118394_bmi north africa business forecast report q4 2010

IMPORTANT NOTICE:

The information in this PDF file is subject to Business Monitor International’s full copyrightand entitlements as defined and protected by international law. The contents of the file are for thesole use of the addressee. All content in this file is owned and operated by Business MonitorInternational, and the copying or distribution of this file, internally or externally, is strictly prohibitedwithout the prior written permission and consent of Business Monitor International Ltd.If you wish to distribute the file, please email the Subscriptions Department [email protected], providing details of your subscription and the number of recipientsyou wish to forward or distribute this information to.

DISCLAIMER

All information contained in this publication has been researched and compiled from sources believed tobe accurate and reliable at the time of publishing. However, in view of the natural scope for human and/ormechanical error, either at source or during production, Business Monitor International accepts no liabilitywhatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part ofthe publication. All information is provided without warranty, and Business Monitor International makes norepresentation of warranty of any kind as to the accuracy or completeness of any information heretocontained.

Business Forecast report

Q4 2010

issn 1746-5788published by Business Monitor international Ltd.

www.businessmonitor.com

nortH aFricaincludes 10-year forecast to 2019

European Debt Crisis: Economic Impact Assessed

4 Business Monitor international ltdwww.businessmonitor.com

nortH aFrica Q4 2010 n

or

tH a

Fric

a –

Ma

cr

oe

co

no

Mic

Da

ta a

nD

Fo

re

ca

sts

alg

eria

2005

2006

2007

2008

2009

e20

10f

2011

f20

12f

2013

f20

14f

nom

inal

Gd

P, u

s$b

n [2

] 10

3.3

117.

113

4.1

156.

913

4.0

160.

316

9.4

190.

520

7.0

222.

0

rea

l Gd

P g

row

th, %

cha

nge

y-o-

y [2

]3.

73.

63.

13.

52.

33.

13.

95.

24.

13.

7

Bud

get b

alan

ce, %

of G

dP

[2]

14.1

13.5

6.6

10.6

-7.5

-2.2

-2.4

1.6

3.3

4.9

con

sum

er p

rices

, % y

-o-y

, eop

[3]

1.7

4.4

3.9

6.4

5.7

4.0

3.0

3.0

3.0

3.0

exc

hang

e ra

te d

Zd/u

s$,

eop

[4]

73.5

870

.11

66.8

970

.46

71.9

175

.00

74.0

072

.00

70.0

070

.00

cur

rent

acc

ount

, % o

f Gd

P [5

] 20

.524

.722

.822

.09.

717

.815

.917

.616

.515

.3

tota

l gov

ernm

ent d

ebt,

% o

f Gd

P [5

] 25

.922

.011

.919

.621

.623

.022

.421

.320

.219

.1

e/f =

BM

I est

imat

es/fo

reca

sts.

Sou

rces

: 1 IM

F/B

MI;

2 O

NS

/BM

I; 3

BM

I; 4

Min

istry

of F

inan

ce/B

MI.

Liby

a

nom

inal

Gd

P, u

s$b

n [2

] 49

.261

.675

.989

.771

.568

.673

.179

.786

.193

.6

rea

l Gd

P g

row

th, %

cha

nge

y-o-

y [2

] 11

.15.

74.

92.

7-0

.93.

83.

46.

04.

95.

5

Bud

get b

alan

ce, %

of G

dP

[2]

24.6

32.3

23.2

24.6

3.2

16.8

17.9

22.0

22.0

22.4

con

sum

er p

rices

, % y

-o-y

, eop

[3]

9.8

2.8

7.3

9.8

0.4

3.0

3.0

3.0

3.0

3.0

exc

hang

e ra

te l

yd

/us

$, e

op [4

] 1.

351.

281.

221.

301.

201.

251.

251.

251.

251.

25

cen

tral B

ank

polic

y ra

te, %

[1,2

] 4.

004.

004.

005.

005.

005.

005.

005.

005.

005.

00

cur

rent

acc

ount

, % o

f Gd

P [2

] 30

.436

.037

.639

.810

.024

.818

.818

.311

.77.

2

e/f =

BM

I est

imat

es/fo

reca

sts.

Not

es a

nd s

ourc

es: 1

Dis

coun

t rat

e; 2

IMF/

BM

I; 3

Cen

tral B

ank

of L

ibya

/BM

I; 4

BM

I.

Mor

occo

nom

inal

Gd

P, u

s$b

n [2

] 59

.065

.975

.289

.293

.994

.999

.010

2.1

104.

210

7.7

rea

l Gd

P g

row

th, %

cha

nge

y-o-

y [2

] 2.

67.

73.

14.

34.

63.

64.

44.

33.

93.

6

Bud

get b

alan

ce, %

of G

dP

[3]

-4.8

-2.2

0.2

0.4

-2.0

0.5

1.7

1.7

2.3

2.7

con

sum

er p

rices

, % y

-o-y

, eop

[1,2

] 2.

13.

32.

04.

21.

52.

02.

02.

02.

02.

0

exc

hang

e ra

te M

ad

/us

$, e

op [4

] 9.

258.

427.

718.

017.

888.

008.

158.

458.

758.

80

cur

rent

acc

ount

, % o

f Gd

P [6

] 1.

82.

2-0

.1-5

.2-5

.0-1

.7-0

.60.

30.

81.

1

tota

l gov

ernm

ent d

ebt,

% o

f Gd

P [3

] 63

5.0

579.

851

3.0

438.

443

3.3

441.

343

5.7

435.

143

9.3

436.

5

e/f =

BM

I est

imat

es/fo

reca

sts.

Sou

rces

: 1 H

aut-C

omm

issa

riat A

u P

lan,

BM

I; 2

Min

istry

of F

inan

ce/B

MI;

3 B

MI.

tuni

sia

nom

inal

Gd

P, u

s$b

n [1

] 27

.631

.636

.737

.139

.142

.146

.050

.253

.657

.3

rea

l Gd

P g

row

th, %

cha

nge

y-o-

y [1

] 4.

05.

46.

34.

62.

43.

95.

86.

05.

75.

5

Bud

get b

alan

ce, %

of G

dP

[2]

-2.0

-2.7

-2.7

-1.6

-0.2

0.4

-0.6

-0.5

-0.4

0.1

con

sum

er p

rices

, % y

-o-y

, eop

[3]

3.9

3.1

5.2

4.2

4.3

3.0

3.0

2.5

2.5

2.0

exc

hang

e ra

te t

nd

/us

$, e

op [4

]1.

361.

301.

221.

311.

321.

321.

321.

321.

341.

35

cen

tral B

ank

polic

y ra

te, %

[4]

-5.

255.

255.

255.

254.

504.

755.

005.

005.

00

cur

rent

acc

ount

, % o

f Gd

P [5

] -1

.1-2

.0-2

.5-7

.0-4

.6-4

.7-4

.6-4

.3-4

.0-3

.6

e/f =

BM

I est

imat

es/fo

reca

sts.

Sou

rces

: 1 IN

S, B

MI;

2 IN

S/B

MI;

3 IN

S; 4

BM

I; 5

IMF/

BM

I.

5Business Monitor international ltd www.businessmonitor.com

contents

BMi risk ratingsBMi risk ratings – algeria ............................................................................................................................................................8BMi risk ratings – Libya ...............................................................................................................................................................9BMi risk ratings – Morocco .......................................................................................................................................................10BMi risk ratings – tunisia..........................................................................................................................................................11africa – ratings League tables ............................................................................................................................. 12

executive summary ................................................................................................................................................ 15north africa: Good prospects in 2010........................................................................................................................................15

chapter 1.1: political outlook - algeria ................................................................................................ 17Domestic politics..................................................................................................................................................... 17corruption, unemployment and inflation still pervasive

algeria’s political risk profile will remain characterised by persistent corruption.

Long-term political outlook .................................................................................................................................. 18stagnation or upheaval: Government’s unpalatable choice

algeria’s political stability faces challenges from islamist radicalism, high unemployment and an unclear leadership future.

taBLe: aLGeria poLiticaL oVerVieW .................................................................................................................................18

chapter 1.2: economic outlook - algeria ............................................................................................. 21economic activity ................................................................................................................................................... 21oil Driven path to Budget surplus

We expect algeria’s budget to stay in deficit due to diminishing hydrocarbons revenues and a public spending growth rate in 2010.

taBLe: aLGeria econoMic actiVitY ...................................................................................................................................21

chapter 2.1: political outlook - Morocco ............................................................................................. 23Domestic politics..................................................................................................................................................... 23political risk profile to improve

ongoing efforts to improve living standards, fight terrorism and reform the judiciary all have the potential to bolster Morocco’s political risk profile.

taBLe: Morocco poLiticaL oVerVieW ..............................................................................................................................23

chapter 2.2: economic outlook - Morocco ......................................................................................... 25economic activity ................................................................................................................................................... 25economy and Budget Looking Good For the Long term

While we expect a slowdown in Morocco’s economic growth to 3.6% in 2010, down from an estimated 4.6% in the previous year, we believe this will be a one-off downturn with average growth over the 2011-2014 period coming in at 4.0%.

taBLe: Morocco econoMic actiVitY ................................................................................................................................25

Balance of payments .............................................................................................................................................. 26current account position to improve, But Deficit remains

We expect Morocco’s current account deficit to narrow in 2010 based on a pick up in goods exports and solid growth in current transfers.


nortH aFrica Q4 2010

chapter 3.1: political outlook - Libya ................................................................................................... 29Domestic politics..................................................................................................................................................... 29sK spat Highlights Diplomatic risks to Business

We maintain our relatively cautious political outlook for libya, and draw attention to several emerging risks.

taBLe: LiBYa poLiticaL oVerVieW ......................................................................................................................................29

chapter 3.2: economic outlook - Libya ............................................................................................... 31economic activity ................................................................................................................................................... 31Market Liberalisation Will support Long term Growth

We view libya’s efforts to encourage foreign investment in the oil sector and attempt to diversify the economy positively.

taBLe: LiBYa econoMic actiVitY ........................................................................................................................................31

chapter 4.1: political outlook - tunisia ............................................................................................... 33Domestic politics..................................................................................................................................................... 33unemployment concerns raise political risks

We hold our view that, owing to tunisia’s authoritarian but stable government, the country will remain politically stable for the medium term.

Long-term political outlook .................................................................................................................................. 34political challenges For the coming Decade: scenarios For political change

tunisia boasts one of the most stable political climates in the region, and we forecast relatively tranquil conditions for the foreseeable future.

taBLe: tunisia poLiticaL oVerVieW ...................................................................................................................................34

chapter 4.2: economic outlook - tunisia ............................................................................................ 37economic activity ................................................................................................................................................... 37GDp Growth expected to reach 3.9% in 2010

tunisia’s economy appears to be recovering well after the fall in eurozone demand for its exports and tourist sector gave way to a slowdown in GdP growth in 2009.

taBLe: tunisia econoMic actiVitY .....................................................................................................................................37

chapter 5: BMi Global assumptions .................................................................................................... 39Global outlook ......................................................................................................................................................... 39us slowdown in H210 Looking LikelytaBLe: GLoBaL assuMptions ...............................................................................................................................................39taBLe: GLoBaL & reGionaL reaL GDp GroWtH ..............................................................................................................40taBLe: consensus Forecasts ...........................................................................................................................................40taBLe: eMerGinG MarKets aGGreGate GroWtH .........................................................................................................41

BMi ratings – Brief Methodology

composite ratingThe composite rating is an unweighted geometric mean of the short-term political and short-term economy ratings, allowing a ranking

of all countries in BMI’s emerging markets universe.

political ratingsThe political ratings are an indicator of political stability, seen as a pre-requisite for a stable economy and business environment.

The long-term political rating considers more structural elements such as: Is there a functioning democracy? Are there free and fair

elections? Is there separation between party and state? Have recent governments pursued similar, enlightened policies amid a stable

political environment? The short-term political rating considers more transient influences such as: Have there been recent large-scale

demonstrations or strikes? To what extent have these threatened the political status quo? Is unemployment currently a potential source

of political instability? What is the current position in the political cycle – to what extent is this contributing to political risk? Is the

government having trouble passing legislation?

economy ratingsThe economy ratings assess the degree to which the country approximates the ideal of non-inflationary growth with contained fiscal

and external deficits and manageable debt ratios. The ratings use as raw material historical data and forecasts fed in from BMI’s

country databases: as historical data are revised and forecasts change, so the ratings change. Factors in the long-term rating include

GDP growth, unemployment, inflation, real interest rates, exchange rates, the fiscal balance, the current account balance and external

debt. A number of other structural factors are also thrown into the equation, including dependence on the primary sector, reliance on

commodity imports, reliance on a single export sector and central bank independence. The factors included in the short-term rating

are a subset of those in the long-term rating.

Business environment ratingThe business environment rating is a broad indicator of the investment climate, for both domestic and foreign players. While areas

such as competitiveness, finance, openness and environment comprise the bulk of the rating, there is also an important feed from the

political and economy ratings. The factors considered include: the state of the national infrastructure, the education system, cronyism/

corruption, red tape, the legal framework, property rights, market access and the corporate tax regime.

