The near-term economic outlook for the Middle East and North Africa region has weakened says the International Monetary Fund (IMF).
In the oil-importing countries, many of which are Arab countries in transition, regional conflict, heightened political tensions, and delays in reforms continue to weigh on growth. In this context, the immediate policy priorities are to restore confidence and create jobs, make inroads into fiscal consolidation to restore debt sustainability and rebuild buffers, and embark on structural reforms needed to support private sector-led, job-intensive growth.
Most oil-exporting countries continue to enjoy steady growth in the non-oil sector, supported in part by high levels of public spending. Although headline growth has declined because of domestic oil supply disruptions and lower global demand, a recovery in oil production is expected to lift growth next year.
Increased vulnerability to a sustained decline in oil prices and intergenerational equity considerations underscore the need for countries to strengthen their fiscal buffers. Key medium-term challenges remain economic diversification and faster private-sector job-creation for nationals.
Economic activity in the Caucasus and Central Asia is expected to continue to expand rapidly the IMF continues. Growth will be driven by a recovery in the hydrocarbon sector and firm growth in domestic demand, supported in part by robust remittance inflows. Considerable downside risks weigh on this outlook, however, stemming in particular from slower-than-expected growth in Russia, an important trading partner and source of remittance inflows.
Countries should take advantage says the IMF of the favorable near-term economic conditions to rebuild fiscal policy buffers that were eroded after the global crisis and set in motion a process of structural transformation into dynamic emerging economies.