Mideast Outlook Varies Markedly Across Region

Region faces uncertainty from a possible global slump and regional unrest

Oil-exporting economies buoyed by higher oil prices

Oil importers face slow economic recovery

The IMF’s Regional Economic Outlook for the Middle East and Central Asia, released October 26, projects growth in the Middle East and North Africa region at 3.9 percent in 2011, down from 4.4 percent in 2010.

The region’s oil-exporting countries (excluding Libya)—Algeria, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, Sudan, the United Arab Emirates, and Yemen—are forecast to expand by 4.9 percent in 2011, thanks to higher oil prices and oil production, before moderating in 2012.

But growth among the region’s oil importers—Afghanistan, Djibouti, Egypt, Jordan, Lebanon, Mauritania, Morocco, Pakistan, Syria, and Tunisia—will register just under 2 percent in 2011 (see table).

“Since the beginning of this year, the region has witnessed unparalleled uncertainty and economic pressures,” Masood Ahmed, Director of the IMF’s Middle East and Central Asia Department, told a press conference in Dubai. The recent worsening of the global economy, he added, would likely add to these pressures.

“But we should not lose sight that the ongoing historical transformation holds the promise of improved living standards and a more prosperous future for the people in the region,” he stressed.

Oil exporters benefit from higher oil prices

Economic activity in the region’s oil-exporting countries has clearly improved, bolstered by continued high energy prices. This expansion is driven by the high level of activity in the countries of the Gulf Cooperation Council (GCC), where growth is projected at 7 percent in 2011. Several countries—Saudi Arabia in particular—have stepped up oil production temporarily in response to higher oil prices and shortfalls in production from Libya.

“The decision to increase oil production in the wake of disruptions in Libya was an essential contribution toward global energy market stability and enhanced activity,” Ahmed noted.

Increased oil revenues have created additional room for government spending in the GCC. Several countries announced spending programs early in the year covering a wide spectrum of measures, such as subsidies, wages, and capital expenditure. At current projected oil prices and levels of production, revenue gains will more than offset the high levels of public spending. In 2011, the oil exporters’ combined external current account...