The International Monetary Fund cut its economic growth forecasts for many countries in the Middle East, citing the impact of political unrest as well as a weaker global outlook.
Output in the Middle East, North Africa, Afghanistan and Pakistan is now expected to expand 2.7 per cent this year, 0.4 percentage point slower than the IMF’s last forecast made in July, the Fund said in its twice-yearly World Economic Outlook, issued this week.
Next year, growth in the region is expected to accelerate to 3.9 per cent – but that is 0.9 percentage point slower than the IMF’s July forecast.
Middle Eastern oil exporters can look forward to only a modest rise in global oil demand while oil supply in North America is rising, the IMF said. Brent crude oil slipped below $91 a barrel on Wednesday to its lowest level since June 2012, down more than $20 since June this year.
Thanks to heavy government spending and robust private sectors, economies in the six-nation Gulf Cooperation Council are expected to stay strong. GCC growth is now projected to average about 4.5 per cent annually in 2014-15, with non-oil gross domestic product expanding six per cent and oil GDP rising just 0.5 per cent, the IMF said.
Among the non-GCC oil exporters, however, growth is forecast to average only 0.25 per cent in 2014 because of recent political shocks and worsening security in Iraq, Libya and Yemen.
Growth is projected to recover to three per cent in 2015, assuming a rebound in oil production in those three countries, but that assumption is “subject to significant uncertainty”, the IMF said.
Meanwhile, the economies of many Middle Eastern oil importers continue to struggle because of “deep-rooted inefficiencies in economic structures, regional conflicts, and continued sociopolitical tensions”, the IMF added.
“Growth is still too weak to tackle persistently high unemployment, especially among the young, and widespread socioeconomic inequities.”
The IMF predicts growth of 2.6 per cent this year for oil importers in the Middle East, North Africa, Afghanistan and Pakistan, in line with its forecast made six months ago. But it has reduced its 2015 forecast by 0.5 percentage point to 3.7 per cent.
Egypt’s presidential election and aid from the GCC have restored some confidence and stabilised growth, but more reforms and aid will be needed to create jobs, the IMF said.
It now predicts growth of 2.2 per cent for Egypt this year and 3.5 per cent next year, down from forecasts made in April of 2.3 per cent and 4.1 per cent.
In Morocco, the IMF said, “the ongoing implementation of structural reforms is beginning to bear fruit, and growth is expected to pick up in 2015. Private investment is expected to strengthen with increased confidence, rising tourism receipts, and stronger export performance.”
But the IMF still cut its Moroccan growth forecasts, to 3.5 per cent from 3.9 per cent in 2014 and 4.7 per cent from 4.9 per cent in 2015.