Middle East economic forecast looks gloomy, Egypt bright spot: IMF

Economic growth in the MENA region looks gloomy, it is expected to be just 1.3% this year according to the International Monetary Fund recent World Economic Outlook.

That marks a sharp fall from the previous estimate of 2.5% made in October last year.

However, In Egypt, the return of its tourism sector has been as important as new taxes and reduced subsidies as a boost to government revenue. Egypt has made some difficult reforms — with a very heavy hand and a cost to human capital — setting an example to the region wary of public reaction to structural reform.

As conditions of Egypt’s IMF program, local fuel prices will be indexed to global ones and most energy subsidies will be eliminated by mid-2019. But Egypt has been rewarded already with praise from the World Bank and with its new status as the only country in the Middle East with higher expected growth in 2019 (at 5.5%) than its respective trend from 2011-2016.

For Egypt “The outlook is favorable, provided policies as agreed under the programme are implemented. The continued strengthening of tourism and construction, and rising production of natural gas are projected to raise GDP growth to 5.5 percent in 2018/19.” IMF report further read.

The projections on Middle East and North Africa on economic growth were announced during International Monetary Fund (IMF) and World Bank Group annual spring meetings which is held in this week in Washington.

On the other hand, Middle East and North Africa growth prospects are low, tied to low growth in the United States and Europe. There are areas of higher growth inside the region, notably in places where reforms are underway or the bounce back from war.

The IMF has lowered its projected growth rate for 17 of the 20 economies in the region, mostly due to a combination of slower oil sector growth in some countries and geopolitical tensions and civil strife in others. Oil exporters such as Iran, Iraq, Kuwait, Libya and Oman are among the worst affected.

The IMF now expects growth across the region’s oil exporters to be just 0.4% this year, compared to a prediction of 2% growth in October.

In an interim report released in January, the IMF had cut its growth forecast for Saudi Arabia from 2.4% to 1.8%. It is sticking with that number for the Saudi economy but it has now also cut its growth forecast for Algeria, Iraq, Kuwait, Qatar and the UAE – these countries are now expected to grow by 2.3-2.8% this year, compared to a previous range of 2.7-6.5%.

The outlook for Oman is even worse, with its growth forecast for this year cut from 5% in October to just 1.1% now, giving it the slowest growth rate of any country in the region other than the two economies in recession: Iran and Sudan.