The IMF, in its regional economic outlook published for the MENAP (Middle East, North Africa, Afghanistan and Pakistan) covering 22 countries, forecast a lower GDP growth of 2.6 per cent for the region in 2009, compared to 5.7 per cent in 2008, as a result of the global financial crisis.
However, the fund said that although the region is not spared from the crisis, strong economic fundamentals and sizeable currency reserves have helped mitigate the impact of the shock. The IMF expects a higher recovery of 3.6 per cent for the region in 2010.
While releasing the spring 2009 outlook in Dubai yesterday, IMF Middle East and Central Asia department director Masood Ahmed said, ”given the global reach of the current economic crisis, countries in the Middle East and North Africa have also been impacted negatively.”
”However, they are likely to fare better than countries in other regions of the world, in part because of prudent financial and economic management, but also because oil exporters in the region can draw upon their large reserves to cushion the impact of the global slowdown on their own economies and the economies of their neighbouring countries with which they have growing economic links,” he added.
The region’s twelve oil exporting countries are affected by a more than 50 per cent fall in revenues due to the slump in oil prices. The economies grew on an average 6 per cent during the past five years, on account of rising oil revenues which is expected to decline to 2.3 per cent in 2009.
Despite the fall in revenues, most of the governments are spending high, on account of the huge accumulated reserves, providing an impetus to the domestic and global demand. Countries with less cash reserves – like Iran, Sudan, and Yemen – need to prioritise their expenses, the IMF said.
The IMF believes that, with the oil prices hovering around current levels, the oil exporter’s external current account position could reverse from a $400 billion surplus in 2008 to a deficit of $10 billion in 2009.
The global turmoil has resulted in credit crunch especially in the Gulf Cooperation Council (GCC) states whose financial systems are more integrated with the global financial markets. The governments reacted by taking various steps to stabilize the financial markets, ease liquidity and support commercial banks.
With regard to the ten oil importing countries, they have mostly evaded the crisis mainly because of low oil prices and their limited exposure to the global financial markets. However, their export earnings, especially from Europe and the US have taken a knock and so foreign direct investment. Income from tourism and remittances too are likely to be affected.
The GDP of this group of countries is forecast to be 3.2 per cent in 2009 compared with 6.2 per cent in 2008.
Oil importing countries that trade mainly with the GCC states could be protected for some time. However, a prolonged recession could have severe impact on these countries, with rising unemployment and poverty. The inflation is estimated to ease from 14.4 per cent in 2008 to below 10 per cent in 2009 providing some relief.
In order to mitigate the global downturn, the IMF stressed that the government’s economic policies should concentrate on key measures, such as increased public spending wherever possible, strengthening of the financial system, easing of monetary policies to support growth, and development of policies to protect the vulnerable sections of the society.
The region’s oil exporting countries are Algeria, Bahrain, Iran, Kuwait, Libya, Oman, Qatar, Saudi Arabia, Sudan, UAE and Yemen.
The oil importers are Afghanistan, Djibouti, Egypt, Jordan, Lebanon, Mauritania, Morocco, Pakistan, Syria, and Tunisia.