Mideast Needs Growth to Create Jobs and Raise Incomes

Growth in Mideast not high enough to reduce unemployment, raise incomes

Arab countries in transition should avoid downward economic spiral

Bold structural reforms needed without delay to kick-start growth

The IMF has called for resolute actions to kick-start growth among other policy priorities.

Economic challenges facing the region were a focal point for policymakers during the 2013 IMF-World Bank Annual Meetings in Washington last week. The meetings brought together ministers and top government officials, as well as journalists, academics, bloggers, and representatives of civil society and the private sector from all over the world to discuss the critical issues facing the world economy. Middle East issues were high on the agenda.

In addition to meetings with country delegations, IMF officials participated in regional and global forums with a focus on the MENA region. Discussions, led by IMF Managing Director Christine Lagarde, Deputy Managing Director Nemat Shafik, and Middle East Department head Masood Ahmed, covered a broad range of topics, including ways to harness the region’s vast potential.

Outlook and policy priorities

The past three years have been difficult for the region’s oil-importing countries, many of which are Arab countries in transition. “The combination of political uncertainty, social pressures, and regional conflict has further delayed economic recovery, and the region’s oil-importing countries are expected to grow at an average of just 3 percent in 2013–14. This is far below the growth rates necessary to reduce persistent unemployment and improve living standards,” IMF Middle East Department Director Masood Ahmed told reporters in Washington last week during a briefing on economic developments in the region.

Ahmed outlined three policy priorities for the region’s oil-importers: creating jobs to help sustain the socio-political transition, making fiscal policy more equitable and efficient, and embarking—without delay—on a bold structural reform agenda that will improve the business climate, reform the labor market, support better governance, and enhance equity.

Looking at developments in the oil-exporting countries of the Middle East, Ahmed expects overall growth to drop markedly this year—to about 2 percent—driven by lower oil production. This is on account of lower global demand as well as domestic oil supply disruptions. “Growth will likely increase to 4 percent in 2014 with a recovery in global demand and...