Date: 29 April 2019
Slowing global growth and elevated tensions in trade and geopolitics are posing economic challenges for countries in the Middle East, according to the International Monetary Fund’s latest report.
“Global developments are affecting the outlook for this year, namely the slowdown in growth especially on trade, the volatility in the oil price, as well as also the global financing conditions, in additional to a certain number of country specific issues,” Jihad Azour, the IMF’s director of the Middle East and Central Asia, told CNBC on Sunday.
The Regional Economic Outlook report — published each spring by the IMF’s Middle East and Central Asia Department — also highlighted how volatile oil prices are negatively affecting some countries, while others are grappling with rising public debt.
“For oil-importing countries where debt is high, it’s very important to tackle it and to reduce the level of deficit. That will allow those countries to reduce their debt burden over GDP,” Azour added.
Growth for oil exporters is projected to dip slightly in 2019 to 0.4 percent, from 0.6 percent the previous year, driven by an economic contraction in Iran following the renewal of sanctions.
For oil-importing countries in the region, growth is expected to slow, declining from 4.2 percent in 2018 to a projected 3.6 percent this year. However, that figure is expected to rebound to 4.2 percent from 2020 to 2023.
“Despite the current increase in prices, the medium-term price projections of oil remain in the corridor of the mid-$60s,” Azour said.
“Therefore it’s very important for countries to pursue and accelerate their diversification strategies and at the same time, maintain their pace of fiscal adjustment that will allow them to reduce their dependence, in terms of revenues on oil,” he added.
Growth in Gulf Cooperation Council countries is expected to be 2.1 percent in 2019 — only a modest improvement from last year’s 2 percent growth.
Rising social unrest
Social tensions are also a growing concern, the IMF said, adding that they underscore the difficult trade-off policymakers face between ensuring macro-stability and addressing medium-term growth challenges.
In the past 18 months, the IMF’s Reported Social Unrest Index — which calculates the share of articles in major news sources that include key terms relating to protests, demonstrations, and other forms of social unrest — has hit multi-year highs in some countries in the Middle East region.
“Clearly, the inability of governments and countries to address the unemployment issue has led to the feelings, especially among the youth, of social unease and tension,” Azour said.
Economic factors are often cited as a motive for protests and other forms of social unrest, according to the IMF.
“Going forward, it’s very important to keep focused on the right reforms that will allow those countries to improve growth, and allow the private sector to grow and create jobs,” Azour added.
“I think it’s a call for action for governments, as well as the private sector, to think more about how to bring growth up.”