IMF Urges MENA Countries to Diversify Economy
The International Monetary Fund has urged countries of the Middle East and North Africa to diversify their economies and implement policies that support jobs and productivity, like education and infrastructure reforms.
Growth is slightly improving in this region, largely driven by higher oil prices and improved export prospects, said the IMF in its latest regional economic assessment.
According to IMF director for Middle East & Central Asia Jihad Azour, the projections indicate that growth will be too low to create enough jobs or improve living standards in this region wherein many countries—especially oil importers—are also carrying high levels of debt.
Both oil exporters and importers are therefore “facing two critical policy imperatives: fiscal consolidation and structural reforms,” he emphasized.
Growth rates for the region’s oil importers are projected to increase from 3.7 percent in 2016 to 4 percent in 2017—thanks in large part to policies that have reduced fiscal deficits and improved the business climate, as in Morocco and Pakistan, stressed the IMF report.
In the region’s oil exporters, non-oil growth is projected to accelerate as well from 0.4 percent in 2016 to 2.9 percent in 2017, although production cuts following the OPEC+ agreement will temporarily reduce overall growth.
The expected increase in growth for the region’s oil-importing countries will not be enough to make a serious dent in the region’s high unemployment rate—at about 12 pc.
For the region’s oil-exporting countries, policy adjustments, such as reductions in public spending, will continue to constrain economic activity. Conflicts are also likely to continue to weigh on the region, said the IMF in its outlook for the region.
Even though fiscal deficits narrowed in oil exporters, deficit-reduction efforts need to continue, building on the progress already achieved in reducing spending, like in Algeria and Saudi Arabia. According to the report, fiscal deficits are expected to decrease from 10 percent of GDP in 2016 to less than 1 percent in 2022, a significant improvement, which will help build resilience.
Fiscal positions have also improved for oil importers. For the broader region, average fiscal deficit fell from 9 ¼ percent of GDP in 2013 to about 7 percent of GDP in 2016, thanks in large part to reduced fuel subsidies (Egypt, Morocco, Sudan) and efforts to increase revenue and strengthen tax collection (Pakistan).
According to the IMF, the ongoing regional conflicts —which have led to a large number of refugees and internally displaced people—continue to exact not only a high humanitarian cost, but also significant economic consequences, both for countries directly impacted by conflict and their neighbors.
Together with other international partners, the IMF is helping countries affected by conflict to cope with the immediate adverse economic consequences, and stands ready to support rebuilding efforts once the conflicts ease. For example, the Fund is providing extensive technical assistance in Somalia and has extended financial support to Afghanistan and Iraq.