The IMF’s outlook for the MENA region

The IMF’s outlook for the MENA region has become over the years some sort of a report of a year’s economic policy result assessment of each country. Generally, and despite the on-going unrest in parts of the Arab world and in its neighbouring countries, the near-term economic outlook is very much subject to uncertainties of the global economy. Lower oil prices and production volumes are felt to have led to obviously lower growth in 2017 for most of the region’s oil exporters. These latter have over time past given some boost to the economies in the region. We could safely say that the IMF’s outlook for the MENA region has more to offer than what it is credited with.

The role of the International MonetaryFund as an overseeing organisation is undeniably helping to have a view at one’s country’s performance from as it were a certain distance. As a global organisation, its main function is to help stabilise exchange rates and provide loans to countries in need. It has previously in its Economic Overview of the MENA countries came up with the following :

“The MENA region commands abundant human and natural resources, accounts for a large share of world petroleum production and exports, and enjoys on average a reasonable standard of living. Within this general characterization, countries vary substantially in resources, economic and geographical size, population, and standards of living. At the same time, intra-regional interaction is weak, being restricted principally to labour flows, with limited trade in goods and services.”

This past summer, it reviewed Morocco twice and under as it said ‘under the arrangement under the Precautionary and Liquidity Line (PLL) and produced a report (IMF Country Report No. 17/264) and available in its PDF format.

The report consists of a Press Release of a statement by the IMF following the report proper prepared by a staff team of the IMF in conjunction with officials of Morocco on economic developments as at on August 1, 2017.  We republish excerpts of its Executive Summary with our respectful compliments to the IMF staff and executves.

Growth prospects for 2017 have improved, but non-agricultural growth is subdued. Inflation is low. The current account deficit is projected to decline and international reserves are at a comfortable level. The outlook is still subject to significant domestic and external risks, including weak growth in the euro area and geopolitical risks in the region. 

Key policies and reforms. The new government is committed to pursue fiscal adjustment and key program objectives, including bringing public debt to about 60 percent of GDP by 2021, from 64.7 percent at end-2016, as well as a gradual transition to a more flexible exchange rate regime. Achieving these objectives, reaching higher, job-rich and inclusive growth, and addressing social tensions requires accelerating key reforms in the areas of tax policy, labour market, education, and the business environment, while strengthening social safety nets.

PLL arrangement. In line with the generally positive assessment of Morocco’s policies by the Executive Board in the 2016 Article IV consultation, and despite a recent slowdown in reform implementation, staff considers that Morocco continues to meet the PLL qualification criteria and on this basis, staff recommends the completion of the second review of the PLL arrangement: 

 Morocco’s economic fundamentals and policy frameworks are sound, the country is implementing (and has a track record of implementing) generally sound policies, and remains committed to maintaining such policies in the future. 

 Staff assesses that Morocco continues to meet the PLL qualification criteria and performs strongly in four out of the five areas of PLL qualification (external, monetary, financial, and data), does not substantially underperform in the fifth area (fiscal), and does not face any of the circumstances under which the Fund might no longer approve a PLL arrangement.

 The end-March 2017 fiscal deficit indicative target (IT) was met, but the end-March 2017 reserves IT was missed due to the widening current account deficit, due in part to temporary factors, since July 2016. The authorities have not drawn on the arrangement and continue to treat it as precautionary.

Further reading is in Country Report 17/265 .