Social unrest, oil prices pressure MENA economies: IMF

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WASHINGTON: The International Monetary Fund said Tuesday that social unrest and oil prices fluctuations were causing large uncertainties in the economies of the Middle East and North Africa.

It slightly cut its growth forecast for the region by 0.1 percentage point to 4.0 percent, in its quarterly World Economic Outlook.

"Commodity price movements and social unrest continue to shape the region’s experience and prospects," the IMF said.

"The short-term outlook is still subject to unusually large uncertainties, stemming mainly from the fluid political and security situation in some MENA economies as well as growing uncertainty about external demand," it said.

The MENA region covered by the IMF report stretches from Iran to Mauritania. The current report, however, has excluded oil-rich Libya due to insufficient data.

The report also did not provide separate figures on Yemen, the impoverished nation hit since January by ongoing protests demanding the ouster of President Ali Abdullah Saleh.

The IMF forecasts growth in oil-exporting countries, including Iran, to reach five percent this year and drop slightly to about four percent in 2012, as uncertainty over the global economy prevails.

Qatar will continue to lead the economic expansion in this category on the back of its growing natural gas exports, as well as Iraq and Saudi Arabia.

However, growth in Qatar this year has been slightly revised down from 20 percent forecast in April to 18.7 percent. The pace of expansion in the tiny energy-rich Gulf state is expected to narrow sharply to 6.0 percent in 2012.

The forecast for Saudi Arabia’s economic growth in 2011 has also been cut from 7.5 percent forecast in April to 6.5 percent. The largest Arab economy is expected to grow by 3.6 percent next year.

Oil importers, mainly those hit by a wave of pro-democracy uprisings over the past months, will continue to have a subdued outlook, the IMF said. It put overall growth forecast for this category at 1.4 percent this year, down from 4.5 percent in 2010.

"Activity in a few economies will be constrained by domestic social unrest and an associated slow recovery in tourism receipts and remittances," it said.

The IMF expected, however, growth for oil-importing countries to increase to 2.5 percent next year, "underpinned by a slow recovery in investment."
The IMF slightly raised its forecast for Egypt’s growth this year to 1.2 percent from 1.0 percent forecast in April. The economy of the most populated Arab country is expected to grow by 1.8 percent next year.

The Tunisian economy will not grow at all this year, according to the IMF.

But the North African nation, which triggered in December a wave of Arab protests in what became known as the "Arab Spring," and ousted president Zine El-Abedine bin Ali, should see its economy expanding by 3.9 percent next year, compared to 3.1 percent in 2010, the IMF said.

Meanwhile, the economy of Syria, hit by European sanctions and a wave of pro-democracy uprising that has left at least 2,600 dead, will contract by 2.0 percent this year, the IMF said.

Syria had posted growth of 3.2 percent in 2010, but protests that erupted in February against the regime of President Bashar Al-Assad have triggered international pressure, and deprived the country of a vital inflow of tourists.

The Fund said the outlook for the whole MENA region was "subject to large downside risks."

"External risks relate to the unfolding weaker outlook in the United States and Europe, which could sharply depress activity and hence commodity prices or further slow external financing flows to the region," it said.

"However, most risks pertain to continued domestic instability, compounded by intraregional contagion. The political turmoil has seen risk premiums rise and private financing and tourism receipts fall; not only in those economies directly affected by the turmoil but throughout the region," it added.

In other oil-exporting MENA countries, the IMF expected growth this year to be at 3.3 percent in the United Arab Emirates, 5.7 percent in Kuwait, 9.6 percent in Iraq, 2.5 percent in Iran, and 2.9 percent in Algeria. Sudan’s GDP is seen contracting by 0.2 percent, excluding South Sudan, which became independent this year.

As for oil-importing states, the IMF expected this year a growth of 4.6 percent in Morocco, 1.5 percent in Lebanon and 2.5 percent in Jordan.

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