There are many uncertainties in the Middle East, according to the latest outlook from International Monetary Fund (IMF), even though it is of the opinion that in 2019, there would be benefits from the higher crude oil prices for the oil dependent economies of the Middle East and its neighbouring region.
Warning of “multiple and intertwined risks cloud the outlook of the MENAP region” as issued by the IMF in its latest regional economic outlook publication for the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region which was Tuesday recently.
“These include a faster-than-anticipated tightening of global financial conditions, escalating trade tensions that could affect global growth and hurt key MENAP trading partners, geopolitical strains, and spillovers from regional conflicts,” the report stated.
The IMF said that greater financial market volatility and deterioration in financial market sentiment could be triggered by these risks and added that such a situation would aggravate “the financing challenges for countries with high levels of debt or large refinancing needs.”
For those Middle East economies that produce oil, revenues from exporting of petroleum has been the primary source of their annual government revenues. There have been attempts made for economic diversification and a shift away of their economies from dependency on oil for revenues and development and the creation of jobs in other sectors have been undertaken by a number of countries of the region – especially in the Gulf area, as their economies were battered by a sharp drop in global crude prices because of imbalances in supply and demand in the oil market
“The outlook and the rising risks underscore the need to intensify efforts to raise growth to levels that generate enough jobs for the benefit of all,” the IMF said. “In this context, countries should expand access to finance, strengthen governance, improve education outcomes, and enhance labour market flexibility, particularly in the Gulf Cooperation Council (GCC).”
In order to make use that any adjustments in the future of their fiscal policies is able to foster growth and be as equitable as possible, the Fund said that the economies in the region have to enhance priority of expenditure for both “growth-enhancing and high-quality investment in human capital and physical infrastructure, while sustaining well-targeted social spending.” And in order to diversify the governments’ revenue bases, a more progressive tax structure was also advocated by the IMF.
The MENAP report was published at a time when there is greater uncertainty in the outlook for global growth, said Jihad Azour, director of the Middle East and Central Asia at the IMF.
“Global conditions are changing in terms of the risk metrics,” Azour told CNBC’s Dan Murphy. “Although we’re still enjoying a high level of growth, that growth is plateauing,” he added.
“Overall, despite a significantly weaker outlook for Iran given the re-imposition of sanctions, oil-exporting countries are projected to grow at 1.4 percent in 2018 and 2 percent in 2019,” the Fund said.
(Adapted from CNBC.com)