The IMF’s Regional Economic Outlook for the Middle East and Central Asia, released on May 2 in Dubai, emphasizes that countries will need to continue with plans to diversify their economies and implement policies that support jobs and productivity, like education and infrastructure reforms.
By Bruno Versailles and Magali Pinat
Growth is slightly improving in the countries of the Middle East and North Africa region, largely driven by higher oil prices and improved export prospects, says the IMF’s latest regional economic assessment, according to IMF Middle East and Central Asia Department.
“This more favorable global environment, together with some firming of commodity prices, is providing some welcome breathing space for the region after what has been a difficult period,” said IMF Middle East and Central Asia Department Director Jihad Azour at the report’s launch in Dubai.
“However, our projections indicate that growth will be too low to create enough jobs or improve living standards. Many countries—especially oil importers—are also carrying high levels of debt.” Both oil exporters and importers are therefore “facing two critical policy imperatives: fiscal consolidation and structural reforms,” he emphasized.
Headline growth rates for the region’s oil importers are projected to increase from 3.7 percent (see table) in 2016 to 4 percent in 2017, thanks in large part to policies that have reduced fiscal deficits and improved the business climate, as in Morocco and Pakistan. In the region’s oil exporters, non-oil growth is projected to accelerate as well from 0.4 percent in 2016 to 2.9 percent in 2017, although production cuts following the OPEC+ agreement will temporarily reduce overall growth.
According to the IMF, the expected increase in growth for the region’s oil-importing countries will not be enough to make a serious dent in the region’s high unemployment rate, at about 12%.
For the region’s oil-exporting countries, policy adjustments, such as reductions in public spending, will continue to constrain economic activity. Conflicts are also likely to continue to weigh on the region.
IMF noted that ongoing regional conflicts, which have led to a large number of refugees and internally displaced people, continue to exact not only a high humanitarian cost, but also significant economic consequences, both for countries directly impacted by conflict and their neighbors.
“We know that conflicts remain a serious concern for countries in the Middle East and North Africa region; it’s a concern that we share at the IMF,” Azour said.
Together with other international partners, the IMF is helping countries affected by conflict to cope with the immediate adverse economic consequences, and stands ready to support rebuilding efforts once the conflicts ease. For example, the Fund is providing extensive technical assistance in Somalia and has extended financial support to Afghanistan and Iraq.
“Improving the humanitarian and economic situation in the parts of the region affected by conflicts is not the merely the responsibility of the countries themselves; it is a global imperative,” he emphasized.