|IMF predicts Middle East GDP gains will beat global average
|Real Gross Domestic Product growth in the Middle East will reach 5.8 percent in 2006 and 5.4 percent in 2007, the International Monetary Fund said Thursday in its World Economic Outlook.|
The regional forecast is 14 percent better than the 5.1 percent growth predicted for the global economy in 2006 and 10 percent above the 4.9 percent global forecast for 2007.
Presenting the new issue of its twice-yearly World Economic Outlook in Singapore, the IMF said the outlook for the region remains generally favorable, given that oil prices are expected to remain high.
"Oil exporting countries have continued to enjoy robust growth, particularly in the non-oil sectors, while external current account and fiscal balances have improved further," the IMF said, citing income gains from higher oil prices and expanded oil production in some countries as main causes.
Under the IMF's classification, Middle Eastern oil exporting countries comprise the member states in the Gulf Cooperation Council, Iran, Libya, Syria, and Yemen, but not Egypt.
While Middle Eastern oil exporters as group are expected to achieve GDP growth of 6 percent in 2006 and drop to somewhat more modest growth of 5.3 percent in 2007, economic development of the Mashreq (Jordan, Egypt, Lebanon and Syria) countries is forecast to lag behind the regional average with 4.7 percent this year but accelerate to 5.2 percent growth in 2007.
Overall, the division of Middle Eastern economies into oil-driven economies and others shows particularly marked differences in the IMF forecasts for current account balances in the next two years.
With an expected peak of $280 billion this year for the region's current-account surplus, the projected ratios of current-account balance to total GDP at 23.2 percent and 22.5 percent in 2006 and 2007 reflect almost entirely the high gains expected for the main oil exporters. By contrast, the outlook for Mashreq countries, including Syria, describes contractions in current account balances by 2.5 percent and 3.4 percent, respectively.
In Egypt, the IMF sees the current-account development as positive, with growth of 2 percent and 1.2 percent, and cited the country's favorable outlook as providing an excellent opportunity to reduce the fiscal deficit and initiate a drop in public debt.
Syria, on the other hand, is projected to undergo annual contraction of 1.8 percent in the current account balance in both years; Lebanon will suffer contractions of 12.8 percent and 16.2 percent, and Jordan will face contractions near 20 percent in 2006 and 2007.
Consumer price inflation pressures are strongest in Iran, where the IMF sees them approaching 15 percent annually, and lowest in Saudi Arabia, with only 1 percent. The regional average for consumer price increase projections is a 7.1 percent increase in 2006 that will accelerate to 7.9 percent next year. While noting that inflation in Middle Eastern economies has begun to pick up, the IMF called inflation "generally well contained" in the region, adding that financial stability had been preserved despite substantial corrections of equity markets since the beginning of the year.
Risks to growth are broadly balanced for the region, with oil exporters facing both opportunities and challenges from the surging oil revenues. Non-oil exporters in the Mashreq have to deal with large terms-of-trade losses from higher costs for energy imports but will continue to benefit from supportive regional and global economic environments. However, geopolitical risks remain "a serious concern," according to the IMF.
With a very likely "substantial permanent component" to the cost burden from high energy import bills, Middle Eastern oil importers could ensure sustainability of their budgets by allowing full pass-through of higher oil prices to consumers, the IMF said, citing recent fuel price increases in Jordan as "appropriate steps in this direction."
The Daily Star