Arab Spring economies to recover slowly in 2013

Most economies hit by the Arab Spring uprisings will recover slowly next year, grappling with high inflation and rising unemployment due to poor global conditions, the International Monetary Fund predicted in a report on Sunday.

In its twice-yearly outlook for the Middle East and North Africa, the global lender said a partial return of political stability could permit somewhat faster growth in the combined output of Egypt, Jordan, Morocco, Libya, Tunisia and Yemen during 2013.

But weak demand in Europe and other regions will weigh on the Arab Spring states, it said. In many of those countries, exports are shrinking and have not yet bottomed out, it added.

“Growth is expected to remain below long-term trends, and unemployment is expected to increase owing to continued anaemic external demand, high food and fuel commodity prices, regional tensions and policy uncertainty.”

Reuters reports that the IMF forecast gross domestic product in the countries excluding Libya would expand by 3.6 per cent next year, accelerating from an estimated 2.0 per cent this year and 1.2 per cent in 2011. In 2010, the year before the uprisings, GDP grew  by 4.7 per cent.

Because of sluggish global demand, the group’s current account balance of trade in goods and services will improve only marginally next year, to a deficit of 4.6 per cent of GDP from this year’s 5.4 per cent deficit, the IMF predicted.

It suggested some countries should consider allowing greater flexibility in their exchange rates – code for permitting their currencies to depreciate – in order to stimulate exports, but did not specify which countries.

Weaker currencies could fuel inflation, which the IMF forecast would rise to 8.6 percent for the group next year, the highest level since 2008, from 7.8 per cent this year.

Inflation is expected to rise in Egypt and Morocco as they try to curb their large budget deficits by scaling back food and fuel subsidies, the IMF said.

Libya, which ousted its dictator Muammar Gaddafi last year, is a spectacular exception to the pattern of slow recovery because of its oil wealth. Oil output is returning to its pre-civil war level faster than expected.

The country’s GDP shrank  by 60 per cent last year but is expected to rise  by 122 per cent this year, 17 per cent in 2013 and seven per cent annually on average between 2014 and 2017, assuming the domestic security situation improves, the IMF predicted.

It forecast Libya would run a huge state budget surplus of 19 per cent of GDP in 2012, and a current account surplus of 22 per cent.