Middle East, North Africa Region Urged to Stay on Course with Reforms

Low oil prices, ongoing conflicts weigh on region’s outlook
Oil exporters should continue to adjust to lower oil prices, diversify their economies
Oil importers need structural reforms to create jobs and inclusive growth
The slump in oil prices and ongoing conflicts continue to weigh on growth prospects of the Middle East, North Africa, Afghanistan and Pakistan, said the IMF in its latest regional assessment.

With these challenges expected to persist, the IMF said that the countries in the region needed to continue the progress they have already made toward strengthening their fiscal balances, and instituting structural reforms, which would help to ensure inclusive and sustainable growth.

The IMF’s Regional Economic Outlook for the Middle East and Central Asia, released on October 19, projects that growth for the region this year will be a modest 3½ percent, with little improvement expected in 2017 (see table). Sluggish economic growth is hurting progress in improving living standards. Structural transformations towards more dynamic private-sector driven economies, plans for which are being formulated in a number of countries, are needed to boost growth and create private sector jobs, the report said.

“The countries of the Middle East and North Africa region are still facing two of the world’s most pressing economic and geopolitical issues: the slump in oil prices and the intensification of conflicts,” said IMF Middle East and Central Asia Department Director Masood Ahmed at the report’s launch in Dubai. “To their credit, these countries have made progress in dealing with these challenges.”

Despite staging a recovery over recent months to reach more than $50 a barrel, oil prices—the key driver of growth for the region’s oil exporters—are projected to remain low over the coming years. The IMF projects prices to barely reach $60 a barrel by 2021, far removed from the highs of more than $100 a barrel just two years ago.

Conflicts, meanwhile, are continuing to cause a severe humanitarian crisis in several of the region’s countries—with higher numbers of refugees than at any other time since World War II—as well as disruption to economic activity and confidence across the wider region.

In the oil-exporting Gulf Cooperation Council (GCC), the IMF projects non-oil growth to be 1.8 percent in 2016 and 3.1 percent in 2017, much lower than the 7 percent average between 2000 and 2014, owing to the dampening effect from fiscal consolidations and a broader weakening of private sector confidence in the face of lower oil prices.

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