Brief Methodology


algeria

BMi risk ratings – algeriaLatest rating* previous rating** trend region avg Global Mkts avg

s-t composite rating 50.6 50.6 = 44.6 53.7

l-t Political rating 60.3 60.3 = 53.4 63.2

s-t Political rating 61.3 61.3 = 59.9 66.7

l-t economic rating 61.7 61.7 = 42.2 53.2

s-t economic rating 60.4 60.4 = 45.0 52.4

Business environment rating 31.9 30.1 = 33.5 46.9

Trends reflect two consecutive months of movement in same direction. ~ indicates rating is below global markets average † out of 133 global markets rated *12/08/2010 **27/05/2010

BMi’s ratings rank states in terms of political risk, the economy and the

quality of the business environment. there are four ratings: a composite

rating, a political rating, an economic rating and a business environment

rating. these are reviewed every month and the results posted on BMi’s

online service (www.businessmonitor.com). the political and economic

ratings have short- and long-term components. the long-term ratings are

designed to reflect more structural considerations and will not change

greatly in the short term. the short-term ratings will change frequently

in response to more transient influences. all ratings are expressed as a

number between one and 100. a high rating is an indicator of lower risk.

poLiticaL risK persisting corruption to Weigh on political risk profile

corruption continues to pose major risks to further economic develop-

ment in algeria and to the improvement of its business environment. a

fast growing population combined with anaemic private sector demand

and relatively low foreign direct investment inflows will make it difficult

for the government to meet popular demands. consequently, workers’

strikes demanding wage raises will fuel instability, a general lack of sup-

port towards the algerian government and in extreme cases, support for

al-Qaeda and other militant groups.

econoMic risK Budget: short-term Deficit, Long-term recovery

With hydrocarbons revenues diminishing and a low public spending

growth rate, we expect algeria’s budget to stay in deficit over the coming

quarters. although in the absence of major developments in other sec-

tors the algerian economy remains vulnerable to sharp movements in

oil prices, we see the budget returning to surplus over the longer term.

our long-term economic rating therefore remains relatively high.

Business enVironMent interventionism Hurting investors’ confidence

the increasing government intervention in algeria’s private sector

will continue to harm the business environment. the ongoing conflict

with egyptian orascom’s unit djezzy, in which the government keeps

raising taxes for telecom companies, with the apparent aim of nation-

alizing the company, will scare off foreign investors and hold back

algeria’s economic progress. Given all these risks, algeria ranks third

from last among its Mena counterparts, with only iraq and yemen

scoring lower.


BMi ratings

LibyaBMi’s ratings rank states in terms of political risk, the economy and the










poLiticaL risK public approval Lowering

libya’s rising oil wealth and large-scale infrastructure projects

should increase employment levels and therefore dissipate sources of

public discontent. However, fundamental issues, including the lengthy

incumbency of leader colonel Qadhafi and the uncertain timing of his

eventual succession, bring down our long-term political risk ratings. as

a result, the lack of a constitutional framework is not likely to change

in the long run, which could fuel underlying dissent as people expect a

more democratic system of leadership.

econoMic risK onward and upward

on the back of libya’s rising oil exports and revenues, the budget

surplus should continue to rise in the medium term. Moreover, a refresh-

ing commitment by the government to invest in the public sector through

construction projects and liberalise core sectors will drive the momentum

to economic growth. However, the erratic behaviour towards foreign

investors could jeopardise private sector growth.

Business enVironMent attractive, But uncertain

the potential for high growth in several sectors has continued to

attract investor attention since libya was reintegrated into the global

economic community in 2004, but more so after the government began

liberalising its economy to encourage growth in the private sector in

early 2010. However, political risk factors and poor market orientation

policies weigh down our business environment rating. Business deals

are still vulnerable to political interference, leading us to conclude that

investors will be highly cautious about entering libya.

BMi risk ratings – LibyaLatest rating* previous rating** trend region avg Global Mkts avg










MoroccoBMi’s ratings rank states in terms of political risk, the economy and the










poLiticaL risK improving conditions But terrorism still a problem

over the medium term, we expect the planned judicial reform and

the implementation of an e-government strategy to improve Morocco’s

political risk profile. With unemployment and low living standards re-

maining the greatest challenges for the Kingdom, several measures

have been taken to tackle these matters. according to the un-Habitat

regional coordinator Jean-yves Barcelo, Morocco ranks second world-

wide in terms of the proportion of its population living in slums. despite

measures taken to counter terrorism, it continues to pose a risk to the

country’s political stability.

econoMic risK Low Demand Holding Back economic Growth

We expect Morocco’s economic growth to slow to 3.6% this year,

down from an estimated real growth rate of 4.6% in 2009. the drawdown

in fiscal stimulus will be the key factor, with government consumption

growth forecast to fall from 11.5% in 2009 to 6.0% in 2010 as a result.

furthermore, the pace of household consumption growth is also set to

fall, with unemployment (stagnating at 9.0% in 2010) still obstructing the

expansion of private sector demand.

Business enVironMent progress confirmed By Major trading partners

Morocco is in the process of improving its international trade posi-

tion, through economic reforms and fighting terrorism. along those

lines, on the occasion of the King’s day on July 31, the french state

secretary for european affairs Pierre lellouche praised the Moroccan

government’s mobilisation and modernity. this marks good progress

on the path to making the Moroccan business environment more at-

tractive to foreign investors.

BMi risk ratings – MoroccoLatest rating* previous rating** trend region avg Global Mkts avg










tunisiaBMi’s ratings rank states in terms of political risk, the economy and the










poLiticaL risK presidential elections Looming

President Ben ali altered the constitution to retain the presidency

before in 2009, and we believe there is a risk he may do so again in

2014, prolonging his already lengthy leadership regime. in our view, the

most pressing driver for political change at that time may come from

the young unemployed, which have risen in number in recent years.

Public unrest or political opposition parties are not tolerated, providing

a base for unresolved tensions – particularly if the president manages

to secure another term in office. if he does, the lack of change or state

accountability could raise the risk of domestic instability, bringing down

our longer term political risk ratings.

econoMic risK productivity Limited By High unemployment

We believe that the government budget balance will continue in

deficit over the medium term, owing to the underwhelming private sector

expansion and associated high unemployment levels. state revenues will

rise slowly, outpaced by government expenditure in the next five years.

We see favourable real GdP growth continuing in the medium term as

tourism and manufacturing sectors expand output. However, much of

the growth in revenues will be directed at debt servicing, leaving the

budget deficit largely unchanged over the long run to 2014, averaging

4.8% of GdP.

Business enVironMent challenging For investors

despite tunisia’s attempt to encourage private sector growth, foreign

investment will remain tentative, which we see as a direct result of its

poor business environment. there are few regulatory authorities in place

to oversee private sector deals and no transparency guidelines in place,

making it challenging to expand business operations in the country.

on the upside, the liberalisation of the economy and the positive real

GdP growth over the long run will be expected to draw in foreign direct

investment, and with it, the expertise to develop core sectors.

BMi risk ratings – tunisiaLatest rating* previous rating** trend region avg Global Mkts avg










africa – ratings League tables

s-t political rank trendMauritius 82.7 1 =tunisia 79.2 2 =Botswana 77.3 3 =Ghana 72.1 5 =Burkina faso 70.4 6 =tanzania 69.6 7 =Morocco 69.2 8 =angola 69.0 9 =rwanda 67.5 12 =namibia 67.1 13 =Mozambique 66.9 14 =Malawi 66.9 15 =senegal 66.7 16 =Libya 65.8 17 =Zambia 65.0 18 =Kenya 64.8 19 +equatorial Guinea 64.0 20 =cameroon 61.3 22 =algeria 61.3 23 =uganda 60.4 24 =south africa 59.2 25 =nigeria 47.9 29 =ethiopia 47.5 30 =sudan 39.6 31 =Zimbabwe 37.3 32 =Madagascar 34.0 33 =Guinea 31.3 34 =cote dìvoire 30.2 35 =congo, dem. rep. 27.5 36 =Regional avg. 59.9 / Global avg. 66.7 / Emerging Markets avg. 64.0

L-t political rank trendMauritius 79.0 1 =south africa 69.8 2 =Botswana 69.4 3 =tunisia 68.6 4 =Ghana 68.6 5 +Morocco 66.9 7 =namibia 66.4 8 =tanzania 65.1 9 =uganda 63.7 10 =Burkina faso 62.3 12 =Malawi 60.8 13 =Mozambique 60.3 14 =algeria 60.3 15 =Libya 59.5 17 =senegal 56.3 18 =Zambia 51.3 20 =Kenya 50.7 21 =rwanda 50.5 22 =equatorial Guinea 50.2 23 =nigeria 43.8 26 =Madagascar 43.4 27 =ethiopia 43.1 28 =cameroon 42.7 29 =cote dìvoire 40.3 30 =angola 38.6 31 =Guinea 35.4 32 =Zimbabwe 30.6 33 =sudan 29.3 34 =congo, dem. rep. 29.1 35 =Regional avg. 53.4 / Global avg. 63.2 / Emerging Markets avg. 59.4

s-t economy rank trendLibya 70.4 1 =nigeria 68.8 2 +Morocco 62.5 3 =algeria 60.4 4 =tunisia 60.2 5 =Mauritius 57.5 6 =Botswana 56.7 7 +tanzania 53.3 8 =angola 53.3 9 =Guinea 53.3 10 =Zambia 52.3 11 -uganda 46.7 12 -cameroon 46.5 13 -ethiopia 46.3 15 =equatorial Guinea 46.3 16 +senegal 45.4 17 =cote dìvoire 45.2 18 -south africa 45.0 19 +Malawi 44.8 20 =namibia 44.8 21 -Kenya 44.2 22 -sudan 44.2 23 -Mozambique 43.5 24 =Burkina faso 40.8 27 =Madagascar 39.6 28 +Ghana 35.6 29 -rwanda 33.3 31 =Zimbabwe 32.1 32 =congo, dem. rep. 27.1 34 =Regional avg. 45.0 / Global avg. 52.4 / Emerging Markets avg. 51.1

L-t economy rank trendalgeria 61.7 1 =Libya 56.5 2 =Botswana 55.1 3 +Morocco 54.4 4 =south africa 53.2 5 =tunisia 53.1 6 =Mauritius 52.7 7 =nigeria 51.0 8 =tanzania 49.9 9 =namibia 49.7 10 -equatorial Guinea 48.8 11 -cameroon 47.0 12 -uganda 45.7 13 -rwanda 45.4 14 =angola 43.5 15 =Kenya 42.9 16 =cote dìvoire 42.4 19 +senegal 42.1 20 =Malawi 40.3 22 =ethiopia 38.9 23 =Ghana 38.2 24 -Guinea 37.9 26 =Burkina faso 37.8 27 =sudan 36.8 28 +Zambia 36.4 30 -Mozambique 35.0 31 =Madagascar 27.6 34 -congo, dem. rep. 23.9 35 =Zimbabwe 13.0 36 =Regional avg. 42.2 / Global avg. 53.2 / Emerging Markets avg. 50.9

Note: Not all countries are included in these ratings tables. Full ratings may be found online.

composite rank trendMauritius 65.4 1 =tunisia 60.0 2 =Botswana 57.1 3 +Morocco 56.5 4 =south africa 56.1 5 +Libya 54.5 6 =namibia 51.7 7 -tanzania 50.8 8 =algeria 50.6 9 =Ghana 50.4 10 -uganda 48.4 11 -nigeria 47.9 12 -Malawi 47.8 13 =Zambia 46.8 16 -Kenya 46.8 17 +Burkina faso 46.2 18 +senegal 45.9 19 =Mozambique 43.8 21 =rwanda 43.8 22 =equatorial Guinea 43.0 23 +cameroon 41.7 25 -angola 41.3 26 =ethiopia 38.7 27 =Guinea 35.4 28 =Madagascar 34.9 29 +cote dìvoire 34.4 31 -sudan 33.4 32 -Zimbabwe 27.5 35 =congo, dem. rep. 23.9 36 +Regional ave. 44.6 / Global ave. 53.7 / Emerging Markets ave. 50.2

Business environment rank trendMauritius 60.2 1 =south africa 54.7 2 =tunisia 49.4 3 =Ghana 44.0 4 =Morocco 42.9 5 =Botswana 41.3 6 =namibia 41.2 7 =Kenya 39.0 8 =nigeria 38.0 10 =Zambia 37.9 11 =Libya 37.4 12 =uganda 37.0 13 =Malawi 36.9 14 =rwanda 33.1 15 =Burkina faso 33.0 16 =senegal 32.5 18 =Madagascar 32.5 19 =tanzania 32.2 20 =algeria 31.9 22 =Mozambique 28.9 23 =ethiopia 27.9 25 =cameroon 26.3 26 =Zimbabwe 26.1 27 -sudan 24.8 28 =cote dìvoire 24.2 29 =angola 22.4 31 =congo, dem. rep. 17.8 36 +Regional ave. 30.0 / Global ave. 46.6 / Emerging Markets ave. 42.0



