Growth in MENA region to fall in 2011 – IMF

MENA_2011A deterioration in the international economic outlook and the buildup of domestic social pressures have resulted in an economic slowdown - Masood Ahmed, Director, IMF, Middle East and Central Asia Department.

The IMF's Regional Economic Outlook for the Middle East and Central Asia, projected growth in the MENA region at 3.9 per cent in 2011, down from 4.4 per cent in 2010.

The economic outlook for countries across the Middle East and North Africa region varies markedly, with the oil-exporters seeing a mild pickup in growth in 2011 on the back of higher oil prices, and the oil-importers experiencing a dramatic slowdown, the IMF says in its latest assessment of the region.

Oil exporters and importers

The region's oil-exporting countries (excluding Libya) - Algeria, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, Sudan, the United Arab Emirates, and Yemen - are forecast to expand by 4.9 per cent in 2011, thanks to higher oil prices and oil production. But growth among the region's oil importers - Afghanistan, Djibouti, Egypt, Jordan, Lebanon, Mauritania, Morocco, Pakistan, Syria, and Tunisia - will register just under two per cent.

"Since the beginning of this year, a deterioration in the international economic outlook and the buildup of domestic social pressures have resulted in an economic slowdown in many of the region's oil-importing countries," Masood Ahmed, Director of the IMF's Middle East and Central Asia Department.

Economic activity bolstered

Economic activity in the region's oil-exporting countries has clearly improved, bolstered by continued high energy prices. This expansion is driven by the high level of activity in the countries of the Gulf Cooperation Council (GCC), where growth is projected at seven per cent in 2011, the report stated.

Several countries - Saudi Arabia in particular - have stepped up oil production temporarily in response to higher oil prices and shortfalls in production from Libya.

"The decision to increase oil production in the wake of disruptions in Libya was an essential contribution toward global energy market stability and enhanced activity," Mr. Ahmed noted.

At current projected oil prices and levels of production, revenue gains will more than offset the high levels of public spending. In 2011, the oil exporters' combined external current account balance is expected to increase from $202bn to $334bn (excluding Libya), and from $163bn to $279bn for the GCC.

Downside risks

But fiscal vulnerability has also increased substantially, as break-even oil prices have risen steadily and are now approaching observed oil prices.

"Oil-exporting countries have understandably increased fiscal spending to address social needs. Looking forward, the widening of non-oil fiscal deficits makes many countries more vulnerable to swings in oil prices, at a time when the world economy is facing heightened risks," Mr. Ahmed added.

Looking ahead, the IMF's assessment foresees a moderation in growth for the region's oil exporters to about four per cent in 2012, and notes that these countries also face some downside risks.

"Undoubtedly, the year ahead will be challenging for many countries, with continued political uncertainty, a deteriorating global economic outlook, and higher financing costs impeding a quick economic recovery. Measures aimed at restoring confidence and fostering more inclusive growth will help countries enhance activity and ultimately address the needs of the population," Mr. Ahmed said.

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