Monday, November 6, 2017

Global Economy - Growth in oil importers is projected to rise to 4.3 percent this year from 3.6 percent in 2016. The upswing is expected to persist in 2018..- IMF

Publication - IMF COUNTRY FOCUS  - 
Middle East, North Africa, Afghanistan, and Pakistan: Take Advantage of Strengthening Global Economy   - 
By Boaz Nandwa and Magali Pinat 
Middle East and Central Asia Department


MENAP Region Highlights
Despite the strengthening global recovery, MENAP’s economic outlook remains relatively subdued owing to the adjustment to low oil prices and regional conflicts. For MENAP oilexporting countries, spillovers from the low oil price environment and fiscal adjustment continue to weigh on non-oil growth, while overall growth is also held down by the Organization of the Petroleum Exporting Countries (OPEC)- led agreement to reduce oil production.


 For oil importers, growth is projected to increase, supported by the strengthening domestic demand and a cyclical recovery of the global economy. However, at 2.6 percent in 2017—unchanged relative to the May 2017 Regional Economic Outlook: Middle East and Central Asia Update—MENAP growth will be about half of the 2016 outturn, largely because of developments among oil exporters. Growth is anticipated to accelerate gradually over the medium term in most MENAP economies, but in many cases, it will remain below what is needed to effectively tackle the unemployment challenges facing the region. Structural reforms need to be accelerated to take advantage of the window of opportunity provided by the strengthening global economy and to secure higher, more inclusive, and resilient growth.


 Oil Exporters: Need to Push ahead with Fiscal Consolidation and Diversification 


Oil prices have remained soft, despite the extension of the production cuts led by OPEC. 

Oil exporters are continuing to adjust to these low oil prices, which have dampened growth and contributed to large fiscal and external deficits. Overall growth in the Gulf Cooperation Council (GCC) region is expected to bottom out in 2017 at 0.5 percent, as the OPEC-led deal reduces oil output. In contrast, non-oil growth is expected to recover to about 2.6 percent in 2017 and 2.4 percent in 2018 as fiscal consolidation generally slows. Both oil and non-oil growth for GCC countries have been revised down since the May 2017 Regional Economic Outlook: Middle East and Central Asia Update. Algeria’s growth is expected to slow to 1.5 percent in 2017 and bottom out at 0.8 percent in 2018, as a consequence of envisaged spending cuts, before recovering over the medium term. In Iran, growth is projected to drop to about 3.5 percent this year, as the post-sanctions boost to oil output wears off. The outlook for Iraq, Libya, and Yemen continues to be dominated by security conditions and oilproducing capacity. 

The reality of lower oil prices has made it more urgent for oil exporters to move away from a focus on redistributing oil receipts through public sector spending and energy subsidies. To this end, MENAP oil exporters have outlined ambitious diversification strategies, but medium-term growth prospects remain below historical averages amid ongoing fiscal consolidation. These subdued growth prospects further highlight the need to speed up implementation of structural reforms. 

Oil exporters should continue pursuing deficitreduction plans to maintain fiscal sustainability and, where relevant, to support exchange rate pegs. Lower oil prices have contributed to large fiscal deficits across MENAP oil exporters. Deficits jumped from 1.1 percent of GDP in 2014 to 10.6 percent of GDP in 2016, but are expected to ease to 5.2 percent of GDP this year on the back of a modest recovery in oil prices and significant deficit reduction efforts. Nevertheless progress is uneven across countries. Some countries will need to identify additional fiscal consolidation measures, while protecting social and growth-oriented expenditures. All countries would benefit from further improving their fiscal institutions and frameworks.



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