Business environment L-t economic L-t political s-t economic s-t political compositeangola 21.6 43.5 38.6 53.3 69.0 41.3Burkina faso 33.0 37.8 62.3 40.8 70.4 46.2Burundi 22.8 28.0 52.3 28.3 54.0 34.7Benin 28.6 42.6 62.8 46.3 77.3 47.7Botswana 42.0 55.1 69.4 56.7 77.3 57.1congo, dem. rep. 17.8 23.9 29.1 27.1 27.5 23.9cote d`ivoire 24.2 42.4 40.3 45.2 30.2 34.4cameroon 26.3 47.0 42.7 46.5 61.3 41.7djibouti 30.4 41.1 49.1 35.2 68.1 42.4algeria 31.9 61.7 60.3 60.4 61.3 50.6ethiopia 28.2 38.9 43.1 46.3 47.5 38.7Ghana 44.0 38.2 68.6 35.6 72.1 50.4Guinea 27.3 37.9 35.4 53.3 31.3 35.4equatorial Guinea 24.4 48.8 50.2 46.3 64.0 43.0Kenya 39.2 42.9 50.7 44.2 64.8 46.8lesotho 38.1 38.0 59.7 41.7 68.1 47.3Libya 37.4 56.5 59.5 70.4 65.8 54.5Morocco 42.9 54.4 66.9 62.5 69.2 56.5Madagascar 32.5 27.6 43.4 39.6 34.0 34.9Mali 28.4 42.5 67.3 43.5 63.1 45.5Mauritius 60.2 52.7 79.0 57.5 82.7 65.4Malawi 36.9 40.3 60.8 44.8 66.9 47.8Mozambique 28.6 35.0 60.3 43.5 66.9 43.8namibia 41.2 49.7 66.4 44.8 67.1 51.7nigeria 38.0 51.0 43.8 68.8 47.9 47.9rwanda 33.1 45.4 50.5 33.3 67.5 43.8sudan 25.4 36.8 29.3 44.2 39.6 33.4sierra leone 31.9 29.3 49.1 5.0 53.3 33.4senegal 32.5 42.1 56.3 45.4 66.7 45.9chad 19.3 36.5 27.6 18.3 51.5 28.7tunisia 49.5 53.1 68.6 60.2 79.2 60.0tanzania 33.5 49.9 65.1 53.3 69.6 50.8uganda 37.0 45.7 63.7 46.7 60.4 48.4south africa 54.7 53.2 69.8 45.0 59.2 56.1Zambia 37.9 36.4 51.3 52.3 65.0 46.8Zimbabwe 26.1 13.0 30.6 32.1 37.3 27.5regional averages 33.5 42.2 53.4 45.0 59.9 44.6emerging Markets averages 42.4 50.9 59.4 51.1 64.0 50.2Global averages 46.9 53.2 63.2 52.4 66.7 53.7Countries rated on 12 August 2010

BMi risk ratings – africa tables



north africa: Good prospects in 2010 While we expect algerian economic real GdP growth to pick up

to 3.1% this year, up from the 2.3% real growth rate recorded in

2009, this only masks weak private sector demand and decreasing

hydrocarbons revenues. in the absence of consistent develop-

ments in the non-hydrocarbon sector, oil price volatility could mean

downside risks to the algerian budget balance. on top of that, owing

to massive government intervention in the private sector, foreign

investors are still cautious about the business environment, which

will cut into potential foreign direct investment (fdi) revenues. Given

the questionable good will of the government as well as its effective

capacity to improve private consumption, we expect turbulent times

to come.

By contrast, libya’s underdeveloped infrastructure and huge oil reserves

will continue to draw in investors, particularly since the government

redoubled its efforts to liberalise the economy, at the start of 2010. in

addition, economic growth will remain highly dependent on oil revenues,

which were helped by the rebound in oil prices during 2010 and are

expected to contribute 83% of the total revenues. the government

has invested heavily in developing manufacturing to diversify the

economy and better distribute its oil wealth while fdi will bring much

needed expertise and knowledge transfer. However, despite this the

government is prone to meddling in business deals, escalating minor

disputes, and this could deter more cautious investors.

the Moroccan economy is set to grow at a slower pace in real

terms in 2010 compared with last year, but revive over the coming

years to 2014. the main grounds for Morocco’s bright outlook are

the government’s efforts to improve the business environment,

creating a good foundation for growth in fdi inflows. on top of that,

the population’s living standards are improving, especially with the

number of those living in the slums around Marrakech and casa-

blanca having consistently reduced. However, the risk of terrorist

attacks still exists, despite the government’s increasing measures

to fight against militant islamists in the Kingdom.

Without large oil reserves, neighbouring tunisia is on the path to

developing its manufacturing and export-led economy with our

projection for real GdP growth averaging 5.4% from 2010 to 2014.

this is favourable in the long run, but high government spending

and slower paced revenue growth will maintain the budget deficit

at an average of 4.8% of GdP in the next five years. Moreover,

unemployment levels are not falling fast enough, which we believe

will limit private consumption growth. the government is keen to

attract fdi, particularly since we believe that encouraging growth in

the private sector will raise employment. However, we believe that

political instability, particularly leading up to 2014, will be driven by

poorly addressed longstanding issues including the undersupply

of jobs.

executive summary


Domestic politics

corruption, unemployment and inflation still pervasive

BMi VieWAlgeria’s political risk profile will remain characterised by persistent

corruption. We also highlight high unemployment and inflation, and so-

cial discontent towards private employers as key challenges that the

government will have to face over the medium term.

Algeria’s government faces multiple challenges over the

medium term. The high level of corruption makes it difficult

for the government to maintain credibility when seeking to

address socioeconomic pressures arising from relatively rapid

population growth. Despite a pickup in real economic growth,

which we forecast to come in at 3.1% this year, private sector

spending remains subdued, along with under-investment in the

non-hydrocarbon sector. Consequently, poor wages and rising

prices are cutting into the population’s purchasing power.

no signs of reducing corruptionAlgeria’s weak democracy and increasing allegations of nepotism

and kickbacks from lucrative contracts connected to high-ranking

officials prevent us from awarding the country a higher score

in its political rating. After having amended the constitution to

remove the two-term limit on presidential mandates, Abdelaziz

Bouteflika was re-elected for the second time in 2009. This raised

questions about whether the constitution was being shaped to

benefit the career of one man. Meanwhile, the Public Works

Ministry is thought to be run by close allies of the president,

which leaves scope for pork-barrel politics. (That said, some

senior officials have been dismissed and placed under investiga-

tion.) In addition, Justice Minister Tayeb Belaiz is also seen as a

Bouteflika associate, raising questions about the independence

and impartiality of the judicial system. Furthermore, despite

the denial of prosecutors, a recent rumour that a minister’s son

had been placed under criminal investigation for drug money

laundering raises more doubts about the integrity of government

officials and their relatives.

While corruption remains a problem, the public will be most

concerned about high unemployment. The jobless rate came

in at 10.2% last year, after the government failed to reach its

target of bringing it below 10.0%. The lack of jobs remains a

major problem in Algeria, especially among those under 30,

who account for 73.4% of the total unemployed population. The

government has put in place temporary employment schemes,

but these are short-term measures, and the public is increasingly

worried about securing a constant income.

More strikes to Fuel agitation Against this backdrop, and amid rising prices and poor hous-

ing, a successive wave of strikes has ensued, encouraged by the

railway workers’ victory at the beginning of Q210. Following

an eight-day strike, they obtained the 20% wage raise demanded

from the government. Owing to this precedent, we expect further

dissatisfied unions to follow suit, with a national crisis appear-

ing likely in an extreme scenario. The government’s decision

to sell a steel factory to steel giant Arcellor Mittal, the biggest

foreign investor in Algeria, was the main reason behind recent

workers’ discontent, and they demanded that the government

renationalise the biggest steel plant in the country or at least

acquire enough shares to enable it to make decisions. Further-

more, the government’s plan to reduce inflation to 3.0%, after

averaging 5.7% in 2009, seems to be failing. Indeed, although

several consumer items including sugar, milk, water and petrol

are subsidised by the state, June consumer prices increased by

6.1% year-on-year (y-o-y). Overall, Algeria may be braced for

a turbulent period this year.

Brief Methodology

17Business Monitor international ltd www.businessmonitor.com 17Business Monitor international ltd www.businessmonitor.com

Chapter 1.1: political outlook – algeria

Long-term political outlook

stagnation or upheaval: Government’s unpalatable choice

BMi VieWAlgeria’s political stability faces challenges from Islamist radicalism,

high unemployment and an unclear leadership future. While we be-

lieve that economic reform is vital for future growth, the political conse-

quences are unclear.

After the trauma of the civil war during the 1990s, Algeria has

enjoyed almost a decade of relative political stability under

the leadership of President Abdelaziz Bouteflika. While the

political challenge from Islamist groups has been effectively

neutralised under the Bouteflika regime, the Islamist movement

has morphed into a smaller, more radical organisation that now

operates under the al-Qaeda banner. In recent years the group has

carried out numerous attacks on government targets in Algeria,

as well as attacks and kidnappings in neighbouring countries.

Although the level of public support for the group in Algeria

appears limited, it could grow if job opportunities and economic

prospects remain limited, and if the public grows increasingly

frustrated with what is effectively one-party rule.

challenges and threats to stabilityAQIM: The most direct threat to the government comes from

AQIM – al-Qaeda in the Islamic Maghreb – the group that grew

out of Algeria’s civil war opposition. The group no longer seeks

to challenge the ruling Front de Liberation Nationale (FLN)

through the ballot box, and does not outline a coherent plan for

replacing the current political system. However, its frequent

attacks on the symbols of government – public buildings, police

stations and military installations – undermine the government

and its claims to have brought security to Algeria.


aLGeria Q4 2010

taBLe: aLGeria poLiticaL oVerVieWsystem of Government Parliamentary democracy, universal suffrage. 389-seat lower house (national Popular as-

sembly – aPn).

Head of state President abdelaziz Bouteflika, five-year term. no limit on number of terms following parliamentary amendment in november 2008.

Head of Government Prime Minister ahmed ouyahia.

last election Presidential – april 9 2009.

Parliamentary – May 17 2007.

composition of current Government coalition (so-called Presidential alliance) of fln, rnd and MsP.

Key figures finance – Karim djoudi; energy and Mines – chakib Khelil (currently president of oPec); foreign affairs – Mourad Medelci; Justice – tayeb Belaiz.

Main Political Parties (number of seats in parliament) national liberation front (fln) – 136 seats. Has ruled algeria since independence in 1962. combines nationalism and socialism with islamic and arab identity. since civil war of 1990s, has campaigned on a platform of national reconciliation and pursued greater economic liberalisation.

national democratic rally (rnd) – 61 seats. created in 1997 and led by ahmed ouyahia, former prime minister. loyal to President Bouteflika; in favour of privatisation agenda.

social Movement for Peace (MsP) – 52 seats. conservative, islamist party, in favour of national reconciliation agenda and amnesty for civil war opponents of the government.

Workers Party (Pt) – 26 seats. left-wing, unionist. led by louisa Hanoune, the first woman to contest a presidential election in the arab world.

rally for culture and democracy (rcd) – 19 seats. Mainly Berber, secularist party rooted in Kab-ylia region. Previous attempts to widen its support have been largely unsuccessful and appeared to alienate part of its core non-arab constituency.

a total of 23 parties and 33 independent candidates are present in parliament.

extra-Parliamentary opposition? al-Qaeda in the islamic Maghreb (aQiM) – islamist terrorist group, successor to the GsPc and Gia. accused of carrying out december 2007 attacks on un compound and constitutional court in algiers, as well as several other attacks.

next election Presidential – 2014

Parliamentary – 2012

ongoing disputes Morocco – closure of land border between the two, due in part to algeria’s material and political support of Western saharan secessionist group Polisario.

Key relations/ treaties Member of oPec, arab league, arab Maghreb union. association agreement with eu since 2005, member of euro-Med Partnership. candidate for Wto membership.

BMi short-term Political risk rating 63.8

BMi structural Political risk rating 57.3

Source: BMI

Political Relevancee: The government also faces a struggle

to demonstrate its relevance at a time of demographic change,

now that the defeat of France and the Islamist insurgency are

in the past. The government eventually defeated the immediate

threat from political Islam in the civil war, and Bouteflika has

attempted to base his own, and his government’s, legitimacy

on the delivery of political stability and economic growth.

However, the presence of AQIM and the tendency towards

economic stagnation threaten this balance.

Leadership Question: Though not immediately pressing, the

question of who will replace Bouteflika will become more press-

ing over the next decade. He was re-elected in 2009 to serve

a third term, after a popular referendum approved a change in

the constitution that removed the two-term presidential limit.

However, the president is already 72 and has suffered from health

problems in the past. At present, there is no clear candidate to

succeed him, which risks creating a power vacuum were he to

vacate his post prematurely.

Power of the Military: The military has played a powerful role

in Algerian politics since independence. Although Bouteflika

has sought to wrest some power away from the generals, it is

not certain whether his successor would be able to retain this

power. Uncertainty over Bouteflika’s succession could give the

military the opportunity to assume more power, particularly if

a growing threat from AQIM provided it with the justification

of ‘maintaining stability’.

Economic Stagnation: Despite Algeria’s huge hydrocarbon

resources, their exploitation has not been coupled with wider

economic development. Much of the economy remains under

state control, is inefficiently run, and suffers from underinvest-

ment. Foreign investment is largely confined to the energy sector,

although tighter government regulations – designed to boost

revenues and reassure the population that Algeria’s energy wealth

was not flowing directly into the pockets of international oil

companies – appear to have dampened the appetite of investors.

