IMF sees ‘breathing space’ in Middle East and Central Asia

washington — Rising growth outside the troubled oil sector is offering some relief to economies in the Middle East and Central Asia, a senior IMF economist said.

But the subdued overall outlook is not enough to spur needed job growth and reduce poverty, according to Jihad Azour, new head of the International Monetary Fund’s Middle East and Central Asia department.

“A more favourable environment, including higher-than-expected growth and some firming up of commodity prices is providing some breathing space,” he told reporters during the spring meetings of the IMF and World Bank in Washington.

In its World Economic Outlook last week, the fund said Middle East oil exporters would see growth drop precipitously in 2017 as producing countries cope with lower petroleum production and fiscal reforms.

Middle East economies, taken together with those of Afghanistan and Pakistan, should expand at a rate of 2.6 per cent — a 1.3 percentage point decline from 2016’s estimated growth rate. The Organisation of the Petroleum Exporting Countries (Opec) in November acted to stabilise tumbling oil prices by agreeing to the first production cuts in eight years.

But Azour said on Friday that growth outside the oil sector in oil exporting countries was on the rise, expected to shoot up from 0.4 per cent in 2016 to 2.9 per cent in 2017. “Although the production cuts following the Opec agreement are reducing the headline growth,” he added.

For oil importers, meanwhile, the IMF expects growth to rise from 2016’s 3.7 per cent to four per cent this year, Azour said.

“While this represents an improvement, our medium-term growth projections are too low to create enough jobs and improve the living standards,” he said. “Many countries, especially oil importers, are also carrying a high level of debt.”

Azour said the fund was encouraged by regional governments’ efforts to introduce new taxes and reform energy subsidies, noting that recent gains in oil prices should help reduce fiscal deficits.

But even oil importers were running an average debt-to-GDP ratio of 80 per cent, he said.

“Therefore fiscal reforms and fiscal consolidation will remain an ongoing priority across the region,” he added. —