DUBAI: The International Monetary Fund says economic growth in the Middle East and Central Asia region could slow to 2.6 percent in 2009 compared to an average of 5.7 percent last year.
In its latest regional outlook released yesterday, the IMF says the region is expected to weather the global financial meltdown better than others because of ‘prudent financial and economic management’ and continued spending by oil exporting countries.
Oil exporters such as Saudi Arabia are using earlier crude oil profits to stimulate spending.
The report indicates that gross domestic product for the Middle East is projected to grow 2.6 percent this year, down from 5.7 percent in 2008, while Saudi Arabia will have a decline in economic growth of 0.9 percent, compared with a 4.6 percent increase last year. The UAE’s economy is forecast to contract by 0.6 percent after growing 7.4 percent last year. Among non-oil producers, the Lebanese economy is forecast to expand by 3 percent, after 8.5 percent growth in 2008.
Speaking on the occasion of the release of the IMF’s Spring 2009 Regional Economic Outlook, IMF Middle East and Central Asia Department director Masood Ahmed said: “Given the global reach of the current economic crisis, countries in the Middle East and North Africa have also been impacted negatively. However, they are likely to fare better than countries in other regions of the world, in part because of prudent financial and economic management, but also because oil exporters in the region can draw upon their large reserves to cushion the impact of the global slowdown on their own economies and the economies of their neighboring countries with whom they have growing economic links.”
The global crisis is affecting the Middle East, North Africa, Afghanistan and Pakistan (MENAP) region through three indirect channels. First, the sharp drop in oil prices is shrinking revenues for oil exporters but also import costs for oil importers. Second, the contraction in global demand and trade is lowering export, tourism and remittances receipts. And third, the tightening of international credit markets and lower investor appetite for risk are reducing asset prices and slowing down investment and capital inflows, Ahmed added.
Despite a marked decline in oil revenues, most oil exporters are maintaining government spending with the help of reserves accumulated during the boom years.