Youth Population : Connected to almost all of Algeria’s other

challenges is the question of demographic change and a rising

youth population. An estimated 56% of Algeria’s population

is under 30, and despite rising levels of higher education, job

opportunities remain limited. The youth unemployment rate

is thought to be as high as 70% in some areas, a situation that

prevents many young people from getting married and starting

families, provoking further frustration. The growing population

is also putting pressure on social housing, with severe shortages

in some regions, leading to sporadic outbursts of violent unrest.

These challenges are reflected in our proprietary political risk

ratings. Although Algeria’s restrictive political system ensures

a certain level of stability in the short term, this is offset by

a weak social stability outlook, due to high unemployment,

the risk of public unrest, and the threat to government control

posed by militant groups. Over the longer term, we believe

that shortcomings in Algeria’s democratic system put it at a

higher risk of upheaval, as reflected in our long-term political

risk rating of 57.3.

scenarios For political changeCivil War: The worst-case scenario for Algeria over the next

10 years would be a return to civil war. AQIM could intensify

its attacks on government targets, potentially swelling its ranks

by attracting foreign fighters or those who have returned from

fighting in Iraq and Afghanistan (a large number of Sunni mili-

tants fighting at the height of the Iraq insurgency were thought

to have come from North Africa), or by stepping up its domestic

recruitment of disaffected, jobless youths. Faced with increased

rebel activity, the army and security services would be forced to

respond, with the possibility of large-scale operations in areas

of concentrated rebel activity, such as the Kabylia region. Large

civilian casualties (due to military operations), or a feeling that

the local population was being persecuted (in a region that has

often been a hot bed of anti-government sympathies), could

spark greater support for the militants, resulting in a downward

spiral of cooperation with militants, government attacks and

AQIM counter-attacks.

Economic Liberalisation: A different scenario is that the

Youth Bulge Population

Source: UN World Population Prospects

0500100015002000

0-4

10–14

20-24

30-34

40-44

50-54

60-64

70-74

80-84

90-94

100+

Male

0 1000 2000

Female

Population in millions


poLiticaL outLooK

government engages more wholeheartedly in a programme of

economic reform and liberalisation, starting with the resump-

tion of privatisations in the banking sector (a process that has

been frozen since late 2007). There is a likelihood of job losses

in some industries as inefficiencies are reduced, which would

arouse some popular opposition. However, we believe that in

the long-run, the process would add dynamism to the Algerian

economy and open up new job opportunities for its youth

population (whereas job losses would likely be concentrated

among older groups).

The political consequences of improved economic growth are

unclear, however. Although initially likely to boost the popular-

ity of the FLN regime, greater wealth and financial autonomy

among Algeria’s youth could spark renewed demands for a

greater role in political decision making. This could take the

form of pro-business parties representing a new middle class,

or potentially a new moderate Islamist party, along the lines of

Morocco’s PJD. Alternatively, economic growth could result in

a perceived dichotomy between rich and poor, fuelling support

for anti-government groups and increasing the aforementioned

risk of a return to civil conflict. Indeed, five years after reformists

began to liberalise the economy over in Egypt, inequalities do

not seem to have narrowed, and the public is growing impatient

of waiting for the changes to feed through into higher living

standards.

Continued Stagnation: Another possibility is of course that the

political situation remains largely the same, with Bouteflika at

the helm (potentially succeeded by a chosen successor at some

point over the next decade) and the security situation kept in

check by the ongoing deployment of large numbers of troops.

Discontent would probably remain high among certain groups

(such as the unemployed), but the government would continue

its attempts to blunt the impact of joblessness through heavy

subsidisation of basic goods such as food and fuel. Security

risks would remain high but a lack of public appetite for politi-

cal confrontation and violent conflict would contain the risk of

a descent into civil war.


aLGeria Q4 2010

economic activity

oil Driven path to Budget surplus

BMi VieWWe expect Algeria’s budget to stay in deficit due to diminishing hydro-

carbons revenues and a public spending growth rate in 2010. Over the

long term, we see the budget returning to surplus towards the end of

our forecast period, owing to the recovery in oil prices. Nevertheless, in

the absence of consistent developments in other sectors, the Algerian

economy remains vulnerable to oil price volatility.

Highly reliant on hydrocarbon exports, Algeria entered the global

economic slowdown from a strong position, with real GDP hav-

ing grown by an average 3.4% y-o-y in real terms from 2006 to

2008. With hydrocarbon exports getting butchered by the drop in

oil prices over H208, economic growth had to be supported by

the government. Although public spending was also relatively

high prior to that, it was funded by significant hydrocarbon

revenues. In 2009 however, total revenues contracted by 25.9%

(hydrocarbon revenues fell by 34.1%), enough for the 11.0%

increase in expenditure to generate the highest budget deficit

in Algeria since the mid 90s ie 7.5% of GDP.

Budget Balance: From Deficit to surplusWe predict this budget deficit to narrow to 2.2% of GDP in

2010, holding the balance in negative territory for the second

consecutive year, after 7 years of running a surplus. Although

revenues will grow by 27.4% y-o-y, low base effects mean they

will remain below total spending in nominal terms, resulting in

a budget deficit. The government’s plan to increase the share of

alternative sources of revenues will contribute to reducing the

gap between the two sides of the budget balance. Improving the

revenue administration and increasing income tax collections,

based on the 2008 wage increase, will contribute to a recovery

in revenues. Investment in infrastructure and employment sup-

port programs (youth unemployment came in at 24% in 2009,

keeping total income tax revenues well below potential) will

drive the 13.0% y-o-y expansion in total public spending.

The recovery in oil prices is merely the ground for the bright

Heading Back to surplus algeria – Budget revenue, expenditure & Balance

Source: Ministry of Finance, BMI

-30

-20

-10

0

10

20

30

40

50

2000

2001

2002

2003

2004

2005

2006

2007

2008

e

2009

e

2010

f

2011

f

2012

f

2013

f

2014

f

Budget Revenue, % y-o-y change

Budget Expenditure, % y-o-y change

Budget Balance, % of GDP


Chapter 1.2: economic outlook – algeria

taBLe: aLGeria econoMic actiVitY 2005 2006 2007 2008 2009 2010f 2011f 2012f 2013 2014f

nominal GdP, dZdbn [1] 7,498.6 8,391.0 9,306.2 10,192.4 9,719.6 11,772.8 12,620.9 13,909.2 14,693.9 15,539.3

nominal GdP, us$bn [1] 103.3 117.1 134.1 156.9 134.0 160.3 169.4 190.5 207.0 222.0

real GdP growth, % change y-o-y [1] 3.7 3.6 3.1 3.5 2.3 3.1 3.9 5.2 4.1 3.7

GdP per capita, us$ [1] 3,145 3,511 3,961 4,565 3,841 4,525 4,711 5,221 5,590 5,913

Population, mn [2] 32.9 33.4 33.9 34.4 34.9 35.4 36.0 36.5 37.0 37.5

industrial production index, % y-o-y, ave [3] 1.6 -0.5 0.3 2.0 1.5 1.5 1.5 1.5 1.5 1.5

unemployment, % of labour force, eop [1] 15.4 12.3 11.8 11.3 10.2 10.0 9.8 9.7 9.6 9.4

Notes: e BMI estimates. f BMI forecasts. Sources: 1 IMF/BMI. 2 World Bank/BMI calculation/BMI; 3 ONS/BMI.

outlook of the budget’s recovery from 7.5% of GDP deficit last

year to our projected 2.2% in 2010. Brent Crude prices rallied

from US$35.95/bbl at the beginning of 2009 and increased by

134.2% to end the year at US$82/bbl. Our oil and gas team

sees demand growth for OPEC oil to come in at 2.5% in 2010,

outpacing the 2.1% y-o-y rate recorded by supply, boding well

for oil prices and hence Algeria’s budget balance. Nonetheless,

with hydrocarbon revenues accounting for almost 80% of the

budget’s gains, potential volatility in oil prices could obstruct

the consolidation of the Algerian fiscal position.

Going forward, we expect a pick up in hydrocarbon prices to

revive revenues through a boost in exports, suppressing the

need for the government to spend as much. With the economy

expected to be resuscitated by the recovery in global demand,

a lower need for public spending will see the total expenditure

growth rate to 4.0% down from 13.0% in 2010. As such, we see

budget returning to surplus starting 2012, coinciding with the

year when BMI Commodities team expects Brent Crude to trade

at US$92.00/bbl, following a leap from our US$85.00/bbl 2010

projection. The turning point will also be signalled by a 16.1%

y-o-y increase in hydrocarbon revenues, generating 14.3% total

revenue growth. Along these lines, we see the budget surplus

widening further to 4.4% by 2014.

non-Hydrocarbon Growth in the pictureThe likelihood of adverse scenarios in oil prices and the long-

term unpredictability of the market will drive the government

to develop macroeconomic strategic programmes aimed at

reducing the dependence on global economic progress. The

government announced plans to support growth of domestic

firms hence bring stable revenues going forward, making the

non-hydrocarbon private sector becoming more inward oriented.

Already, earlier this month the Algerian government announced

that domestic companies will benefit from preferential treatment

compared with foreign investors, allowing them to obtain shares

of the US$286bn planned to be spent over the next five years

on modernising the economy. Furthermore, the authorities plan

to stimulate private investment by extending tax incentives for

infant industries competing with lower import prices from foreign

more mature companies. Ultimately, business-unfriendly wil

We expect non-hydrocarbon revenues, accounting for around a

quarter of total revenues, to grow by an average 8.0% through-

out our forecast period, supported also by sustained progress

in tax collection. The government’s plans to make clean tax

records a prerequisite for all financial transactions and simpli-

fying the revenue administration bode well in this regard. The

increasing importance assigned to the effectiveness of public

spending will also help to reduce the gap between expenditure

and revenues, turning it into surplus over the long-term. The

reform of budget management will be supported by the activity

of projects assessment house Caisse Nationale d’Equipments

et des Developpement, which has been appointed to evaluate

the rationality and economic profitability of public investments.

risks to outlookDespite all the measures to boost the non-hydrocarbon private

sector, if the global demand downturn scenario plays out, and

oil prices fall, the Algerian public sector would have a hard time

sustaining long-term growth. On top of that, aggressive measures

to give priority to domestic businesses could turn out to be a

double-edged sword for long-term economic growth: the law

according to which contracts must first be offered to a national

tender, with Algerian firms being the only ones eligible, could

scare off foreign investors and develop an aversion towards the

market among foreign investors over the long-term. The attempt

to nationalize the profitable Egyptian mobile phone operator

Orascom’s Algerian unit, after hitting it with tax demands,

stands as a good illustration of the volatile and unpredictable

policies the government came out with. All these would reduce

growth and hence fiscal revenues, posing downside risks to our

projection that the Algerian budget balance will return to surplus

towards the end of our forecast period and instead maintain a

budget deficit, mainly driven by increased public expenditure.

is oil that important? – Yes, it is! Budget revenues & Brent crude Price

Source: BMI

-60

-40

-20

0

20

40

60

80

2000

2001

2002

2003

2004

2005

2006

2007

2008

e

2009

e

2010

f

2011

f

2012

f

2013

f

2014

fBudget Revenues, % y-o-y change

Brent Crude, % y-o-y change, US$/bbl


aLGeria Q4 2010

Domestic politics

political risk profile to improve

BMi VieWOngoing efforts to improve living standards, fight terrorism and reform

the judiciary all have the potential to bolster Morocco’s political risk pro-

file. In turn, this should also improve foreign direct investment inflows

and investor confidence. Militant Islamists remain active and pose risks.

The Moroccan government introduced legislation in three areas in

recent weeks, aimed at improving political stability, stimulating

economic growth and making the business environment more

attractive for foreign investment. We believe that the reforms

will contribute to an ongoing improvement in Morocco’s politi-

cal risk profile.

Domestic recovery on the right pathThe government has initiated a number of successful measures to

tackle unemployment and poverty, which are likely to contribute


Chapter 2.1: political outlook – Morocco

taBLe: Morocco poLiticaL oVerVieWsystem of Government constitutional monarchy; 325-seat parliament elected by universal suffrage for five-year term. executive power

rests with the King, who can dissolve parliament.

Head of state King Mohammed Vi

Head of Government Prime Minister abbas el fassi

last election Parliamentary – september 8, 2007

composition of current Government coalition of istiqlal (9 ministries), rni (7), usfP (5) and PPs (2). a further 10 government positions are held by ministers with no political affiliation.

Key figures King Mohammed Vi – Head of state, military chief, religious leader

economy and finance – salaheddine Mezouar; foreign affairs – taieb fassi fihri; interior – chakib Benmoussa

Main Political Parties (number of seats in parliament)

istiqlal (independence Party) – 52 seats. led by abbas el fassi, nationalist and monarchist party (despite previ-ously being opposed to the rule of former king, Hassan ii). Has formed part of several coalition governments since the 1970s.

Justice and development Party (PJd) – 46 seats. Moderate islamist party, formed through the amalgamation of several islamist groups (including the more extremist chabiba islamia) and renamed PJd in 1998. received the highest number of votes in 2007 election but structure of the electoral system meant that it won less seats than istiqlal. Has toned down its criticism of the westernisation of Moroccan society since the 2003 casablanca bomb-ings and adopted a more pragmatic attitude, but other parties have sought to keep it out of government.

Popular Movement (MP) – 41 seats. economically liberal but socially conservative.

national rally of independents (rni) – 39 seats. second largest party in governing coalition. leader Mustapha el Mansouri is speaker of the House of representatives.

socialist union of Popular forces (usfP) – 38 seats. formerly the largest party in parliament but lost ground to coalition partner istiqlal in 2007 polls.

