End reliance on public jobs, IMF tells Middle East countries

International Monetary Fund (IMF) managing director Christine Lagarde (CNN)
Updated 12 February 2018
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End reliance on public jobs, IMF tells Middle East countries

DUBAI: Middle East countries must equip their youth with skills for the private-sector workplace to help curb dependence on government employment, International Monetary Fund (IMF) managing director Christine Lagarde said.

Failure to encourage a transition to the private sector would lead to “a very messy situation if there are no jobs around,” Lagarde told CNNMoney Emerging Markets EditorJohn Defterios.

“Five million (young people) per year every year (will be entering the job market) in the next five years, so there has to be a focus on helping them access the job market, making sure they’re equipped with the skills to adjust to what will be a new workplace,” she said.

The IMF chief said that youth unemployment is a particular concern in the Middle East and North Africa, with jobless rates as high as 30 percent in nine out of 21 countries in the region. The region’s population is among the youngest in the world, with over 40 percent under 20 years of age.

“More young people are coming (to the job market),” she said.

With about 5 million entering the region’s job market annually, there has been pressure on governments to absorb the new workforce through public employment, though the IMF said that this had not translated into lower overall unemployment.

In a study released last month, the IMF called on Middle East countries to reduce their bloated public wage bills at a time of heightened fiscal constraints.

“The use of public wage bill policies to influence broad socioeconomic outcomes has not achieved the desired objectives. Though other factors are also at play, countries continue to struggle with high unemployment, poverty and inadequate service delivery,” the study said.

Public wage bills in the Middle East and North Africa region, as well as Pakistan, are higher than in other emerging market and developing economies, the IMF said. In the past 10 years, these countries allocated an average 6 percent of annual GDP, or about a fifth of their total expenditure, to the government payroll.

“Wage bills are now weighing on fiscal sustainability amid slowing or declining fiscal revenue and economic growth due to lower oil prices and remittances. If left unaddressed, these tensions will intensify in the coming years due to demographic changes and technological innovation,” the IMF said.

Lagarde said that “there has to be a shift from assuming the public sector will employ everybody, as was the case in many countries in the region.

“(We should) welcome the private sector, giving it some certainty, so that investors feel comfortable, (thereby) creating activity, employing young people and avoiding what would be a very messy situation if there were no jobs around,” Lagarde said.

“(Without jobs) there would be no hope,” she said.


German economy defies trade gloom with strong growth

Updated 8 min 27 sec ago
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German economy defies trade gloom with strong growth

  • Germany’s economy, Europe’s biggest, grew by 0.5 percent compared with the previous three-month period
  • Economists had forecast a 0.4 percent increase this time

BERLIN: The German economy accelerated in the second quarter despite the US move to impose new tariffs on Europe, official data showed Tuesday, performing slightly better than economists had expected.
Germany’s economy, Europe’s biggest, grew by 0.5 percent compared with the previous three-month period. That is up from 0.4 percent in the first quarter — a figure that was revised upward Tuesday from the initial reading of 0.3 percent given in May. Economists had forecast a 0.4 percent increase this time.
Its performance in the April-June period was helped by higher private and government spending and by increased investment in equipment and construction, the Federal Statistical Office said. Rising exports were outpaced by increasing imports.
The figure underlined the German economy’s continuing robust performance, with business confidence high and unemployment low despite some disappointing data on factory orders this year and concern about global trade tensions.
It has now grown for 34 of the past 37 quarters, said Carsten Brzeski, an economist at ING in Frankfurt, but he cautioned that “the challenges facing the German economy will increase rather than decrease.”
Those include the specter of a possible escalation of trade tensions, despite a recent deal to defuse a US-European Union dispute, geopolitical risks such as that posed by events in Turkey and a shortfall in investment and structural reforms at home, he said.
In year-on-year terms, the economy expanded by 2.3 percent in the second quarter.