Economic growth should speed up to 4.2 per cent in the Middle East and North Africa this year as several countries rebuild after a wave of unrest, the IMF says.
The organisation's forecast for the region is more upbeat than its outlook of 3.5 per cent growth for the overall global economy. But the regional forecast reveals widening differences between the fortunes of oil exporters and importers.
The GCC and other oil exporters should grow by 4.8 per cent, more than twice the 2.2 per cent expansion of oil importers, the IMF said in a report released yesterday.
Iraq should grow by 11.1 per cent, Saudi Arabia by 6 per cent, Egypt by 1.5 per cent and Tunisia by 2.2 per cent. Growth in the UAE should reach 2.3 per cent, as the IMF forecast last month.
"Among oil importers, strong oil prices, anaemic tourism associated with social unrest in the region, and lower trade and remittance flows reflecting ongoing problems in Europe are the major constraints," the report said. "Among oil exporters, negative developments in the Islamic Republic of Iran are projected to be offset by increased oil production in Iraq and Saudi Arabia and a bounce-back in Libya."
The Arab world was rocked last year by an outbreak of turmoil in several countries, during which leaders in Tunisia, Egypt, Libya and Yemen were forced from office. Economic activity was disrupted. Saudi Arabia unveiled a 23 per cent rise in public spending, while the UAE also increased outlays on public-sector pay and housing.
Growth in the region last year was 3.5 per cent, the IMF said. GDP growth next year would be 3.7 per cent, it said.
"The primary challenge is to secure economic and social stability, but there is also a short-term need to place public finances on a sustainable footing," the IMF said in its report. "For oil exporters, governments need to seize the opportunity presented by high oil prices to move towards sustainable and diversified economies."
Recent social disruption highlighted the need for growth that included a broader cross-section of society, the report said. The growth also needed to stimulate private-sector activity, open up greater access to economic opportunities and create jobs, particularly among the young.
The IMF also issued a warning about the subsidies interwoven into the fabric of life in Egypt, Tunisia, Jordan, Syria, the UAE, Saudi Arabia and other countries.
Rising spending on fuel and food subsidies, along with pressure to raise civil service wages and pensions, was straining public finances, particularly for oil importers, it said. Such approaches "will not be sustainable over the medium term", it said. Better targeting of subsidies as well as fuel-subsidy reforms would help to ease the strain.
The IMF raised its projection for global economic growth this year to 3.5 per cent, up from a 3.3 per cent forecast it made in January. Growth would rise to 4.1 per cent next year, it said. The figures hide a wide gap between the performance of debt-laden western countries and nimbler emerging economies.
GDP growth in the United States would reach 2.1 per cent this year and 2.4 per cent next year, the IMF said, while forecasting a GDP decline of 0.3 per cent in the euro zone this year. China would grow by 8.2 per cent and Japan by 2 per cent, it said.
"The most immediate concern is still that further escalation of the euro-area crisis will trigger a much more generalised flight from risk," it said. "Geopolitical uncertainty could trigger a sharp increase in oil prices."
More demand and possible supply disruptions would cause oil prices to rise by 10 per cent on average through the year compared with a year earlier, it said.