Party of authenticity and Modernity (PaM) – created in June 2008 and conceived as a way of unifying existing political movements. Parties to have joined to date include the environment and development Party, alliance of liberties, civic initiative for development and al-ahd.

a total of 23 political parties are represented in parliament.

extra-Parliamentary opposition? al Badil al Hadari – islamist party. contested 2007 parliamentary elections but outlawed in february 2008, ac-cused of planning terrorist attacks.

Justice and charity – outlawed islamist party. calls for the abolition of the monarchy and establishment of shari’a law.

next election local elections – 12 June 2009; Parliamentary – 2012

ongoing disputes Western sahara – Polisario front demands independence for the territory which has been controlled by Morocco since 1975; land border between the two countries is closed, algeria provides material and political support to the Polisario front; spain – existence of spanish enclaves of ceuta and Melilla

Key relations/ treaties Member of the arab league, organisation of the islamic conference (oic), arab Maghreb union. strong ally of the us and european union.



Source: BMI

to an improvement in living standards and boost support for the

government. According to the UN-Habitat regional coordinator

Jean-Yves Barcelo, Morocco ranks second worldwide in terms

of reducing the population of slums in 2000-2010. This was

achieved through a government voluntary policy setting well-

defined objectives supported by appropriate funding, in order

to meet the Millennium Development Goals.

Furthermore, modernization projects have boosted sectors like

tourism, increasing the number of tourists from 2 million a year

in 2000 to 9 million at the end of 2009, while creating 600,000

new jobs. In addition, the government and various banking

institutions will allocate MAD5.2bn for implementation of the

e-government Maroc Numeric 2013 strategy, focusing on greater

integration and wider use of information technology in public

services, which in turn will reportedly create 26,000 new jobs.

Indeed, while we expect the unemployment rate to come in at

9.9% at end-2010 (the same level as at end-2009), over our

2011-2014 forecast period we see the jobless rate dropping to

8.0% on the back of the government’s strategies.

Business environment reformsWe expect Morocco’s achievements in improving its interna-

tional trade relations, alongside the removal of several trade

barriers, to make the business environment more attractive for

foreign investors, which will also be supportive for growth and

jobs. With France and Spain accounting for Morocco’s main

trade partners as well as primary creditors and investors (the

EU accounted for 73.5% of total foreign direct investment in

2009), improving relations with southern European states has

proven beneficial. Morocco has been granted advanced status

by the EU, deepening free trade agreements, to improve the

new Jobs creation paying off unemployment

Source: BMI

-15

-10

-5

0

5

10

15

20

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

f

2011

f

2012

f

2013

f

2014

f

National Average Unemployment Rate

% change y-o-y

trade of manufactured goods and industrial products between

Morocco and all 27 countries in the bloc.

security situation improvingRecent measures to combat terrorism by increasing surveillance

in public places and allocating more resources for investiga-

tions will contribute to improving security in Moroccan urban

areas. Ever since the 2003 terrorist attack in Casablanca, the

Moroccan government has taken strict action to prevent any

further movements of militant Islamists such as the Salafiya

al-Jihadia (‘Jihad for Pure Islam’) and takfirists. 35 defendants

including 6 political figures were convicted in the Belliraj ter-

rorism case last week, adding to the dismantling of 11-member

cell of takfirists in June and another 24-member network with

ties to al-Qaida in April.


LiBYa Q4 2010

economic activity

economy and Budget Looking Good For the Long term

BMi VieWWhile we expect a slowdown in Morocco’s economic growth to 3.6% in

2010, down from an estimated 4.6% in the previous year, we believe this

will be a one-off downturn with average growth over the 2011-2014 peri-

od coming in at 4.0%. Alongside, we expect the fiscal balance to flip back

into surplus in 2010, averaging 2.2% of GDP over our forecast period.

We see Moroccan economic growth slowing to 3.6% y-o-y in

2010, down from an estimated 4.6% recorded last year. The

drawdown in fiscal stimulus will be the key factor, with govern-

ment consumption growth forecast to fall from 11.5% in 2009

to 6.0% in 2010 as a result. Furthermore, the pace of household

consumption growth is also set to fall, with unemployment

(stagnating at 9.0% in 2010) still obstructing the expansion of

the private sector demand.

Beyond 2010, we see economic growth pushing back up to

4.4%, mainly due to an improvement in household expenditure

and gross fixed capital formation, the major two contributors to

growth. Thereafter, growth is forecast to average 3.9% through

to 2014. Household expenditure is expected to grow by 3.8% on

average throughout our forecast period, based on a decrease in

unemployment (especially youth unemployment) and healthy

demographics (1.2% population average growth rate over 2011-

2014). Gross fixed capital formation growth will average 6.8%

over the same period. Owing to weak European demand, imports

will continue to outpace exports, leaving the trade balance in

negative territory and weighing on aggregate economic growth.

Fiscal consolidation aheadAfter slumping into deficit in 2009, Morocco’s budget is expected

to flip back to surplus in 2010, based on a sharp slowdown in

expenditure growth, on the back of a major fiscal austerity plan.

To that end, after recording a 2.1% of GDP deficit in 2009, based

on a worryingly low 2.5% growth in fiscal revenue (averaging

22.9% in the previous three years), the Council of Government

has adopted a bill, encouraging financial supervision of state

spending Weighing on Growth real GdP Growth Breakdown

Source: BMI

0

1

2

3

4

5

6

7

8

9

-200,000

-100,000

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

2004 2005 2006 2007 2008 2009e 2010f 2011f 2012f 2013f 2014fHousehold Expenditure (MADmn)Government Consumption (MADmn)Gross Fixed Capital Formation (MADmn)Net Exports (MADmn)Real GDP, % Chg y-o-y RHS


Chapter 2.2: economic outlook – Morocco

taBLe: Morocco econoMic actiVitY 2005 2006 2007 2008 2009 2010f 2011f 2012f 2013f 2014f

nominal GdP, Madbn [1] 522.6 575.3 616.3 688.8 729.3 753.6 799.6 847.8 896.2 944.7

nominal GdP, us$bn [1] 59.0 65.9 75.2 89.2 93.9 94.9 99.0 102.1 104.2 107.7


GdP per capita, us$ [1] 1,933 2,135 2,409 2,822 2,934 2,932 3,021 3,080 3,106 3,173

Population, mn [2] 30.5 30.9 31.2 31.6 32.0 32.4 32.8 33.2 33.5 33.9

industrial production index, % y-o-y, ave [3] 5.4 5.2 4.5 1.9 2.0 3.0 3.0 3.0 3.0 3.0


Notes: e BMI estimates. f BMI forecasts. Sources: 1 Haut-Commissariat Au Plan, BMI. 2 World Bank/BMI calculation/BMI; 3 IMF; 4 Haut-Commissariat Au Plan.

expenditures and public tenders. As such, we pencil in a budget

surplus of 0.6% of GDP for 2010, with income tax revenues

growing by 3.3% y-o-y.

Throughout 2011-2014 budget revenue will grow by 5.8%

on average, supported by the government’s announcement to

implement austerity measures, controlling the wage bill and

reducing public spending on telephony, fuel, travel, and vehicle

and building procurement. Consequently, expenditure growth

will only average 3.6% over the forecast period, generating an

average budget surplus of 2.2% of GDP.

risks to outlookWith levels of uncertainty vis-à-vis the European economy

remaining elevated, there are major risks to our outlook for

Moroccan real GDP growth and budget. Should European de-

mand fail to recover, reduced exports will cut into international

trade in turn, impacting Morocco’s fiscal position and growth.

Tourism and workers’ remittances could also suffer.

Balance of payments

current account position to improve, But Deficit remains

BMi VieWWe expect Morocco’s current account deficit to narrow in 2010 based

on a pick up in goods exports and solid growth in current transfers.

Over the remaining of the forecast period the deficit will persist, but nar-

row to 1.3% of GDP, despite export growth outpacing that of imports,

due the latter’s superior nominal value.

We are forecasting Morocco’s current account deficit to come

in at 4.3% in 2010, narrowing from an estimated 5.0% last year.

The country’s last year was driven by a huge hit in trade, due

to weak demand in the debt crisis-impacted eurozone. Goods

imports fell by 20.2% y-o-y, while exports contracted by 28.1%

compared to the year before, caused by an unprecedented 63.5%

drop in phosphate exports. Nevertheless, a pick up in world

commodity prices and a recovery in European demand over

the coming years should act as a remedy for Morocco’s current

account deficit. Tourism will also be a major contributor to nar-

rowing the current account deficit going forward. We expect the

services balance to grow consistently over our forecast period,

based on continuous investment in the tourism sector.

trade: Key Driver of the Deficit narrowingAlthough from a low base, monthly exports grew by an av-

erage rate of 12.5% y-o-y over the January to May period,

signalling an improving situation regarding Morocco’s trade

solid revenues Going Forward Budget Balance

Source: BMI

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

-10

-5

0

5

10

15

20

25

30

2004 2006 2008 2010f 2012f 2014f

Revenue, y-o-y % changeExpenditure, y-o-y % changeBudget Balance, % of GDP

narrowing trade and current account Deficit Budget Balance

Source: BMI

-25

-20

-15

-10

-5

0

5

10

15

20

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

f

2011

f

2012

f

2013

f

2014

f

Goods Balance, % of GDPServices Balance, % of GDPCurrent Transfer, % of GDPCurrent Account Balance, % of GDP


LiBYa Q4 2010

balance. Encouraged by these figures as well as a weakening

dirham against the euro over the past one and a half months, we

pencil in 10.0% overall export growth in 2010. We see further

downside for the Moroccan currency against the euro, with our

global team expecting the euro to stabilize against the US dollar.

Imports also recorded impressive growth rates in the first five

months of 2010, yet lower than those of exports. We see goods

imports growing by only 4.0% in 2010, with weak domestic

demand (3.0% growth in real terms expected in 2010) holding

down orders. Despite the superior growth rates expected from

exports, the nominal value of exports will remain almost twice

as big, keeping the trade deficit at MAD131.9bn (US$16.4bn).

Beyond this year, we see exports expanding further by 6.75%

y-o-y on average over 2011-2014. With the eurozone expected

to recover to average 1.8% real growth over 2011-2014 period

in after a 4.1% contraction in 2009 and accounting for more than

50% of Morocco’s exports, we see potential for an improvement

in the Kingdom’s trade position. An expansion in Morocco’s ag-

riculture and manufacturing industries will diversify the exports

base, contributing to an increase in volume over the long-term.

On the other side of the balance, imports over the long term will

grow by a smaller 4.8% y-o-y rate, contributing to a narrower

trade deficit of 15.6% of GDP in 2014 compared to 18.2% in

2009. The 10-year plan to build wind energy farms, increasing

the share of the country’s energy consumption from renewable

energy sources to 42%, will reduce the country’s dependency

on oil imports, in turn undermining overall import volume.

tourism outperforming the regionDespite world tourism being strongly affected by the global

financial crisis and economy slowdown, Morocco was the only

country among its North African counterparts to show strong

growth. Compared to the 6.9% y-o-y contraction in tourism

in 2009, the first 5 months of this year have recorded a 11.1%

increase. The monthly data suggests that tourism bottomed out

in August 2009, with the figures having been improving, ever

since November flagging up a 35.0% increase compared to the

same month previous year. Nonetheless, as with goods exports,

the European demand outlook will play a key role in the future

readings of the services balance. For the time being, with tour-

ism accounting for more than 95% of total services, we pencil in

receipts from this sector to see 5.0% growth in 2010. We forecast

a 16.0% expansion of the services balance, closing the year with

6.0% of GDP surplus. Continuous investment plans in the sec-

tor will increase tourism receipts by 15.0% from 2009 to 2014.

Current transfers will return to positive growth in 2010, after

contracting by 5.0% in 2009. In 2010, we see remittances from

Moroccans abroad growing by 6.0% y-o-y, encouraged by the

data for the first five months showing an 11.0% y-o-y rise.

Going forward, we expect remittances to continue at the same

pace throughout 2011-2014, pushed by increasing labour force

migration towards more developed neighbouring eurozone

countries, and a recovery in the economies of the host countries.

risks to outlookAlthough BMI’s outlook for oil prices is one of potential down-

side risks over the medium term, a spike in Brent Crude prices

along a drop in phosphate prices could impact Morocco’s trade

balance. Should this scenario play out, the share of phosphate

exports to total could drop further after halving from 2008 to

2009, while imports could grow faster than our predicted 5.0%,

thereby widening the trade deficit.

recovering eurozone absorbing exports eurozone real growth & goods exports, % y-o-y

Source: BMI

-35

-25

-15

-5

5

15

25

35

-5

-4

-3

-2

-1

0

1

2

3

4

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

f

2011

f

2012

f

2013

f

2014

f

Eurozone Real GDP Growth, % y-o-yGoods Exports, y-o-y growth RHS

imports Benefitting From Demand pick up Goods imports & Private expenditure, y-o-y chg, real terms

Source: BMI

-40

-30

-20

-10

0

10

20

30

40

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

f

2011

f

2012

f

2013

f

2014

f

Goods Imports, % y-o-y change

Household Expenditure, % y-o-y change


econoMic outLooK

Domestic politics

sK spat Highlights Diplomatic risks to Business

BMi VieWWe maintain our relatively cautious political outlook for Libya, and draw

attention to several emerging risks. While we believe that Libya has

domestic security under control, its relations with other countries re-

main fraught. In our view, although disputes do not tend to escalate to

conflict, disagreements often affect foreign investment, which in turn

could potentially lower public favour for the government in the long run.

