DUBAI - Recent uprisings in the Middle East and North Africa provide an opportunity for the region to lay the foundation for a socially inclusive growth agenda, but in the near term oil-importing countries including Pakistan face multiple pressures stemming from higher crude prices, disruptions to economic activity, and slow growth rate of around 2.3 percent, the IMF said in its latest assessment of the region.
The IMF’s Regional Economic Outlook for the Middle East and Central Asia, released on Wednesday, April 27, projects growth in the Middle East and North Africa region at 3.9 percent in 2011, unchanged from 2010.
By contrast, growth among the region’s oil importers, Pakistan, Afghanistan, Djibouti, Egypt, Jordan, Lebanon, Mauritania, Morocco, Syria, and Tunisia is set to slow to a mere 2.3 percent.
The economies of oil-exporting countries—Algeria, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, Sudan, the United Arab Emirates, and Yemen—are expected to expand by 4.9 percent owing largely to higher oil prices and oil production.
Both the surge in global commodity prices and the widespread social unrest in the region have changed the outlook for 2011. Higher oil prices have further strengthened the external and fiscal positions of oil exporters, while oil importers have seen their import bill rising and domestic pressures mounting in the face of higher food and fuel prices.
“The immediate challenge facing many countries in the Middle East is to maintain social cohesion and macroeconomic stability in the face of multiple pressures,” Masood Ahmed, Director of the IMF’s Middle East and Central Asia Department, told a press conference in Dubai.
To mitigate the impact of higher food and fuel prices and stem the social unrest, governments in the region have been expanding subsidies, raising wages and pensions, making additional cash transfers, stepping up other public spending, and reducing taxes.
With higher oil prices and increased oil production, the combined external current account balance for regional oil exporters (excluding Libya) is expected to more than double to $380 billion in 2011. Their fiscal position will also improve, despite the additional spending, which will be more than offset by higher oil revenues.
Oil importers face a difficult economic year as they manage political, social, and economic pressures. The deterioration in the terms of trade resulting from higher food and fuel prices is expected to inflate their import bill by about $15 billion, or nearly 3 percent of GDP, on average, the IMF outlook says. This will, in turn, translate into either higher inflation or a worsened fiscal balance, depending on the extent of subsidies.
For many oil importers, political turmoil is expected to weigh on tourism and investment which, together with higher interest rates and pressures for higher spending across the region, will add to fiscal pressures.
Throughout the region, the slow growth equilibrium of the past years did not generate enough jobs for the growing labor force in a region where youth unemployment rates register well above 20 percent in a number of countries
“Moreover, there was an increasing sense that business environments were suffering from unfair competition, with systems benefitting a privileged few,” the report said.
Each country will need to find its own homegrown path for development, the report said, but all will need to respond to some common goals.–Agencies