The global crisis and trade in the Middle East and North Africa region Farrukh Iqbal The World Bank May 5, 2009

Features of crisis pertinent to developing countries  Credit crunch  Growth collapse in OECD countries  Decline in investment flows to developing countries

Credit crunch  Banks reduce lending to each other Freeze in interbank markets in last quarter of 2008  Banks reduce lending to industry Loan to deposit ratio falling in most countries  Banks reduce lending for trade Shortage of trade finance facilities

Growth collapse in OECD countries Source: World Bank and National Agencies. Growth of real GDP, Q to Q3-2008, percent change annualized

Decline in investment flows to developing countries  Reduction in foreign investment flows Affected sectors include real estate, large infrastructure projects, tourism etc.  Reduction in portfolio investment Stock markets crash around the world

$ billions Net private debt and equity flows , projected Percent Percent of GDP (right axis) Private capital flows to developing countries Source: World Bank.

Implications for trade: sharp deceleration  Trade volumes are declining globally  Latest available data from selected MENA countries also show declining trade

World trade to contract in 2009 for the first time since the early 1980s Source: World Bank. annual percent change in trade volumes World trade volume Developing country exports

Evidence from MENA countries  Data only available for selected countries  Data mostly available for fourth quarter of 2008 For Tunisia, first quarter 2009 available  Most countries show decline in exports and imports Compared to previous quarter Compared to same quarter last year

Country specific evidence: exports  Compared to previous quarter  Egypt: down 26%  Iran: down 51% (includes oil)  Jordan: down 13%  Lebanon: down 7%  Morocco: down 28%  Tunisia: down 13%

Country specific evidence: exports  Compared to same quarter last year Egypt: down 16% Iran: down 29% (includes oil) Jordan: down 19% Lebanon: up 5% Morocco: down 12% Tunisia: down 19%

Link between investment and trade  Jordan case FDI down by 69%; imports down by 19%; exports down by 14%  Morocco case FDI down by 51%; imports down by 20%; export down by 28%

Medium term outlook  Latest projections by WB and IMF show that several MENA countries will have current account pressures in both 2009 and 2010

Projected current account balances (as percent of GDP) for selected countries

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