The Middle East can look forward to solid growth this year and next, but a fall in crude prices could undermine prospects for oil exporters and importers alike, the IMF warned on Thursday
The International Monetary Fund in its twice-yearly World Economic Outlook said that if the nascent global economic recovery fizzled out “oil prices may fall sharply, which could have important implications for oil exporters and their regional trading partners.”
Oil exporters in such circumstances might have to slash public spending, a move that would hamper growth in oil importers by lowering remittances sent home by foreign workers.
As oil prices dwindled, most Middle Eastern oil exporters maintained vigorous public spending programs, part of which “spilled over to the non-oil producers in the region, providing important support to these economies.”
But for the moment, according to the IMF, “the outlook for the Middle East has improved.”
Regional economic growth is projected to reach 2.0 percent this year, the same pace predicted by the IMF in July, and a healthy 4.25 percent in 2010, up from the July estimate of 3.7 percent.
The best performers this year are expected to be Lebanon, with growth of 7.0 percent, Egypt, 4.7 percent, Jordan, 3.0 percent, Syria, 3.0 percent and Iran 1.5 percent.
Saudi Arabia, the region’s largest oil producer, should see its economy shrink 0.9 percent before returning to growth of 4.0 percent in 2010.
The IMF found that economic expansion in oil importers was expected to come to 4.5 percent in 2009, more than three times that of exporters, which were hard hit by weak crude prices earlier in the year.
The report recommended that as the recovery takes hold, countries that have strong budgetary positions should maintain domestic policies aimed at stimulating demand.
Countries in a weaker fiscal position, according to the Fund, will have to rein in spending — notably by reducing government subsidies — to avoid an unsustainable debt burden.