encouraged by the expected downward trend in oil prices, which the IMF expect to be 2.3 per cent lower in 2013 and a further 4.9 per cent lower in 2014, on average. This would lower revenue for oil exporters, dampening economic performance, while it should reduce import costs for net importers, providing an economic boost.