IMF says oil to prod growth in MENA
DUBAI–High oil prices will support economic expansion in the Middle East and North Africa (MENA) in 2012-2013 as importers grapple with fallout from the Arab Spring uprisings and external pressure, the IMF said on Monday.
The MENA region covered by the International Monetary Fund, which stretches from Iran to Mauritania, is expected to grow at 5.3 percent in 2012, compared with 3.3 percent last year, the IMF said in its annual World Economic Outlook.
Oil exporters will expand collectively at 6.6 percent, compared with 3.9 percent in 2011, thanks to a strong rebound by Libya after its economy came to a grinding halt during the 2011 revolt that ousted Moammar Gadhafi.
Oil importers, however, will see collective growth slow further to 1.2 percent, compared with 1.4 percent in 2011, as many countries face political and economic uncertainties as well as slowing growth in major trading partners.
In 2013, MENA economies should see growth slow down to 3.6 percent, with expansion in oil exporting economies dropping to 3.8 percent, while oil importing economies widen their pace of growth to 3.3 percent.
The IMF has excluded Syria from the regional aggregate due to its 19-month conflict.
“Higher government spending in most oil exporters has supported robust growth,” the Fund said.
“Elsewhere, uncertainties from political and economic change after the Arab Spring, slowing growth in major trading partners, and, in some cases, internal conflict have led to a marked weakening in activity,” it added.
Tunisia, Egypt, Libya and Yemen have seen uprisings that ousted their longtime leaders. Other countries, including Algeria, Bahrain, Jordan, Morocco and Oman had various levels of protests.
Risks for oil exporters in the short term “revolve primarily around oil prices and global growth,” the IMF said.
It warned public expenditure in those countries has “risen to such a degree that substantial declines in the price of oil could undermine fiscal positions.”
“Despite significant accrued financial buffers, such declines could put at risk ongoing infrastructure investment and growth,” it said, pointing out, however, that tension with Iran over its nuclear program and other geopolitical risks could lead to higher oil prices.
Countries with little or no oil wealth have meanwhile suffered a drop in tourism and foreign direct investments due to uncertainty and unrest, the Fund said.
Those countries remain “vulnerable to trade spillovers if downside risks to growth in major economies materialize,” it said.
The IMF also warned an immediate concern over spikes in commodity prices would be the “strain on budgets and foreign exchange reserves” in countries that have extensive food and fuel subsidies.
“Meeting social demands when growth has slowed and political uncertainty has increased has resulted in higher budget deficits and declines in foreign exchange reserves,” it said.
In figures, the IMF expects Iran’s economy to contract by 0.9 percent in 2012 as its economy reels under the impact of sanctions.
Libya’s economy contracted last year by a whopping 59.7 percent, and it is expected to leap back into life with a 121.9 percent growth as oil production has recovered to near pre-conflict levels.
Economic growth in Libya is expected to remain strong at 16.7 percent in 2013.
The economy of oil-rich Iraq is also forecast to maintain expansion, jumping from 8.9 percent growth in 2011 to 10.2 percent and 14.7 percent in 2012 and 2013 respectively.
Economic growth in Saudi Arabia is expected to ease from 7.1 percent last year to 6.0 percent this year and further to 4.2 percent in 2013. In the UAE, growth will slow to 4.0 percent this year and 2.6 percent next year, compared with 5.2 percent in 2011.