SINGAPORE, Asharq Al-Awsat – Rising oil revenues have bolstered economic growth in the Mideast, and the outlook remains good because oil prices are expected to stay high, according to the International Monetary Fund.
Economic growth in the region is projected at 6 percent this year, and is likely to moderate to roughly 5.5 percent in 2007, the Washington-based group said in a report on global economies ahead of its annual meeting in Singapore next week.
Growth in the non-oil sector is currently 8 percent, but most countries have been able to contain rising inflation with pegged exchange rates and open product and labour markets alongside low global inflation, the report said.
It said Saudi Arabia was correct to lift restrictions in equity markets for foreign investors.
“Reforms aimed at improving market liquidity and transparency will help to reduce asset price volatility that is not related to fundamentals,” the IMF said.
“The central policy challenge for the oil-exporting countries remains managing booming oil revenues,” the IMF said. It said most countries have used higher revenues to increase spending on infrastructure and programs to provide employment for burgeoning populations.
“At the current juncture, there seems ample scope for this build-up of spending, given high unemployment in many countries and still low inflation,” the report said. But it warned of the threat of overheating amid continued rapid credit growth.
The IMF urged countries to allow the “full pass-through” of higher global oil prices to end consumers to ensure budget sustainability and changes in energy consumption. It praised recent fuel prices increases in Jordan as the right move.
The IMF also said Egypt had an opportunity to use a favourable economic outlook to reduce its large fiscal deficit, setting the stage for a trend of declining public debt.