São Paulo – The Arab countries should enhance public and private investments to secure growth and job creation for the young population. These are the region’s main challenges, according to the report “Investment and Growth in the Arab World” by the International Monetary Fund (IMF) released this Tuesday (10).
The financial institution says that to face these investment challenges is more urgent now due to the less favorable economic scenario. According to the IMF, oil importers and exporters in the region are exposed to lower medium-term growth prospects in trade partners and possible higher funding costs associated with the normalization of the monetary policy in the United States.
Also, oil’s low prices will make it difficult for the public sector to continue driving growth and job creation, which increases even further the need to transition to a more diversified economic model, with a bigger role for the private sector.
The report states that investment rates increased in the Arab world in the last two decades, reflecting improving global conditions, but that there are huge gaps between countries in the region. Private investment, particularly foreign direct investment, has been registering a weaker performance compared to public investment, says the IMF.
However, conflicts in the region increased the economic challenges to these countries, which were all directly or indirectly impacted. And in this moment, macroeconomic conditions must be kept stable when facing a more challenging global scenario.
The IMF advises countries in the region to carry out reforms in order to improve the business environment, including refocusing the role of the government, boosting private sector dynamism, attracting foreign direct investments and fostering diversification.
The fund proposes to step up analysis and policy dialogue through its Middle East and Central Asia Departments in two critical areas: policies and reforms to boost private investment and options to generate fiscal space for public investment and reforms to enhance its efficiency.
*Translated by Sérgio Kakitani
