IMF Sees Stronger Middle East Growth in 2010
Middle East economies have improved recently as global oil prices have rebounded from previous lows and there are signs of a recovery in the world economy, the International Monetary Fund said on Thursday.
In its latest World Economic Outlook, the IMF raised next year’s growth estimate for the region to 4.2 percent from a July forecast of 3.7 percent. It maintained this year’s projection at 2 percent.
The global recession and the collapse in world oil prices as well as oil production cuts hit the region hard.
“The recent improvement in global financial conditions and rise in commodity prices, however, are helping restore the pace of economic activity,” the IMF said in the report launched ahead of World Bank and IMF meetings here.
The report said gross domestic product growth of Middle East oil-importing countries is projected to rise 4.5 percent in 2009, more than three times the growth rate of oil exporters.
This is because non-oil producers have benefited from strong public spending in oil-producing countries, providing support for their economies. Meanwhile, in Lebanon more security has buoyed tourism and financial services.
Global oil prices hit record highs above $145 a barrel in July 2008, but slipped to a low just above $32 a barrel during the peak of the global crisis. Oil traded in London was above $66 a barrel on Wednesday.
The IMF said oil prices had been pushed higher on perceptions that the worst of the global recession was over.
A key risk to the outlook for the Middle East is any sharp fall in oil prices, which could have implications for oil exporters and their regional trading partners.
The sharp slowdown in the economic activity of oil exporters reflects cutbacks in oil production, a result of efforts by the Organisation of Petroleum Exporting Countries to stabilise oil prices, it said.
Meanwhile, inflation across the region is expected to decline to 8.3 percent in 2009 from 15 percent in 2008.
The IMF said countries with fiscal room should maintain high public spending levels to spur an economic recovery. However, countries with weaker fiscal positions should cut back unproductive spending and rein in subsidy programs, it added.
The Fund urged more cross-border financial supervision. It said bank credit to the private sector, which dried up after financial sector problems in Bahrain and Dubai, the region’s main financial centers, was hampering the economic recovery.
The global lender said sovereign wealth funds should become more transparent, particularly given their growing participation in domestic economies.
Reuters