Creating
jobs and restructuring energy and food subsidies remain critical challenges for
Middle East oil exporting countries the wake of the political turmoil in the
region, the IMF has said.
High
unemployment rates and untargeted subsidies have sparked social unrest across
the region, but the solution doesn’t lie in short-term spending plans or social
reforms, said the Middle East director for the fund.
“I think
it’s certainly the case that whenever you look around the world whenever there
is a crisis there is acceleration in momentum for reform or change,” Masood
Ahmed told Arabian Business.
“Right
now we are in a point in the region where we’ve seen the first round of
changes. Those are mostly changes to try and bide time and to give people
initially what they want in terms of more handouts,” he added.
The
region spends around eight percent of GDP – or $200bn – overall on subsidies
for energy and food which remains largely untargeted, said Ahmed.
“This
large amount that we spend on subsidies doesn’t actually go very often to poor
parts of society because it’s distributed depending on how much you consume,”
he said.
“Obviously
fuel is consumed more by middle income and upper middle income households than
it is by people that are more reserving.”
The Middle
East boasts some of the highest unemployment rates in the world, which
disproportionately affect the region’s burgeoning youth population.
Total unemployment rates for 15-24 year olds
in Lebanon, Jordan, Morocco and Tunisia is around 40 percent and as high as 60
percent in Egypt and Syria, according to the IMF.
“How to
diversify and create jobs for people, how to strengthen the management of the
fiscal resources…how much to save and how much to spend, and the development of
the financial sector including domestic debt markets – all those issues are
still very much on the agenda,” said Ahmed. “In some ways one could argue that
the current period when you do have these extra resources is an opportunity to
make progress.”
Economic
growth for most oil exporters in the Middle East and North Africa is expected
to increase this year, despite a slowdown due to social unrest, the IMF said on
Wednesday.
Regional GDP (excluding Libya) is expected to increase 4.9
percent this year compared to 3.5 percent in 2010, the IMF said in its regional
economic report. GCC states are expected to grow 7.8 percent this year as oil
production expands to stabilise global oil supply in the face of unrest.
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