UAE economy to grow 3.4 per cent next year, up from 1.7 per cent in 2017
IMF forecasts economic recovery for Middle East economies in 2018
Economic growth in the Middle East, North Africa, Afghanistan and Pakistan (Menap) is likely to rebound in 2018 after losing momentum this year, weighed down by geopolitical risks and a slowdown in Iran's economy, according to the International Monetary Fund (IMF).
Overall Menap growth is projected to rise to 3.5 per cent in 2017 from 2.6 per cent this year, the Washington-based IMF said in its world economic outlook report on Tuesday.
The region’s 2018 prospects are just below that of the world economy as a whole, which is forecast to grow by 3.7 per cent next year, and far ahead of the average for advanced economies, which are predicted to grow by just 2 per cent.
The UAE's economy, which is more developed and diversified than most others in the Menap region, is expected to grow 3.4 per cent in 2018, up from 1.7 per cent this year.
"In 2018, [Menap] growth is expected to increase to 3.5 per cent, mostly reflecting stronger domestic demand in oil importers and a rebound of oil production in oil exporters," the IMF said, adding that regional insecurity and geopolitical risks still weigh on the outlook.
Iran's economic growth will slide to 3.5 per cent in 2017 from 12.5 per cent in 2016 but is expected to expand 3.8 per cent next year, the fund said. Other oil producing nations are also expected to see a drop in the pace of economic growth this year as the after effects the 2014 oil price crash linger on.
Saudi Arabia, the region's biggest economy, is projected to grow 0.1 per cent in 2017 from 1.7 per cent per cent last year. It is forecast to grow by 1.1 per cent in 2018.
Meanwhile, the pace of economic growth is Kuwait is expected to contract to 2.1 per cent this year is expected recover in 2018, growing at 4.1 per cent. Its GDP expanded 2.5 per cent last year.
The net oil importers are projected to fare better, led by Pakistan which is estimated to grow by 5.3 per cent in 2017 from 4.5 per cent last year. The economy of the South Asian nation could expand by 5.6 per cent in 2018 next year. The country's economic fortunes have improved since a series of reforms that were linked to an IMF loan. The country has also benefited from investment in the China-Pakistan Economic Corridor.
Egypt, which is recovering from years of political and economic turmoil in the aftermath of the 2011 uprising that toppled Hosni Mubarak , is estimated to grow by 4.5 per cent next year from 4.1 per cent this year. It grew by 4.3 per cent in 2016 after the most populous Arab nation devalued its currency in last November and reduced energy subsidies as part of an aid package agreed with the IMF, which helped in attracting international investments and boosted its foreign reserves to a record high in August.
The IMF boosted its forecasts for global growth for this year but said that many countries were plagued by lackluster productivity as evidenced by weak inflation.
The said that it expected global GDP to advance by 3.6 per cent in 2017 and 3.7 per cent in 2018, a 0.1 percentage point increase for both years.
"Notable pickups in investment, trade and industrial production, coupled with strengthening business and consumer confidence are supporting the recovery," the fund said. "However, the recovery is not complete: although the baseline outlook is better, growth remains weak in many countries. The outlook for advanced economies has improved, notably for the euro area, but in many countries inflation remains weak, indicating that slack has yet to be eliminated and prospects for growth in GDP per capita are held back by weak productivity growth and rising old-age dependency ratios."
While generally upbeat, the IMF warned that years of cheap financing had stretched asset valuations, which means that some markets should be watched closely by economic policy makers. The fund also warned that policy makers in China, the world's second biggest economy, and elsewhere would need to rein in credit expansion to minimize risks of a sharp slowdown.
"Many other economies need to guard against a buildup of financial stability risks in a global environment of easy finance and monitor the risks from volatility as advanced economies' central banks gradually withdraw stimulus," it said.