WASHINGTON, 12 April 2007 — Middle Eastern oil producers, despite sound economies, are saddled with high unemployment rates and must find new sources of wealth to meet a growing demand for jobs, the IMF said yesterday.
The International Monetary Fund in a report on global economic prospects nonetheless said the outlook for the Middle East as a whole remained “favorable,” with growth in the region expected to come to 5.5 percent this year and next after 5.7 percent in 2006.
In addition to Gulf oil exporters, the IMF classification of the Middle East includes Iran, Egypt, Syria, Lebanon, Jordan and Israel. Among oil exporters, economic momentum is seen slipping to 5.3 percent in 2007 and 5.2 percent in 2008 from 5.5 percent last year.
But the IMF contended that oil producers are still heavily dependent on the petroleum sector at a time when “rapid population growth has contributed to some of the highest unemployment levels in the world.” While Gulf oil exporters have managed to boost public sector employment, “the demand for jobs is outpacing economy-wide supply by increasing margins,” the IMF said.
It added that currently favorable circumstances afford an opportunity to address “the twin challenges of diversifying oil-dependent economies and providing employment in a rapidly expanding labor force.” The Fund in particular urged a greater role for private investment in the non-oil sector and improvements in the business climate through a reduction in red tape and better access to credit for small- and medium-sized companies.
It said that the pace of growth in the Middle East had been tempered by a decline in oil prices since August, a trend that could affect activity overall this year. But the IMF noted that “prudent management” of oil revenues has left exporters “in a much stronger position than in previous cycles to smooth public spending.”
Meanwhile, Africa’s economic growth will likely accelerate in 2007, outpacing the global economy, but armed conflict and political instability undermine prospects in some countries, the IMF said yesterday.
In its report, the IMF pegged Africa’s real gross domestic product growth at 6.2 percent for this year, revised up from its September forecast for 5.9 percent growth and well above last year’s pace of 5.5 percent. For 2008, the IMF expects growth to slow to 5.8 percent. Africa has turned in strong growth in recent years, helped by global economic expansion, debt relief, oil production, and demand for nonfuel commodities. The key question is whether that growth is sustainable. The IMF said risks were tilted somewhat to the downside, noting that Africa’s expansion phases tended to be short and “end in painful output collapses.”
“While armed conflicts and political instability continue to undermine prospects in a number of countries, the frequency of such events in the region as a whole has declined over the past decade,” the report said.