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 Friday.
But the subdued overall outlook is not enough to spur needed job growth and reduce poverty, according to Jihad Azour, the new head of the International Monetary Fund's Middle East and Central Asia department.
“A more favorable 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 this 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 percent - a 1.3 percentage point decline from 2016’s estimated growth rate.
Oil price stability
The Organization of the Petroleum Exporting Countries in November acted to stabilize 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 percent in 2016 to 2.9 percent 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 percent to four percent 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 percent, he said.
“Therefore, fiscal reforms and fiscal consolidation will remain an ongoing priority across the region.”