crude, oil
An employee looks out across oil pipes used for landing and unloading crude and refined oil at the North Pier Terminal, operated by Saudi Aramco, in Ras Tanura, Saudi Arabia. Image Credit: Bloomberg

Dubai: Economic growth in Middle East’s oil importing countries is projected to remain moderate in 2019, reflecting the weaker external environment as well as domestic factors, according to the latest regional Economic Outlook report of the International Monetary Fund (IMF).

Masking considerable variation across the region, real GDP growth in MENAP [Middle East North Africa and Pakistan] oil importers is expected to slow from 4.2 per cent in 2018 to 3.6 per cent in 2019, before rebounding to 4.3 per cent during 2020—23.

“Although growth is expected to pick up slightly over the medium term, it remains constrained by persistent structural rigidities in many countries and is too low to effectively reduce unemployment as demographic pressures rise,” said Jihad Azour, the IMF’s Mideast and Central Asia department director.

For all these economies, near term risks from elevated debt levels are worsened by a less favourable growth outlook and more volatile global financial conditions, particularly as a large amount of foreign currency debt matures over the next years.

Policymakers increasingly face a trade-off between rebuilding buffers to strengthen resilience to near-term risks, as debt dynamics become less favourable, and addressing growth challenges.

According to the IMF, oil importers from the region face a projected cumulative fiscal deficit of $154 billion with a refinancing requirement of $54 billion in 2019-20.

Unemployment remains particularly high among young people (24.4 per cent in 2018) and females (18.9 per cent in 2018) in the region, while female labour force participation also remains very low (26 per cent in 2018).

Social tensions have been building in many countries across the region as fiscal consolidation efforts, together with limited progress on structural reforms, have weighed on socioeconomic conditions.

Although growth is picking up in Egypt, for oil importing countries in the region, inflation overall is expected to remain high around 10 per cent and growth is expected to slow from just over 4 per cent last year to 3.6 per cent in 2019. That average is mainly driven by Pakistan, where economic growth is expected to slow from about 5 per cent last year to close to 3 per cent this year.

Slow growth environment combined with high unemployment and high inflation, according to the IMF are expected create social unrest in some of these countries. “The unrest in countries like Algeria and Sudan is heavily rooted in economic discontent over unemployment, corruption and poor public services.

For oil importing countries, unemployment remains stubbornly high at close to 25 per cent among young people,” the IMF report said.

Iran hit hard by sanctions

Dubai: Iran’s economy will be hit hard by the US sanctions impacting its medium term growth prospects, according to the International Monetary Fund (IMF).

The IMF expects a six per cent contraction in economic growth in 2019 — and that does not factor in the recent announcement by the US that waivers on Iranian oil exports will expire next week, further deepening Iran’s economic recession. “The removal of waiver will deepen the recession the country is already facing,” said Jihad Azour, the IMF’s Mideast and Central Asia department director. Last year, Iran’s economy contracted by nearly 4 per cent and the inflation projected at 37.2 per cent this year and 31 per cent in 2020.