'A more favorable environment, including higher-than-expected growth and some firming up of commodity prices is providing some breathing space.'
Growth in non-oil sectors offer relief for Middle East economies
Rising growth outside the troubled oil sector is offering some relief to economies in the Middle East and central Asia, a senior IMF economist said at the weekend.
But the subdued overall outlook is not enough to spur needed job growth and reduce poverty, according to Jihad Azour, the new head of the IMF’s Middle East and central Asia department.
“A more favorable environment, including higher-than-expected growth and some firming up of commodity prices is providing some breathing space,” he said during the spring meetings of the IMF and World Bank in Washington.
In its World Economic Outlook last week, the fund said Middle East oil exporters would see growth drop precipitously in 2017 as producing countries cope with lower petroleum production and fiscal reforms.
The Saudi economy is expected to expand 1.3 per cent in 2018, down from a 2.3 per cent projection in January, the IMF said in its report. The Washington-based lender left this year’s forecast unchanged at 0.4 per cent, citing “lower oil production and ongoing fiscal consolidation”.
Middle East economies, taken together with those of Afghanistan and Pakistan, should expand at a rate of 2.6 per cent – a 1.3 percentage point decline from 2016’s estimated growth rate, the fund said.
Opec in November acted to stabilise tumbling oil prices by agreeing to the first production cuts in eight years.
But Mr Azour said at the weekend that growth outside the oil sector in oil exporting countries was on the rise, expected to shoot up from 0.4 per cent in 2016 to 2.9 per cent in 2017.
“Although the production cuts following the Opec agreement are reducing the headline growth,” he added.
For oil importers, meanwhile, the IMF expects growth to rise from 2016’s 3.7 per cent to 4 per cent this year, Mr Azour said.
“While this represents an improvement, our medium-term growth projections are too low to create enough jobs and improve the living standards,” he said.
“Many countries, especially oil importers, are also carrying a high level of debt.”
Mr Azour said the fund was encouraged by regional governments’ efforts to introduce new taxes and reform energy subsidies, noting that recent gains in oil prices should help reduce fiscal deficits.
But even oil importers were running an average debt-to-GDP ratio of 80 per cent, he said.
“Therefore fiscal reforms and fiscal consolidation will remain an ongoing priority across the region.”
As the global recovery gathers pace, the IMF is turning up the volume on its call for wealthy countries to address popular anger over the impact of globalisation and head off the threat of protectionism.
The weekend meetings brought the two multilateral institutions’ 189 members face-to-face with the US president Donald Trump’s “America First” agenda for the first time.
The IMF in particular has sounded warnings against Mr Trump’s plans to shrink US trade deficits with potential measures to restrict imports, arguing in its latest economic forecasts that protectionist policies would crimp global growth that is starting to gain traction.
“This sentiment of populism in the views of many is fuelled by the feeling of being excluded, or being left out,” the IMF managing director Christine Lagarde said last week.
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