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Dubai International Financial Centre (DIFC), the leading financial hub in the Middle East, Africa, and South Asia region (MEASA), hosted the launch of the International Monetary Fund (IMF) Spring 2019 Regional Economic Outlook (REO) report for the Middle East, North Africa, Afghanistan and Pakistan (MENAP) region today.
MENAP’s oil exporters are projected to grow at 0.4 percent in 2019, down from 0.6 percent last year, largely driven by a contraction in economic activity in Iran following the renewal of sanctions. In GCC countries, growth is expected to stay largely unchanged, at about 2 percent. Oil production cuts and ongoing fiscal consolidation in countries such as Bahrain, Oman, and the UAE are contributing factors to this outlook.
Growth in oil importing countries is expected to slow to 3.6 percent this year (down from 4.2 percent in 2018) but should rebound to 4.2 percent in 2020-23. There is significant variation in growth in 2019 across the region though, with Egypt continuing to see strong expansion, while Pakistan’s economy is expected to slow sharply.
Challenging global economic conditions and geopolitical tensions shadow the outlook for countries across the MENAP region. Uncertain global financial conditions are also a concern, particularly for oil importers that will soon see large foreign currency debt mature.
Across the region, fiscal concerns are growing, as rising public debt is increasingly limiting countries from addressing pressing structural needs. Additionally, social tensions are a growing concern, underscoring the difficult trade-off policymakers face between ensuring macrostability and addressing medium-term growth challenges.
In response to these challenges, the report calls on MENAP countries to accelerate structural reforms that boost the private sector, strengthen governance and tackle corruption, and increase investment in education and technology. Such reforms would help spur job creation, diversify economies, and ultimately lead to higher and more inclusive medium-term growth. Of particular importance are efforts aimed at promoting small and medium-sized enterprises, a critical source of jobs in the region.
With fiscal vulnerabilities rising, the report recommends continued fiscal consolidation to rebuild buffers and strengthen resilience, while ensuring that adjustments are growth friendly and preserve spending on health and social safety nets.
Alya Al Zarouni, Executive Vice President of Operations of DIFC Authority, said: “Our strategic partnership with the IMF and its biannual regional economic outlook report continue to play a pivotal role in helping outline the region’s growth needs and reform priorities and realise the opportunities that arise with every challenge. For the DIFC, enhancing human capital, facilitating financial inclusion and strengthening our legal and regulatory framework are essential to ensuring the region, in which we operate, experiences a positive trend of economic growth and development.
“As such, initiatives such as FinTech Hive and the DIFC Academy, and the enactment and revision of a number of our laws and regulations, are helping spur investment into the region and allowing businesses to set up and operate from Dubai.”
Jihad Azour, Director of the IMF’s Middle East and Central Asia Department, said: “At the heart of policy efforts throughout the entire MENAP region is the need to put fiscal balances on a sound footing and lift medium-term growth with structural reforms such as measures to improve the business environment and governance, enhance labor market flexibility, and strengthen market competition. These reforms are essential if the region is to create jobs for the millions of young people entering the workforce. Also critical to this mission is the need to expand access to finance for small and medium-sized enterprise, which make up the vast majority of businesses but are an untapped source of jobs in the region. Finally, social spending and measures to protect the poor and the vulnerable and provide these groups with opportunities to benefit from economic growth remain essential.”
The IMF Regional Economic Outlook report details trends and developments across countries of the Middle East, North Africa, Afghanistan, Pakistan (MENAP) and the Caucasus and Central Asia (CCA). The report’s findings and indicators are widely used as a benchmark for future economic projections and set the tone for growth, trade and investment.
The full report can be accessed here
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