BUS 230503 IMF Briefing VSAKLANI-5-1683114502933
How oil fares through rest of 2023 will decide the eventual growth numbers for Gulf and Middle East economies. Image Credit: Virendra Saklani/Gulf News

Dubai: Combined real GDP growth for Middle East and North Africa economies would settle at 2.7 per cent this year, down from 5.4 per cent in 2022.

The Gulf economies had hit a growth of 7.7 per cent in 2022, when oil prices soared and helped propel a liquidity rush for them But this year that could slip to 2.9 per cent, according to the latest IMF projections.

Oil had consistently pushed at the $100 a barrel level during 2022, fuelled by the tensions over the Russia-Ukraine situation. This year, oil has come off those highs amidst a renewal of worries that the global economy might stumble into a recession.

Read more

The good news is the growth in the non-oil sector is somehow resilient, at around 4-4.5 per cent on average this year and next. According to Azour, this reflects the efforts made to diversify economies and as governments increased their capacity to raise revenues outside of oil.

“It is important to maintain this track of public finances being less dependent on an oil (price) upside,” the IMF official added.

Across the MENA region, the IMF estimates non-oil GDP to grow by 3.1 per cent this year, against 4.3 per cent a year ago. This year’s growth will be burdened by tight fiscal policies to restore macroeconomic stability.

Plus, there is the agreed upon OPEC+ oil production cuts, and the fallout from the recent deterioration in global financial conditions.

“Having said that, also it’s very important to differentiate between countries that have high levels of reserves and those who have less level of reserves,” said Azour.

After surging last year, inflation is forecast to remain at a still elevated 14.8 per cent this year before declining modestly in 2024.

Potential risks for MENA economies include further instability in the financial sector in Western economies, and a resurgence of global price pressures. The region’s financial markets have moved in line with global trends, though countries with large debt burdens have had a greater impact.