Food and Energy Prices, Government Subsidies and Fiscal Balances in South Mediterranean Countries
AbstractWorking paper, focusing on the impact of soaring commodity prices, notably for food and energy on the economy and public finances of Mediterranean neighbour countries of the EU. Just before the global crisis soaring commodity prices pushed up inflation significantly, not least in EU neighbour countries at the Mediterranean. These price shocks affected public finances in the southern Mediterranean region, notably via government subsidies. Partly due to lags in the transmission of commodity prices into prices for final users the subsidies burden continued to be felt, despite the price falls registered in the wake of the credit crisis. We show that downward price rigidities play a role. Recently, commodity price pressures have re-emerged. We focus on food prices and analyse recent developments in food inflation in Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, the occupied Palestinian territories, Syria and Tunisia in comparison with other middle income economies. Subsidies on food and fuel are quantified per country for the period 2002-2010. The incremental government subsidies entail an estimated deterioration of the government balances of up to more than 2% of GDP in 2008 and, for most countries only slight improvements in the global recession year 2009. Ensuing longer-term challenges for public finances remain as inflation rises on the back of higher global economic growth. As recent events in Tunisia illustrate, these can have important political implications. Finally, the paper discusses some options that can lead to more efficient government spending, even in the event of sharp swings in prices of basic necessities.
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Bibliographic InfoPaper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 437.
Length: 36 pages
Date of creation: Feb 2011
Date of revision:
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Other versions of this item:
- Albers, Ronald & Peeters, Marga, 2011. "Food and energy prices, government subsidies and fiscal balances in south Mediterranean countries," MPRA Paper 28788, University Library of Munich, Germany.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
- L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
This paper has been announced in the following NEP Reports:
- NEP-AGR-2011-04-02 (Agricultural Economics)
- NEP-ALL-2011-04-02 (All new papers)
- NEP-ARA-2011-04-02 (MENA - Middle East & North Africa)
- NEP-ENE-2011-04-02 (Energy Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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"Food prices, government subsidies and fiscal balances in south Mediterranean countries,"
37707, University Library of Munich, Germany, revised 20 Mar 2012.
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- repec:pra:mprapa:37705 is not listed on IDEAS
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