Libya is no stranger to international spats, even with its trade

and business partners. Two key events of this nature in 2010

underline our concerns that the private sector is still highly

vulnerable to government interference, even when these are

entirely separate matters. We also highlight that with foreign

direct investment picking up in several core sectors with con-

current government investment; the spilling over of political

matters into business deals may become more frequent and

deter investors over the long run.

south Korea issue still unresolvedIn July 2010 Libya deported a South Korean national, on the

premise that he was allegedly conducting covert intelligence

while working in Libya. The Libyan government has offered

a resolution in the form of a hefty US$1bn fine, to be paid by

South Korea and more specifically, in the shape of a construc-


Chapter 3.1: political outlook – Libya

taBLe: LiBYa poLiticaL oVerVieWsystem of Government revolutionary republic or Jamahiriya (state of the masses). Most decision-making power is held

by the revolutionary committees and, ultimately, the head of state. legislative functions are car-ried out by ‘People’s congresses’ at municipal, regional and national level (national General Peo-ple’s congress – GPc), with executive functions held by the corresponding ‘People’s committees’

Head of state leader of the revolution – Muammar Qadhafi

Head of Government Prime Minister and General secretary of the GPc – Baghdadi Mahmudi

last election no national parliamentary elections. local People’s committees elect their own leadership and secretaries of local People’s congresses every four years. delegates from these make up the regional People’s congresses. around 2700 regional representatives constitute the GPc, which elects the General People’s committee (cabinet) every year at its annual meeting. in reality, cabi-net ministers can be moved or replaced by Qadhafi.

Key figures saif al-islam – Qadhafi’s son, head of the Qadhafi international foundation for charity associa-tions; imbarek al-shamekh – deputy Prime Minister; abdelfatah obidi – Public security Minister

Main Political Parties (number of seats in parliament) no political parties. libya’s political system is nominally based on the philosophy put forward by Qadhafi in his Green Book, which combines islamist theory with socialism and a rejection of parlia-mentary democracy and political parties.

extra-Parliamentary opposition? opposition to the regime is limited. the government has effectively neutralised the threat from islamist militant groups. the establishment of non-governmental organisations (nGos) is allowed, although they must conform to the goals of the revolution. trade unions do not technically exist, but numerous professional associations are integrated into government structures and may send delegates to the GPc.

ongoing disputes us – switzerland – relations frozen following arrest of one of Qadhafi’s sons in geneva in 2008. the two swiss businessmen were released in early 2010; compensation for victims of various libyan-sponsored terrorist attacks and organisations (such as ira); niger – libya’s alleged sup-port for tuareg rebels in niger border areas; israel

Key relations/ treaties relations with West have been improving since the 2003 dismantling of nuclear programme and renouncement of support for international terrorism. strong links with fellow arab states (member of arab league, organisation of the islamic conference, arab Maghreb union) and africa (african union, african development Bank). Member of un security council (2008-09)



Source: BMI

tion project of this value. Coupled with a token warning that

South Korean firms in Libya will face restrictions otherwise,

we believe that South Korea is likely to pay the fine to protect

its operations in the country. However, the fact that the matter

has reached such unwelcome heights further supports our view

that the Libyan government is not averse to resorting to drastic

measures – even when this has negative implications for both

diplomacy and foreign led business ventures.

risk to outlookWe also believe that Libya’s fractious dealings with other

countries, even those on which it is on relatively amicable

terms, could lead to internal security issues in the long run, in

turn pulling down our already weak long term political risk

rating of 59.5 out of 100. Given that Qadhafi appears to be in

good health and has not alluded to stepping down, or even his

eventual succession, we believe that he is likely to stay in power

for the medium term, maintaining our current rating. Those in

favour of reform may grow frustrated with sporadic progress in

economic development and attempt to form opposition groups

but the security infrastructure will ensure that their success is

limited. Under the current regime, this would be regarded as

dissent and would likely be quashed, fuelling further tensions

and raising internal political risks. Our long term political risk

ratings favour a democratic system in which discontent can be

resolved legally and non-violently, even if it means lower day-to-

day policy stability (and a lower short term political risk rating).

Nonetheless, Qadhafi’s tendency to interfere in the private sec-

tor is unlikely to mellow, and he will continue to use business

issues between Libya and its trade partners as political leverage.

Therefore, we hold to our view that a key downside political

risk for Libya is the unpredictable nature of its leader, and the

far-reaching implications of seemingly minor diplomatic disa-

greements. The two altercations this year (with Switzerland and

South Korea) point to frequent discord between Libya and its

investors. Both matters reached near disaster in international

relations terms, and underscore the country’s low political and

business environment risk ratings.

taking the rough With the smoothOn the internal front, we believe that there are no serious threats

to domestic stability in the short to medium term. The removal of

economic sanctions in 2004 and the subsequent rise in oil exports

drove popular support for fairer income distribution and to this

end, the government’s plans to invest heavily in infrastructure

should placate any discontent arising from this. After years of

sanctions, the strong growth in real GDP and GDP per capita

will only improve living standards.

Therefore, we believe that the government is likely to view

its public sector investments as a tool to retain public favour,

particularly since we also expect employment levels to pick up.

Also, if the state adopts a more friendly approach to its foreign

partners, the momentum for private sector growth will continue

to bolster public opinion and reduce the threat of militant group

formation, which usually arises from the lack of opportunities.


Morocco Q4 2010

economic activity

Market Liberalisation Will support Long term Growth

BMi VieWWe view Libya’s efforts to encourage foreign investment in the oil sec-

tor and attempt to diversify the economy positively. In the short-to-me-

dium term, we believe that higher oil prices and rising oil exports will

have the greatest impact on growth. In the long run, the privatisation of

strategic sectors will reduce market inefficiencies and increase output,

providing ongoing momentum for GDP growth.

A combination of UN sanctions and decades of under-investment

by the government has meant that Libya’s oil output has only

been a fraction of its proven reserves. Bringing in outside ex-

pertise through either entirely private or part-private ownership

programmes are now considered by the government to be the most

optimal ways of achieving higher oil production and revenues.

economic Growth still oil DrivenLibya’s relative economic isolation buffered it from the worst of

the global financial crisis, increasing its appeal to foreign inves-

tors looking for new growth opportunities. Our real GDP growth

forecast for 2010 is 3.8% y-o-y, which is largely attributed to

an increase in oil prices. We believe that government efforts to

privatise some state-owned enterprises and attract foreign inves-

tors, particularly in core sectors like oil and gas, infrastructure

and transport, should be good news for the economy. Indeed,

market liberalisation should help erode structural inefficiencies

and foster job creation in the private sector. Going forward, we

see GDP growth reaching 5.8% in 2015, although as mentioned,

higher oil exports are expected to form the bulk of this growth

– contributing 2.5 percentage points.

We also believe that consumer spending will gain on the back

of rising investments in the oil and construction sectors and the

resultant job creation. Although we forecast that private con-

sumption will contract by -16.7% in 2010, we expect spending to

rebound in 2011, reaching 7.0% growth in 2015 and accounting

for 2.9pp headline economic growth.

On the external front, the trade balance will stay firmly in sur-

plus, helped by a slowdown in import growth from 10.0% in

2010 to 6.0% in 2015 and alongside a pickup in export growth

from 1.5% in 2010 to 4.2% by 2015. The rise in exports will

widen the trade surplus, raising its contribution toward final

a change For the Better contribution to real GdP Growth, pp

Source: IMF, BMI

-16

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

8

2006 2007 2008 2009e 2010f 2011f 2012f 2013f 2014f

Net Exports Gross Fixed Capital FormationGovernment Consumption Private Consumption


Chapter 3.2: economic outlook – Libya

taBLe: LiBYa econoMic actiVitY 2005 2006 2007 2008 2009 2010f 2011f 2012f 2013f 2014f

nominal GdP, lydbn [1] 66.5 78.9 92.8 116.5 86.1 92.1 98.1 107.0 115.6 125.6

nominal GdP, us$bn [1] 49.2 61.6 75.9 89.7 71.5 68.6 73.1 79.7 86.1 93.6

real GdP growth, % change y-o-y [1] 11.1 5.7 4.9 2.7 -0.9 3.8 3.4 6.0 4.9 5.5

GdP per capita, us$ [1] 8,313 10,178 12,300 14,254 11,137 10,503 10,979 11,759 12,477 13,318

Population, mn [2] 5.9 6.0 6.2 6.3 6.4 6.5 6.7 6.8 6.9 7.0

Notes: e BMI estimates. f BMI forecasts. Sources: 1 IMF/BMI. 2 World Bank/BMI calculation/BMI

GDP growth figures to 0.4pp by 2015.

Budget: oil Led surplusFurther affecting the importance of oil for the economy,

Libya’s fiscal surplus hit 3.2% of GDP in 2009 on the back

of revenues generated in the hydrocarbon industry. Moreo-

ver, given that we expect a further increase in oil prices this

year, we hold to our forecast for the surplus to reach 16.8%

of GDP in 2010. Over the longer term, we believe that the

budget surplus will be 22.0% of GDP by 2015, although this

will come on the back of increased oil production and exports

in light of Libya’s recent gradual liberalising of the energy

sector. Ultimately, Libya’s dependence on oil revenues, which

we estimate to contribute to 82.8% of total revenues in 2010,

will still feature heavily in budgetary revenues in 2015 with

76.0% and 4.4% y-o-y growth.

risk to outlook A major downside risk to our growth forecast is that more

entrenched problems – such as the lack of regulatory authority

and transparency in business dealings, and the ongoing risk of

political interference could stifle foreign direct investment (FDI)

in the medium term, or hold back progress on existing projects

which in turn will weigh on economic growth. Our positive

outlook for the hydrocarbon sector is based on both higher

investment from private sources and our forecast for rising oil

prices. Therefore, we believe that key risks to economic growth

will be from a fall in oil prices or a dramatic decline of FDI.

using oil to Drive Growth real GdP Growth forecast (%)

Source: IMF, Central Bank Of Libya, BMI

0

10

20

30

40

50

60

70

80

90

100

-2

0

2

4

6

8

10

12

2005 2006 2007 2008 2009e 2010f 2011f 2012f 2013f 2014f 2015f

Real GDP Growth (%), LHS

OPEC Basket Oil Price (US$/bbl), RHS


Morocco Q4 2010

Domestic politics

unemployment situation poses Long-term security risks

BMi VieWWe hold our view that, owing to Tunisia’s authoritarian but stable gov-

ernment, the country will remain politically stable for the medium term.

There is no strong opposition group to the current government and any

signs of dissent, even news coverage that could cast the regime in a

negative light, are quickly stifled. However, we note that rising unem-

ployment levels among graduates will form a base of public discontent,

which presents a risk to political stability in the long term.

Grumpy GraduatesThe latest data release from the institute of statistics in Tunisia

shows that unemployment rose to 13.3% in 2009, from 12.4%

in 2008 and which we project the level will reach 15.2% by

2014. Unemployment among graduates was recorded at 21.7%

in 2009, and the government expects this to fall to 13.6% by

2014. We are not optimistic that this is realistically achievable.

The jobless rate, including graduates, has been on the rise and

has seemingly gone unaddressed for decades in spite of official

claims to be prioritising the problem.

In our view, the government has not put forward sustainable

policies for reducing unemployment significantly in the me-

dium term and therefore growing dissatisfaction among youth

will continue unabated. In a conference held by the Ministry

of Employment and Vocational training in July 2010, the state

championed entrepreneurship as a potential driver for employ-

ment and focussing on reforming the education system to ac-

commodate relevant market skills, including languages and IT.

For the current unemployed, the outcome of this meeting will

make little difference to their immediate job prospects, with most

graduates spending up to three years looking for work at present.

We see this as further evidence whatever policies the govern-

ment is taking to encourage private sector expansion, which

would otherwise create jobs, are not working- certainly not fast

enough. Given that the Tunisian government is keen to raise

exports, tourism and promote growth in high value sectors, we

believe that bringing unemployment down will require a more

pragmatic approach to both realigning education with business

needs in mind.

But no threat to social stability Yet President Zine El Abidine Ben Ali’s tight grip on the media will

ensure any form of uprising is censored to prevent the potential

for a wave of small scale protests erupting around the coun-

try. Given the stronghold the government has on free speech,

protests are unlikely to occur. However, the next presidential

elections are due to take place in 2014, and according to the

current constitution, at 78, Ben Ali will be three years older than

the maximum age limit to run for the position. If he amends

the constitution for a second time to his favour and goes on to

win the next election, we believe that the pace of change for

lowering unemployment will remain slow or stagnate, in line

with previous years.

Despite the potential for long term public discontent and even

the possibility of protests, the government has thus far shown

no signs of urgency in linking the private sector with university

programmes to correct the misalignment between private sec-

tor needs and education. A major downside risk therefore, is

that the young unemployed are more likely to support opposi-

tion parties – particularly when by 2014, the date of the next

scheduled presidential election, the current incumbent will be

ineligible to stand.

risks to outlookWe also believe that 2014 could also present an ideal opportu-

nity for the discontent unemployed to bring about a refreshing

change of government, particularly if Ben Ali accepts the current

terms and does not run for office again. Aside from the issue of

succession, we believe that simmering unrest among the youth

could form a destabilising base during that time.

