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IMF Lowers Growth Expectations for Middle East & North Africa


Note: Data for some countries are based on fiscal years. 1Movements in consumer prices are shown as annual averages. 2Percent of GDP. 3Percent. 4Includes Bahrain, Libya, Oman, and Yemen. 5Includes Djibouti and Mauritania. Excludes Syria because of the uncertain political situation.

The International Monetary Fund has revised its 2015 economic growth projection downward for the Middle East and North Africa by a greater margin than any other country or region in the world in its latest economic outlook, reflecting expectations of a fragile global recovery and ongoing regional political instability.

The IMF on Tuesday lowered its projections for global growth this year and next year, painting a picture of a slower-than-anticipated recovery in advanced economies coupled with emerging markets that are expected to struggle because of lackluster demand and lower world trade growth.

Globally, the IMF said growth this year will be 3.3%, a downward revision from a July estimate of 3.4%.

In the Middle East and North Africa, where conflict and political instability have raged in Iraq, Syria, Libya and Yemen this year, the IMF is forecasting 2.6% growth in 2014 followed by 3.8% growth next year. The 2015 growth figure is a full percentage point lower than the IMF’s estimate in July, the largest downward revision of any region or country it examined in its world economic outlook.

The challenges in the Middle East aren’t uniform. In the Gulf Arab oil-exporting countries, growth is expected to be steady, helped by a modest increase in oil production and a much bigger contribution from the non-oil sector.

The story is different in places where political upheaval and violence have been most acute. In Iraq, where Islamic State militants have taken large swaths of territory since the summer, the IMF expects GDP to decline by 2.7% this year. The IMF didn’t even measure Syrian GDP, citing the unstable political situation there more than three years into a civil war.

The IMF’s prescriptions for Middle East growth are familiar ones. For oil exporters, the IMF recommends fiscal consolidation to help rein in budget deficits that ballooned after the financial crisis and Arab Spring unrest. Oil-rich countries have used their deep pockets to bolster social infrastructure – schools, hospitals, homes for nationals and other projects – but economists warn that the pace of spending growth isn’t sustainable in the long run.

For oil importers, major structural reforms are still necessary in many countries to keep them competitive and solve rampant unemployment, the IMF said.

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(via WSJ Blogs)

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