MENA Economic Growth to Outperform World, but Remain Two-folded: IMF

The International Monetary Fund (IMF) said Sunday the economic growth in the Middle East and North Africa (MENA) will outperform the global growth in 2012, but will witness a gap between Arab oil exporters and importers.

Speaking at the regional economic outlook session in Dubai, Masood Ahmed, the IMF director for the Middle East and Central Asia, said the MENA region will grow by 5.1 percent in 2012 (up from 3.3 percent in 2011) "before moderating in 2013."

Reaching 5.1 percent, MENA growth for the current year will outperform the world growth, which Ahmed said will reach 3.3 percent in 2012. However, the region witnesses a significant growth gap between Arab oil exporting nations, which the IMF expects to grow by 6.6 percent this year, and oil importing states on the other hand, which Ahmed said will register "just above 2 percent."

The IMF expects MENA oil importers' growth to recover to about 3.25 percent next year amid a rebound in tourism, trade and foreign direct investment in the MENA oil importing bloc. However, this growth would not be sufficient to seriously address unemployment and socially inclusive growth, said Ahmed.

While oil-exporting nations benefitted from high oil prices and production levels this year, MENA oil importers are suffering from a difficult external environment, such as negative spillover effects from the euro zone debt crisis and domestic disruptions. The latter phenomenon applied mostly to Arab oil-importing states where governments were toppled in the wake of the Arab unrest and which are now in a state of transition such as Tunisia, Egypt, or Yemen, said Ahmed, who added that foreign direct investment remained subdued in these countries.

The government in Egypt seeks a 4.8-billion-U.S. dollar loan. It said it hoped to secure the loan before the end of year. Ahmed commented on these negotiations that he was optimistic but that Egypt had to provide a "transparent spending plan" which would outline how exactly the proceeds of the loan would be used, in order to have a broad public support.

Although traveler figures picked up in Tunisia and Egypt this year, their tourism sectors were still operating below levels in 2010 before the unrest broke out in early 2011, said Ahmed.

Nevertheless, oil exporters also face challenges. The six member countries of the Gulf Cooperation Council (GCC) -- Saudi Arabia, Kuwait, Bahrain, Qatar, United Arab Emirates and Oman -- will see a decline in real GDP growth from 7.5 percent in 2011 down to 3.24 percent in 2013 "as oil production reached a plateau, " said the IMF director for MENA and Central Asia region.

The oil exporters' combined current account surplus will remain near its historic high at 400 billion dollars in 2012. For 2012 to 2013, the IMF expects that oil prices (Brent) will continue to trade above 100 barrels per barrel.

The GCC states implemented expansionary fiscal policies in order to create jobs for GCC nationals. Saudi Arabia, for example, has an employment rate of over 12 percent. However, Ahmed pointed out that the GCC states were facing the threat of rising fiscal vulnerability. "With oil exporters increasing their fiscal spending, the fiscal breakeven price moves upwards," said Ahmed. In the last four years, the fiscal break-even price for Arab oil exports increased by 40 dollars. The United Arab Emirates, for example, needs in 2012 an oil price of 80 dollars per barrel, up from an average price of 55 dollars in the period from 2008 to 2012.

Earlier in the month, the IMF warned the GCC surpluses could turn into deficits in 2017 if they were not trimming their spending policies.

The IMF regional director also noted positive developments for the entire region. Ahmed said the sharp increase in bilateral trade between the MENA region and Asia, and China in particular, added value to both Arab oil importers and exporters.

While in the last decade these trade relations were mostly commodity-based, "we see an encouraging shift towards non-oil trade and logistics in Sino-Arabian terms of trade, said Ahemd, adding that the IMF expects the look-East policy will have a positive impact for MENA growth as a whole over the next five to 10 years.