However, this could require substantial democratic progress over

the coming years. Tunisian politicians will be watching events

in Egypt closely: an increasingly free political situation there


Chapter 4.1: political outlook – tunisia

could encourage agitation in Tunisia. Without such a trigger,

the presidential election is more likely to bring a senior Con-

stitutional Democratic Rally (CDR) figure to power, resulting

in no real substantive policy shift. Tunisia is one of the most

closed political societies in the MENA region (already the

world’s laggard as far as democracy is concerned). As such we

do not expect it to lead any regional move towards democracy:

it will more likely follow a more influential country like Egypt.

Long-term political outlook

political challenges For the coming Decade: scenarios For political change

BMi VieWTunisia boasts one of the most stable political climates in the region,

and we forecast relatively tranquil conditions for the foreseeable future.

Although we highlight four potential sources of political instability, we

do not expect a fundamental rupture in the country’s political develop-

ment in the coming decade.

Tunisia consistently ranks the highest in the MENA region in

our proprietary short-term political risk rating, typically scoring

high in the policy-making process and security/external threats

categories. This in large part reflects Tunisia’s strong execu-

tive and relatively efficient bureaucracy and effective security

apparatus. The opposition is weak and fragmented, the media

strictly controlled, and dissent subject to systematic repression.

When combined with relatively strong economic foundations

and few international constraints on government, this makes for

a high degree of political stability in the short term.

In the longer term, however, authoritarianism is likely to be a

liability rather than a strength. Tunisia scores just 40.3 out of

100 in the ‘characteristics of polity’ category of our long-term

political risk rating, which measures the openness of the political

system and the level of democratic representation. Within this

category, Tunisia scores particularly low in the ‘constitutional

framework’ sub-category, where it scores 0 for media freedom

and independent judiciary and 1 for political parties and civil

society. These shortcomings represent the biggest threat to po-

litical stability going forward, in our view, given our underlying

assumption that undemocratic systems of government are more


tunisia Q4 2010

taBLe: tunisia poLiticaL oVerVieWsystem of Government Presidential republic. 189-seat parliament, 20% of seats reserved for opposition.

Head of state President Zine el abidine Ben ali – five year term, no limit to renewal

Head of Government President Zine el abidine Ben ali; Prime Minister Mohamed Ghannouchi

last election Presidential – 26 october 2009

Parliamentary – 26 october 2009

composition of current Government all ministers appointed by president and come almost entirely from the ranks of the rcd.

Key figures President Zine el abidine Ben ali – exercises considerable control over executive, which in turn dominates parliament (latter never originates legislation and passes almost all bills put forward by executive); Minister of finance – Mohamed rachid Kechiche; Minister of defence – Kamel Mourjane

Main Political Parties (number of seats in parliament) democratic constitutional rally (rcd) – 161 seats. Previously tunisia’s only political party, cur-rently controls 75% of parliamentary seats. Broadly left-wing, socialist ideology (member of the socialist international) but functions largely to support President Ben ali.

Movement of socialist democrats (Mds) – 16 seats. founded in 1978. nominally an opposition party but officially supports the rule of President Ben ali.

Party of People’s unity (PuP) – 12 seats. Won 3.4% of the popular vote in the 2009 election.

unionist democratic union (udu) – 9 seats. arab nationalist party.

Movement ettajdid – 2 seats. evolved from the tunisian communist Party.

social liberal Party – 8 seats. liberal democratic party.

extra-Parliamentary opposition? opposition to government (including human rights groups and nGos) tightly controlled. islamist terrorists have targeted government targets, although attacks have been far less frequent and militant groups far less visible than in algeria.

next election Presidential and Parliamentary – 2014

ongoing disputes none

Key relations/ treaties Member of arab league, arab Maghreb union, organisation of the islamic conference, african union, african development Bank (currently headquartered in tunis), Wto. strong economic and political ties with europe – member of euro-Med Partnership. Political ally of the us.



Source: BMI

vulnerable to political unrest in the long term than liberal ones.

That said, the overall long-term political risk rating (68.6/100)

compares favourably with the rest of the region, reflecting the

country’s relatively strong institutions, high standard of living,

and homogenous society.

threats and challenges to stability1. Political Succession: President Zine el Abidine Ben Ali is

now in his last term as president, having achieved another crush-

ing victory in the presidential election of October 2009. Under

current rules, which bar anyone older than 75 from standing for

presidency, he will be ineligible to run again in 2014 (Ben Ali is

73). While we do not discount the possibility that he may amend

constitution to allow him to govern for another term – there is

certainly precedent for this, given that in 2002 he abolished term

limits for presidents – we maintain that political succession in

the coming decade is very probable. The president will be 78 by

the time of the election and there have been growing rumours

that he has prostate cancer.

Speculation currently surrounds the President’s son-in-law,

Sakher Materi, who has taken on a senior role in government.

However, he has repeatedly denied having political ambitions,

and at only 30 years of age he will probably be considered too

young for the top job. Crucially, he also lacks close ties to the

military-security establishment or patronage networks within

the RCD, where many oppose the idea of family succession.

As things stand, the list of likely candidates include several

senior members of the politburo, including the former defence

minister and newly appointed foreign minister Kamel Mourjane,

RCD’s general secretary Mohamed Ghariani, and Prime Minister

Mohamed Ghannouchi. The first is the leading contender, in our

view, given his rising status in recent years, which indicates that

he enjoys the confidence of the ruler. Yet none of these figures

has a particularly high profile in comparison with the president,

and Ben Ali’s dominance of the political scene risks creating a

vacuum upon his eventual exit.

2. Authoritarianism: Authoritarianism is a key pillar of Ben

Ali’s regime, and as such it poses two main threats to stabil-

ity. First, the ongoing suppression of dissent runs the risk of

further fuelling resentment and opposition to the government,

increasing the potential for major political upheaval. Groups

such as Human Rights Watch and Amnesty International have

repeatedly accused Tunis of suppressing internal dissent and of

muzzling the domestic press. Tunisia consistently scores low in

Freedom House’s political freedom and civil liberties ratings – 7

and 5 respectively (on a scale of one to seven, with seven being

the least free), ranking ‘not free’. Despite the rising chorus of

disapproval from the international community and promises of

change from the regime, there is no indication it will change

tack any time soon.

The government has historically justified its tight controls on

the grounds that it is necessary to avoid the kind of conflict

witnessed in Algeria, where the authorities fought a bloody

civil war with Islamist militants. However, denying Islamic

groups an outlet for the expression of legitimate grievances

and opposing political views could actually strengthen such

groups in the longer term. Secondly, human rights issues have

proved a sticking point in diplomatic relations with the EU and

other Arab states. There is a possibility – albeit distant, in our

view – that political change will be forced from abroad, for

example, through the withholding of ‘advanced partner’ status

that is sought from the EU.

3. Economic Pressures: To the extent that Ben Ali has pinned

much of his legitimacy on his effective economic stewardship,

long-term political stability remains vulnerable to adverse eco-

nomic shocks. While our outlook for the Tunisian economy is

bright – we are forecasting headline real GDP to average 5.6%

for the remainder of the forecast period (2011-2019) – the country

is plagued by relatively high rates of unemployment, especially

among youth. This was made manifest in 2008 when large-scale

protests erupted over rising inflation and a lack of employment

opportunities. We project the unemployment rate to reach 15.1%

in 2010, up from 14.7% the year before, and exceed 10% for the

rest of the decade. Accordingly, structural unemployment will

remain a permanent thorn in the government side, although we

do not expect it to threaten the regime’s survival.

4. Islamist Militancy: In comparison with Morocco, and particu-

larly Algeria, the terrorist threat appears very slight in Tunisia.

Islamist militant activity has largely abated since the govern-

ment’s crackdown in the early 1990s and again in early 2003.

Like governments in Algeria, Tunis has taken a zero-tolerance

approach to radical Islam, particularly after the 2003 bombing

of a synagogue on the island of Djerba,. The constitution bans

the participation of religious parties in politics, and outward

symbols of religion are discouraged – women wearing the

hijab are banned from entering public buildings, for example.

With Ben Ali resolutely opposed to the existence of an Islamic

opposition, a change in the law is highly unlikely while he re-

mains in power. The longer term danger is that Islamist groups

channel frustrations about high unemployment and political


poLiticaL outLooK

exclusion to recruit new members to their cause. In addition,

the improving security situation in Iraq could result in militants

returning home to join or form local terror networks focusing

on domestic targets.

scenarios For political changeIn our view, the main bifurcation in Tunisia’s political develop-

ment is towards (a) increasing authoritarianism or (b) greater

political liberalisation, both of which will likely occur within the

established constitutional framework. We assign slightly more

weight to the former given that the incumbent will retain a say in

charting the way forward, either directly through his re-election

in 2014 or via the appointment of a like-minded successor.

More Authoritarianism: Our core scenario is for the regime

to continue to stall on political reform or even revert to more

authoritarian ways of governing. This is in keeping with the

trend of the past decade that has seen repression progressively

extended beyond the illegal Islamist and leftist groups to the

legal secular opposition, human rights activists, and regime

critical journalists. Ben Ali has shown increasingly autocratic

tendencies since coming to power, personally appointing min-

isters and using cabinet reshuffles and other tactics to ensure

that no figure within the government builds up a base support

to challenge his position. We believe similar authoritarian

tendencies can be expected of Ben Ali’s successor. It can be

presumed that the President’s pick will be status-quo oriented

since he (or less likely she?) will need the endorsement of the

military-security establishment as well as the dominant factions

within the RCD. These have a vested interest in preserving the

existing political set up.

Political Liberalisation: Our best case scenario would be a

move towards a more competitive political landscape and a

strengthening of basic political freedoms, on the basis of our

view that liberal democracies are the most conducive to long-term

stability. At a minimum this would entail the easing of restric-

tions on political activism and the media, more transparency in

government, and an overhaul of the judicial system.

The chances of this happening under the current regime are

remote, but not unthinkable. An impetus could come from

Brussels, which has made good governance a key tenet of its

preferential trade agreements with ‘neighbour’ countries. Several

EU officials have threatened to withdraw the offer of ‘advanced

partner’ status if the government does not make good on its

promises of political liberalisation and respect for human rights.

This would put Tunisia at a significant disadvantage relative to

its main competitors in Eastern Europe and Morocco, and may

induce the government to change its policies for appearance sake.

However, any concessions that follow from external pressures

are likely to be of little substance. The West is equally (if not

more) concerned about terrorism and immigration as it is about

human rights, and as a result it may turn a blind eye to periodic

lapses in its democratic conduct.


tunisia Q4 2010

economic activity

GDp Growth expected to reach 3.9% in 2010

BMi VieWTunisia’s economy appears to be recovering well after the fall in euro-

zone demand for its exports and tourist sector gave way to a slowdown

in GDP growth in 2009. We believe that low interest rates and rising

private consumption will drive economic growth in the medium term.

Government at the Helm in 2009During the worst of the global economic downturn, Tunisia’s

GDP growth slowed down but did not contract, largely driven

by government spending. We estimate that this rose to15.4%

of GDP in 2009 – a 5.5% increase in real terms from 2008 and

outpacing the growth in private consumption.

We estimate that the government spent TND17.2bn in 2009 – a

7.1% rise on 2008 – with the proportion of capital outlays rising

modestly from 20.8% to 21.0%. Latest data given by the Tuni-

sian Central Bank indicates that real GDP growth increased by

1.9% q-o-q during Q409. In the previous quarter of 2009, the

country experienced economic growth of 2.6%, going against

global trends.

We expect the growth in GDP to rise from an estimated 2.4%

y-o-y in 2009 to 3.9% y-o-y in 2010 before making a full re-

covery to a 5.8% growth by 2011. The reliance on government

spending should ease as exports increase (which we estimate

will contribute 1.7 percentage points toward GDP during 2010)

while private consumption will contribute 2.2pp toward real

GDP growth in 2010. On the back of rising exports, we believe

that Tunisia’s longer term growth prospects are also favourable

– with GDP expansion expected average 5.4% over the next

five years to 2014.

Focus shifts to private consumption Private consumption increased by an estimated 3.0% in 2009.

Our forecast indicates that private consumption will undergo a

recovery with a 3.5% increase in 2010, making a higher contri-

bution to GDP growth of 2.2pps. By 2014, private consumption

will contribute 3.0pp toward economic growth.

Heading up GdP Growth outlook (%)

Source: Institut National de la Statistique, BMI

0

1,000

2,000

3,000

4,000

5,000

6,000

0

1

2

3

4

5

6

7

2004

2005

2006

2007

2008

2009

e

2010

f

2011

f

2012

f

2013

f

2014

f

Real GDP Growth (%), LHSGDP per Capita (US$), RHS


Chapter 4.2: economic outlook – tunisia

taBLe: tunisia econoMic actiVitY 2005 2006 2007 2008 2009 2010f 2011f 2012f 2013f 2014f

nominal GdP, tndbn [1] 37.6 41.1 44.9 48.6 51.8 55.6 60.8 66.3 71.8 77.4

nominal GdP, us$bn [1] 27.6 31.6 36.7 37.1 39.1 42.1 46.0 50.2 53.6 57.3


GdP per capita, us$ [1] 2,757 3,120 3,594 3,590 3,748 3,999 4,320 4,655 4,913 5,200

Population, mn [2] 10.0 10.1 10.2 10.3 10.4 10.5 10.7 10.8 10.9 11.0

industrial production index, % y-o-y, ave [1] 1.6 2.8 9.6 3.3 -7.7 0.5 3.5 4.0 4.0 4.0


Notes: e BMI estimates. f BMI forecasts. Sources: 1 INS, BMI. 2 World Bank/BMI calculation/BMI; 3 INS/BMI.

