São Paulo – Countries in the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) face a task of creating jobs amid a more challenging scenario of slowing global economy and trade tensions, volatile oil prices, and high public debt amid oil-importing countries. These are the economic outlooks of the region presented in the document by the International Monetary Fund (IMF) published on Monday (29).
“In the best of times, countries in the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) would face a formidable task of creating jobs for millions of young people entering the workforce,” says the IMF. In the face of a challenging scenario to do so, the fund says that a commitment to reforms that build resilience and help secure higher and more inclusive private-sector-led growth is more urgent than ever.
According to the IMF, economic growth in the region’s oil exporters is projected to remain subdued relative to 2018. Although growth in the Gulf Cooperation Council (GCC) is projected to improve slightly from 2% in 2018 to 2.1% in 2019, a decline in Iran’s economic activity results in a mere 0.4% rate of growth for 2019 for the region’s oil-exporting countries. GCC is formed by the UAE, Saudi Arabia, Qatar, Oman, Bahrain, and Kuwait.
Meanwhile, growth for oil importers is projected to slow from 4.2% in 2018 to 3.6% this year, reflecting the slowing global economy and domestic factors. The IMF, however, highlights a wide variation in this scenario. Egypt, for instance, continues to perform strongly, while Pakistan shows a weak growth.
According to the IMF, a key development that will shape the region’s economic outlook is oil price volatility. The Brent raw oil price was around USD 69 in January 2018, increased to USD 81 in October, then started January 2019 at USD 59 and in March was at USD 66. On Monday (29), it ended the day over USD 70. There was a low-price trend, but tensions and production cuts are causing the price to increase.
According to IMF, the oil price volatility may continue amid uncertainties around global trade, Iran sanctions, and the strategy of the Organization of the Petroleum Exporting Countries (OPEC) to work together with non-member countries, as well as other geopolitical risks, security concerns, and uncertainty surrounding global financial conditions.
These factors will weigh on fiscal balances in the countries. Public debt ratios have continued to rise in recent years despite fiscal consolidation efforts. The debt levels for some countries, such as Egypt, Jordan and Lebanon, exceed 80% of Gross Domestic Product (GDP), limiting the space for social and infrastructure spending, and leaving economies vulnerable to less favorable conditions.
IMF says there is more urgency for countries to pursue reforms that lead to a private-sector-led growth that benefits all. “This means fostering an inclusive growth environment that can attract investments – an area where both oil exporters and importers have long trailed their peers – create jobs, and drive innovation,” says the document.
Translated by Guilherme Miranda
