The real GDP of oil exporting countries in the Middle East is projected to grow at 5.2 per cent in 2022, up from 4.5 per cent in 2021, according to the IMF’s latest economic outlook. Growth is projected to slow to 3.5 percent in 2023 as OPEC+ production wanes, oil prices ease, and global demand slows.
The October 2022 regional economic outlook was released on Monday by Jihad Azour, Director of the IMF’s Middle East and Central Asia Department at a press conference at the Dubai International Financial Centre (DIFC).
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Overall, the Middle East and Central Asia (ME&CA) is projected to grow at 5 per cent, increasing from 4.1 per cent in 2021, as a multispeed recovery continued in the first half of the year. The growth forecast for 2023, however, is currently at 3.6 per cent.
“In the near-term, the priorities for all countries are to maintain or restore price stability while protecting the vulnerable, respond to tightening global financial conditions while ensuring fiscal and financial stability, and ensure food and energy security,” Azour said.
“The worsening global environment, tightening macroeconomic policies, and the limited policy space in several countries raise the urgency of pressing ahead with structural reforms to bolster economic growth while transforming economies to become more resilient, sustainable, diversified and inclusive,” Azour said.
The IMF’s support remains steadfast in the region, he added.
Crude producers, in particular, are projected to accrue a cumulative oil windfall of about $1 trillion over 2022−26, which oil-exporting countries like the UAE could use to continue to invest in projects that support future economic growth, the IMF noted.
Oil exporters’ external accounts, including the UAE, are expected to further improve in 2022−23 as energy prices remain considerably higher than their 2020−21 levels.
Primary non-oil fiscal balances are also slated to improve with most GCC states expected to continue to save a substantial share of their oil revenues.
In contrast, oil-importing countries face a deep terms-of-trade shock, higher sovereign spreads, and eroded market access.
Nonetheless, robust remittance flows and resurging tourism receipts are helping offset potential headwinds in some countries.
Uncertainties and downside risks include the possibility that commodity prices remain elevated and result in increased food insecurity and fiscal pressures, inflation proves to be broader and more costly to reduce than expected, and tighter financial conditions push up on government debt service costs and worsen debt dynamics.
The IMF recommends countries to mitigate the cost-of-living crisis, strengthen resilience and growth prospects, and press ahead with a variety of structural reforms. This includes completing energy subsidy reforms in conjunction with enhancing social safety nets that will be key to building resilience to future shocks.
Accelerating structural reforms, such as removing barriers to private firms, enacting reforms that reduce informality and improve tax equity, and investing in climate-resilient technology and infrastructure, has become even more urgent.
This will help to mitigate any potential adverse effects on growth and boost productivity. Bolstering medium-term fiscal frameworks will also be critical to anchor confidence in fiscal sustainability.
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