Slower Global Growth Adds to Challenges

In June, I visited Morocco with the IMF’s Chief Economist, Pierre-Olivier Gourinchas, to attend a conference in Rabat organized by the Bank Al-Maghrib and the IMF in the run-up to the 2023 IMF-World Bank Annual Meetings in Marrakech. We also had the opportunity to meet with young Moroccan entrepreneurs to discuss their prospects and challenges, including access to finance, regulation, and finding and retaining talent.

During the conference, we discussed the impact of a protracted war in Ukraine and sanctions against Russia on global economic growth. In her virtual speech, the IMF’s First Deputy Managing Director, Gita Gopinath, said that global economic growth is likely to be lower than previously expected, and the war and accompanying sanctions will add to the challenges facing the world’s poor.

The discussions focused on inflation and how it has broadened beyond energy and food commodity prices in many economies. At that time, strict shutdowns in China weighed on growth and risked causing further supply chain disruptions. A further deterioration of the situation in Ukraine would increase human and economic costs, and higher-than-expected inflation could inflame social tensions.

In this panel, Mr. Gourinchas further elaborated on the economic effects of the war and sanctions. You can also watch the discussion I moderated on gender, inequality, and inclusive growth here.

Fairer Taxes to Aid Growth, Ease Inequality

We took a deep dive into the region’s tax systems in a new IMF staff paper. We found that although the region’s tax systems have evolved significantly, tax revenue as a share of GDP remains relatively low on average. Meanwhile, governments face immediate pressure to increase spending to protect the poor from inflation, improve health and education, build resilience to future shocks, and meet the United Nations Sustainable Development Goals.

You can read more about the gap between actual and potential tax collection in the region in our blog. For more details about the findings of the paper, watch this video of the launch event in July, featuring FDMD Gopinath and other panelists.

North Africa’s Shadow Economy

The shadow economy in North Africa was the main topic of discussion at a conference in Rabat, which IMF Deputy Director Antoinette Sayeh attended in June. The event, which also featured Nadia Fettah, Morocco’s economy minister, and Hala El-Said, Egypt’s planning minister, focused on the findings of an IMF staff paper on informality in North Africa. About two-thirds of the region’s workers operate without any formal arrangement, and informal workers and firms generate about 30 percent of GDP. We found that, to a certain extent, this high level of informality reflects North African countries’ level of development. Nonetheless, it is also due to policy distortions that segment labor markets, such as excessively burdensome and distortionary regulatory, tax, and social protection systems. Thus, bringing informality into the fold requires efforts to improve the quality of governance, reduce the burden of government regulations, widen the availability of financial services, design efficient and non-distortionary tax systems, and remove unnecessary rigidities in labor market codes.

IMF Visits to Egypt and Tunisia

IMF teams visited Egypt and Tunisia in July. They had productive discussions with the respective authorities on the economic reforms and policies that an IMF Extended Fund Facility (EFF) would support. Our teams will continue to engage closely with the authorities in each country to reach staff level agreements.

Readers can find more details about the Egypt visit here and the Tunisia visit here.

Saudi Arabia to Grow at Fastest Pace in a Decade

According to our recent Article IV consultation report, Saudi Arabia will be one of the world’s fastest-growing economies this year, as sweeping pro-business reforms and a sharp rise in oil prices and production drive growth. GDP is expected to expand by 7.6 percent, the fastest rate in almost a decade.

Our report highlights the importance of managing oil revenues sustainably so that spending does not rise and fall with the price of oil. Doing so promotes fiscal sustainability and could help prevent returning to previous oil-driven boom and bust cycles.

Read this Country Focus piece for more on Saudi Arabia’s economic growth.