Low inflation should Boost spending powerThe oil price surge in 2008 caused producer prices in Tunisia to

escalate, rising to a peak of 12.2% y-o-y in 2008 which had a

modest effect on the consumer price inflation (see chart below).

Although subsidies provided by the Tunisian government would

have buffered the blow of a massive price rise for consumers,

this was still negative for domestic demand. However, these

pressures have now subsided with monthly producer price data

showing a period of deflation averaging around -1.8% y-o-y

between July 2009 and January 2010. The latest data for PPI

given in April 2010 gives 1.1% y-o-y growth, while we expect

end year 2010 producer prices to remain largely unchanged from

2009 figures with y-o-y growth of only 1.0%.

Data from the most recent release in April 2010 shows that

there was 4.9% y-o-y rise in consumer price inflation up from

3.7% y-o-y average in 2009, which was a slowdown from the

2008 inflation growth rate of 5.2%. We expect consumer prices

to average 4.2% during 2010 before embarking on decline to

3.0% in 2011 onwards. Historically for Tunisia, inflation hit a

peak of 5.1% in 2008 however as consumer demand picks up

during 2010 there will be a recovery to the low inflation levels

seen prior to the global financial crisis. This is manageable by

previous standards and demonstrates that consumers are spend-

ing more, which should boost the economy in the medium term.

Low interest rates Bode Well When risk appetite picks upAnother positive note is that interest rates are falling, although

marginally, which should boost bank lending and give rise

to higher levels of consumer spending. We believe that real

interest rates should remain at around 2.1% during the next

two years. The potential for higher consumer spending should

maintain our view that domestic demand in Tunisia will drive

the economy forward.

That said, unemployment rates are still unfavourably high, which

we estimate to be at around 14.7% in 2009. Historically, this is

marginally lower than a ten-year peak in 1999 (15.8%) but is

still undesirable. The jobless rate among graduates is continuing

to increase, partly owing to the misalignment between private

sector needs and higher education. If the government were to

encourage a boost in private sector employment rates, there

would be upside risks to private consumption as incomes rose.

eurozone Demand implications For exportsLow eurozone demand will continue to hold back export growth

for Tunisia. That said, we expect export growth to rise over the

medium term from 4.7% in 2010 to 6.1% during 2011, gradually

narrowing the trade deficit over the longer term. Eventually, two

of Tunisia’s most prominent trading partners, Italy and France,

are expected to return to a high level of private consumption

spending as a driver for economic growth. For France, we be-

lieve this should occur by 2012, where private consumption will

contribute 1.1pp toward GDP growth, which is more in line with

the level of domestic demand seen before 2008. By the end of

2010 we expect Tunisian exports to contribute 1.69pp toward

domestic GDP growth, rising to 2.5pp by 2014, in line with

our longer term expectations for recovering eurozone demand

and the rise in manufacturing output from the private sector.

risk to outlookAn upside risk is that eurozone demand could exceed our

cautious expectations, which would speed up the recovery in

Tunisian exports and therefore GDP growth. On the other hand,

prolonged low demand from the eurozone or a slower than

expected recovery will negatively impact Tunisian economic

growth which filters down to domestic job losses – worsening

an already high unemployment ra

supporting Higher Domestic spending cPi average, % y-o-y

Source: Institut National de la Statistique ,BMI

0

1

2

3

4

5

6

2006 2007 2008 2009 2010f 2011f 2012f


tunisia Q4 2010

Chapter 6: BMi Global assumptions


taBLe: GLoBaL assuMptions2009 2010f 2011f 2012f 2013f 2014f

real GdP Growth (%)

usa -2.4 2.8 1.8 2.2 2.3 2.3

eurozone -4.1 1.1 1.4 1.9 1.9 1.8

Japan -5.2 1.9 0.9 1.1 1.2 1.2

china 8.7 8.8 7.5 8.6 7.6 7.1

World -1.7 3.4 3.0 3.6 3.6 3.6

consumer inflation (avg)

usa -0.4 1.6 0.5 1.2 1.7 2.0

eurozone 0.2 0.9 1.4 1.7 1.6 1.8

Japan -1.3 -0.5 -0.3 0.0 0.8 1.3

china -0.7 2.6 2.6 2.2 1.7 2.0

World 1.8 3.0 3.1 3.3 3.3 3.3

interest rates (eop)

fed funds rate 0.00 0.00 0.00 2.50 4.00 4.25

ecB refinancing rate 1.00 1.00 1.00 2.00 3.00 4.00

Japan overnight call rate 0.10 0.10 0.10 0.20 0.30 0.30

exchange rates (avg)

us$/eur 1.40 1.29 1.22 1.26 1.25 1.25

JPy/us$ 93.60 96.00 104.00 110.00 110.00 112.50

cny/us$ 6.83 6.83 6.83 6.69 6.52 6.36

oil Prices (avg)

oPec Basket (us$/bbl) 60.10 83.00 85.00 90.00 90.00 90.00

Brent crude (us$/bbl) 67.00 85.00 87.00 92.00 92.00 92.00

Source: BMI

Global outlook

us slowdown in H210 Looking LikelyOur global growth projections envisage a slowdown in real GDP

expansion from 3.4% in 2010 to 3.0% in 2011. Emerging markets

will be the main contributor to growth, with the economies of

the US, several Western European states and Japan all forecast

to weaken going into 2011. There is increasing evidence that

the US economy is headed for a slowdown in the second half

of 2010, in line with our long-held core view. Core states in the

eurozone have shown significant resilience so far this year and our

2010 forecast for the bloc has been bumped up slightly to 1.1%

from 1.0% since our last Global Assumptions update in June.

We are continuing to forecast very loose monetary policy

in developed states, with the Federal Reserve and European

Central Bank remaining on hold until the end of 2011. With

growth weak and inflationary risks tilted to the downside, any

significant tightening of monetary policy will have to wait until

2012 at the earliest.

Bloomberg consensus forecasts for 2010 US growth come

more in line with our projections – moving from 3.2% in June

to 3.1% in July (closer to our 2.8% figure) – as recent data, in-

cluding leading indicators, have been disappointing. Similarly,

Bloomberg consensus estimates for Chinese growth in 2011

have fallen from 9.3% to 8.9%. Our forecast for Chinese real

GDP growth is 7.5%.



taBLe: GLoBaL & reGionaL reaL GDp GroWtH2009 2010f 2011f 2012f

World -1.7 3.4 3.0 3.6

developed states -3.4 2.0 1.6 2.0

asia ex-Japan 5.7 7.5 6.3 7.2

latin america -1.7 4.2 3.4 3.3

emerging europe -5.1 3.9 4.3 4.7

sub-saharan africa 2.4 5.5 5.8 6.2

Middle east & north africa 1.8 4.0 3.9 4.1

Developed Market exchange rates

eurozone us$/eur, ave 1.40 1.29 1.22

Japan JPy/us$, ave 93.60 96.00 104.00

switzerland cHf/us$, ave 1.09 1.05 1.04

united Kingdom us$/GBP, ave 1.55 1.50 1.58

emerging Market exchange rates

china cny/us$, ave 6.83 6.83 6.83

south Korea KrW/us$, ave 1212.54 1167.69 1183.84

india inr/us$, ave 47.23 46.40 48.00

Brazil Brl/us$, ave 2.00 1.82 1.93

Mexico MXn/us$, ave 13.49 12.50 11.80

russia ruB/us$, ave 31.72 29.41 28.00

turkey try/us$, ave 1.55 1.48 1.42

south africa Zar/us$, ave 8.38 7.47 7.25

Source: BMI

taBLe: consensus Forecastsus eurozone Japan Brazil china russia india

2010 Bloomberg consensus 3.1 1.1 3.4 6.6 10.0 4.0 n/a

BMi 2.8 1.1 1.9 6.0 8.8 4.7 7.8

2011 Bloomberg consensus 2.9 1.3 1.7 4.5 8.9 4.5 n/a

BMi 1.8 1.4 0.9 3.6 7.5 4.4 7.8

Source: BMI

Developed statesOur developed states aggregate growth forecasts reflect our

view that the US, eurozone and Japanese economies are likely

to experience a slowdown in growth going into 2011. We are

forecasting 2.0% growth for developed states in 2010, falling to

1.6% in 2011 (the latter figure has been revised down slightly

from 1.7% in our previous set of estimates in June). Our eurozone

real GDP growth forecast (see previous page) has been bumped

up from 1.0% to 1.1% for 2010, primarily owing to upgrades to

our Belgian outlook. The acceleration to 1.4% in 2011 mainly

reflects our view that some states will exit outright contraction,

which effectively means that the aggregate figure for the bloc

will be higher owing to base effects rather than a significant

and tangible improvement in activity. We remain concerned

by the potential for a significant retrenchment in developed

world consumption in H210 and 2011 as households rebuild

their balance sheets, the labour market remains loose and the

effects of government stimulus measures wear off.

emerging MarketsEmerging markets (EM) on aggregate are forecast to grow by

5.7% in 2010, up from 5.6% in our previous update. In keep-

ing with our view that the rebound will fade following a strong

post-recession recovery, we have made no change to our 5.1%

outlook for EM in 2011.


BMi GLoBaL assuMptions

taBLe: eMerGinG MarKets aGGreGate GroWtH2009 2010f 2011f 2012f

emerging Markets aggregate Growth 1.5 5.7 5.1 5.6

Latin america -1.7 4.2 3.4 3.3

argentina 1.0 4.3 2.3 2.0

Brazil -0.2 6.0 3.6 3.9

Mexico -6.5 4.4 3.2 2.7

Middle east & north africa 1.6 3.9 3.8 4.0

sub-saharan africa 2.4 5.5 5.8 6.2

south africa -1.8 3.0 4.1 4.1

nigeria 6.9 7.5 7.4 7.6

saudi arabia 0.1 2.2 2.7 3.0

uae -2.9 4.8 3.6 4.1

egypt 4.7 4.9 4.8 5.3

emerging asia 5.7 7.5 6.3 7.2

china 8.7 8.8 7.5 8.6

Hong Kong -2.8 5.4 1.5 3.0

india* 7.4 7.8 7.8 8.5

indonesia 4.5 5.2 5.3 5.7

Malaysia -1.7 4.9 3.4 4.3

singapore -1.3 12.9 3.3 4.5

south Korea 0.2 5.5 3.2 3.7

taiwan -1.9 5.9 2.8 5.1

thailand -2.5 3.6 3.7 4.0

emerging europe -5.1 3.9 4.3 4.7

russia -7.9 4.7 4.4 4.5

turkey -4.7 4.9 4.7 5.3

czech republic -4.1 2.2 3.2 3.8

Hungary -6.3 1.1 3.0 3.5

Poland 1.7 3.4 3.9 4.0

*Fiscal years ending March 31 (2009=2008/09)

Our Latin America projection for 2010 has been pushed up to

4.2% from 4.0% previously, owing primarily to an increase in

our Argentine growth forecast. Our aggregate forecasts for the

Middle East & North Africa and Sub-Saharan Africa regional

forecasts have moved up slightly, with the former coming in at

3.9% and 3.8% for 2010 and 2011, and the latter at 5.5% and

5.8% in those years, respectively.

Our forecasts for emerging Europe and emerging Asia also

remain broadly unchanged. While our caution on China natu-

rally leaves us wary of emerging Asia, we continue to forecast

it being the highest-growth emerging market region, with real

GDP expansion of 7.5% in 2010, slowing to 6.3% in 2011.

Mermaid House, 2 puddle Dock, London ec4V 3Ds

tel: +44 (0)20 7248 0468Fax: +44 (0)20 7248 0467email: [email protected]: www.businessmonitor.com

analyst: roxy nader, filip tarleaeditor: liz Martinssub-editor: delaina Haslamsubscriptions Manager: yen lyMarketing Manager: Joanna ashtonproduction: lisa church, chuoc lampublishers: richard londesborough, Jonathan ferozecopy Deadline: 12 august 2010

© 2010 Business Monitor international. all rights reserved.

all information, analysis, forecasts and data provided by Business Monitor international ltd is for the exclusive use of subscribing persons or organisations (including those using the service on a trial basis). all such content is copyrighted in the name of Business Monitor international, and as such no part of this content may be reproduced, repackaged, copied or redistributed without the express consent of Business Monitor international ltd.

all content, including forecasts, analysis and opinion, has been based on information and sources believed to be accurate and reliable at the time of publishing. Business Monitor international ltd makes no representation of warranty of any kind as to the accuracy or completeness of any information provided, and accepts no liability whatsoever for any loss or damage resulting from opinion, errors, inaccuracies or omissions affecting any part of the content.

118394_bmi north africa business forecast report q4 2010

Documents