By Massoud A. Derhally
Oil exporters will see significantly stronger growth than non-oil exporters, the IMF says
Economies of the Middle East and North Africa will expand by 5.1 percent this year from 3.3 percent in 2011, the International Monetary Fund (IMF) said.
Though oil-exporting countries are growing at an average of 6.6 percent on the back of higher oil prices, oil importing nations - Afghanistan, Djibouti, Egypt, Jordan, Lebanon, Mauritania, Morocco, Pakistan, Sudan, and Tunisia - will see a lower rate of about 2 percent, the Washington-based organisation said in a report issued on Sunday.
"The biggest challenge facing governments in the Arab countries in transition is how to manage the rising expectations of populations that are becoming increasingly impatient to see a transition dividend at a time when there are threats to near-term macroeconomic stability and the margin for policy manoeuvre is limited," said Masood Ahmed, director of the IMF’s Middle East and Central Asia department.
As the price of oil is set to remain above US$100 a barrel in 2012-13, oil exporters’ combined current account surplus is forecast to be at a historic high of about US$400bn in 2012, the IMF estimates. The swelling of coffers with petrodollars has helped governments to address growing demands of their people by increasing spending on wages and salaries.
“Looking ahead, the main issue facing Middle East oil exporters is how to take advantage of their current positive position to strengthen their resilience against oil price declines and diversify their economies to boost private-sector job creation," Ahmed said.
Oil exporters need to bolster their national savings, create private-sector jobs and spur growth to avoid economic slowdown and offset the results of oil prices dropping, the IMF said. A 10 percent drop in oil prices would bring down the oil exporters’ combined current surplus by about US$150bn, the organisation said.
Uncertainty has held back investment in Arab countries undergoing political transition. Increasing social demands and rising food and fuel prices have led governments in Arab states in transition to significantly increase spending on subsidies, while budget revenues have decreased and fiscal balances have deteriorated, with average public debt at more than 70 percent of GDP.
Arab countries in transition need to embark on policies that will restore macroeconomic sustainability and structural reforms aimed at improving competitiveness, the IMF said.
“With fiscal pressures continuing to build, there is a growing urgency to act on macroeconomic stabilisation," Ahmed said. "It is equally important that both stabilisation measures and the design of structural reforms are done in a way that minimizes adverse impacts on the poor and vulnerable."