Mideast Countries See Opportunity Amid Unrest

  • Opportunity for Mideast to lay foundation for socially inclusive growth agenda
  • Challenge is to maintain social cohesion while preserving economic stability
  • International community has key supporting role to play
  • The IMF’s Regional Economic Outlook for the Middle East and Central Asia, released April 27, projects growth in the Middle East and North Africa region at 3.9 percent in 2011, unchanged from 2010.

    The economies of oil-exporting countries—Algeria, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, Sudan, the United Arab Emirates, and Yemen—are expected to expand by 4.9 percent (projections exclude Libya), owing largely to higher oil prices and oil production.

    By contrast, growth among the region’s oil importers—Afghanistan, Djibouti, Egypt, Jordan, Lebanon, Mauritania, Morocco, Pakistan, Syria, and Tunisia—is set to slow to a mere 2.3 percent (see table).

    A changed outlook

    Both the surge in global commodity prices and the widespread social unrest in the region have changed the outlook for 2011. Higher oil prices have further strengthened the external and fiscal positions of oil exporters, while oil importers have seen their import bill rising and domestic pressures mounting in the face of higher food and fuel prices.

    The unrest has caused short-term disruptions to economic activity in a number of countries. More generally, developments have dented investor confidence and weighed on tourism and foreign direct investment throughout the Middle East and North Africa.

    “The immediate challenge facing many countries in the Middle East is to maintain social cohesion and macroeconomic stability in the face of multiple pressures,” Masood Ahmed, Director of the IMF’s Middle East and Central Asia Department, told a press conference in Dubai.

    To mitigate the impact of higher food and fuel prices and stem the social unrest, governments in the region have been expanding subsidies, raising wages and pensions, making additional cash transfers, stepping up other public spending, and reducing taxes.

    Ahmed said the cost of these new measures ranges widely across countries, but is, in many cases, substantial. “Additional spending in the near term is understandable and necessary to ensure social cohesion, but will add to the strain on public finances,” he added. Managing Director Dominique Strauss-Kahn said recently that the IMF could provide support of up to $35 billion to help Middle Eastern oil-importing countries meet financing needs.

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