IMF sees Tunisian economy strengthening, expects growth in Egypt to remain slow

DUBAI — Growth in Egypt's economy is expected to remain sluggish this year as political uncertainty keeps tourists and foreign investors away, the International Monetary Fund (IMF) said Tuesday. 

The economy of the Arab world's most populated country was forecast to grow by 2.7 per cent this year after expanding by 2.1 per cent in 2013, the IMF said in its World Economic Outlook.

"Growth in 2014 is expected to be broadly the same as in 2013, as political uncertainty will continue to weigh on tourism and foreign direct investment," it added.

The slow performance was likely despite the "fiscal stimulus" of support from Gulf countries, which promised billions of dollars in aid to Egypt after the army ousted president Mohamed Morsi in July.

Saudi Arabia pledged $5 billion in aid to the military-installed government in Cairo, with Kuwait and the United Arab Emirates (UAE) offering a combined $7 billion.  

"Large imbalances will persist unless structural reforms and fiscal consolidation are initiated," said the IMF, which was until last year negotiating a $4.8 billion loan to Cairo to help finance the government while it undertakes reforms.

Political changes in the country have set the talks back.   

Egypt's economy grew at 5.1 per cent in 2010, prior to the January 2011 uprising that forced president Hosni Mubarak to step down after ruling for nearly 30 years.

Separately, the IMF expects economic growth in Tunisia, cradle of the Arab Spring uprisings, to gather pace on the back of political and security improvements.

The economy of the North African nation grew by 2.7 per cent in 2013, but is expected to expand by 3 per cent this year, the IMF said.

Growth in gross domestic product (GDP) should reach 4.5 per cent in 2015, it indicated.

"Tunisian growth is expected to strengthen, spurred by improved confidence from a new constitution, reduced security tensions, and pre-election reforms," the IMF said.

Tunisia's central bank said last month that economic growth slowed in 2013 to 2.6 per cent from 3.6 per cent in 2012, citing negative political and security factors. 

Since the 2011 uprising that ousted dictator Zine Al Abidine Ben Ali, Tunisia has been hit by sporadic violence.

Elsewhere, the IMF warned that a rapid growth in US oil production combined with potentially weaker global demand present a downside risk to Gulf oil output and prices.

But despite an expected drop in their current account surpluses, most Gulf Cooperation Council (GCC) economies continue to have "substantial buffers" to cope with short-lived price shocks, the IMF said.

And economic growth in most of the oil-rich GCC economies is to hover near the rates registered last year, with Saudi Arabia's largest Arab economy expanding by 4.1 per cent in 2014, compared to 3.8 per cent in 2013, it added.

"Faster-than-expected growth in the US oil supply and lingering risks of weaker-than-expected global oil demand because of a slowdown in either emerging markets or advanced economies present downside risks to oil prices and GCC production," it elaborated.

The GCC comprises top oil exporter Saudi Arabia, as well as Bahrain, Kuwait, Oman, Qatar and the UAE.

US oil output has been rising fast on the back of the newly tapped shale-based reserves.

The Organisation of Petroleum Exporting Countries (OPEC) oil group said last month that supply from non-members is expected to increase by 1.31 million barrels per day this year, mainly from the United States, Canada and Brazil.

Large current account surpluses in Middle East and North Africa oil exporters are expected to decline in 2014 "because of lower oil revenues," the IMF indicated.

"Although fiscal positions have been weakening across the GCC economies over the past several years, most still have substantial buffers to withstand large shocks to oil prices, provided the shocks are short lived," it said.

Those countries adopted expansionary fiscal policies to fend off the impact of the global financial crisis in 2008, channelling some of the oil windfall into infrastructure projects.

Reduce dependence
on oil

"Policy priorities continue to be centred on diversifying these economies to reduce dependence on oil, increase employment opportunities in the private sector for nationals and enhance resilience to shocks," the IMF recommended.

"Reforms to foster entrepreneurship, along with public wage and employment restraint, are key," it stressed. 

Economic growth in the UAE is expected to be around 4.4 per cent and 4.2 per cent in 2014 and 2015 respectively, compared to 4.8 per cent last year, the IMF said.

Dubai's winning of the right to host World Expo 2020 has further strengthened growth prospects in the UAE where real estate prices are rising at a "fast pace", the IMF added.

Dubai's property sector had nosedived due to the global financial crisis, following five years of rapid growth. But the sector has made a strong comeback as investors flocked back in the emirate that is perceived as a safe haven amid regional turmoil.

Growth in gas-rich Qatar will ease slightly from 6.1 per cent last year to 5.9 per cent in 2014, picking up again in 2015 at 7.1 per cent.

The emirate is expected to spend billions of dollars on infrastructure projects in preparation for the football World Cup tournament in 2022.

Kuwait's economy will grow 2.6 per cent this year and 3 per cent in 2015 after growing by just 0.8 per cent last year.