IMF report calls for reforms to promote job-rich growth and build resilience
DUBAI: Dubai International Financial Centre (DIFC), a global top 10 international financial centre and the leading financial hub in the Middle East, Africa and South Asia (MEASA) region, hosted the launch of the International Monetary Fund (IMF) October 2019 Regional Economic Outlook (REO) report for the Middle East, North Africa, Afghanistan and Pakistan (MENAP).
The report shows that the impact on growth in the MENAP region from global headwinds has been muted thus far. However, growth remains too low to meet the needs of growing populations, while risks to the outlook have increased. They include global trade uncertainties, volatile oil prices, geopolitical tensions, and domestic vulnerabilities in some countries.
Fiscal vulnerabilities, rising debt and elevated budget deficits, continue to weigh on the region’s growth potential. The report thus calls on governments to strengthen fiscal balances equitably, protecting the poor and most vulnerable. The report also underscores the need to accelerate structural reforms, including improving the business environment and modernising the regulatory framework, to stimulate private investment and foster job creation.
According to the IMF, these policies would put countries on a more sustainable and higher growth path, helping boost competitiveness, attract foreign direct investment (FDI), and tackle public debt. Greater transparency combined with strengthened procurement could reduce the volatility of discretionary government spending and improve the predictability of fiscal policy.
The region has in recent years experienced a surge in portfolio and bank flows which, in many countries, helped finance external and fiscal deficits. While capital flows have remained resilient, the region’s increased integration in the global financial markets has made it more exposed to shifting market sentiments. Revitalising FDI by easing restrictions and promoting macroeconomic stability while deepening domestic financial markets can provide more stable sources of funding, thus mitigating the risk of volatile portfolio flows.
Jihad Azour, Director of the IMF’s Middle East and Central Asia Department, said: “To pave the way for higher growth in the face of a challenging global environment, countries of the region should accelerate structural reforms that boost private sector activity and lift productivity. Additionally, both oil exporters and importers should work to ensure they can meet their fiscal objectives while taking the utmost care to protect poor communities and promote inclusion.”