DUBAI (Reuters) – The Middle East and North Africa’s economic growth is recovering robustly, the International Monetary Fund said on Sunday.
The region’s gross domestic product should expand by 4.2 percent this year, unchanged from May’s projection, after 2.3 percent in 2009 the IMF said in its regional economic report for the MENAP region, which also includes Afghanistan and Pakistan.
“We expect most countries in the region to grow faster in 2010 and 2011 than in 2009,” said Masood Ahmed, director of the IMF’s Middle East and Central Asia Department.
GDP growth is projected at 4.8 percent in 2011, still short of 5.7 percent seen ahead of the 2008 global credit crunch.
For the MENAP oil exporters, economic activity is picking up considerably, the IMF said, adding that crude oil production was projected to grow to 25 million barrels per day in 2010 and 26 million in 2011 because of a pick-up in global demand.
The rise in oil prices by 23 percent in 2010 and more than 3 percent in 2011 would lead to a marked turnaround in external balances, the global lender said.
Oil prices stood at $81.69 per barrel on Friday, lifted by positive German business data, French strikes and a volatile dollar index.
The combined current account surplus of the MENAP oil exporting nations is projected to rise by around $80 billion in 2009-2011 on current oil price expectations, the IMF said, of which almost $50 billion is accounted for by six Gulf Cooperation Council countries (GCC).
The IMF expects Saudi Arabia’s GDP growth of 3.4 percent in 2010 and 4.5 percent next year, and for the United Arab Emirates to grow by 2.4 percent and 3.2 percent respectively, repeating forecasts from its World Economic Outlook earlier this month.
Non-oil activity in crude-exporting countries is set to pick up, although more gradually, with lacklustre private demand offset by supportive policies, the IMF said.
“In many countries, accommodative fiscal and monetary policies will continue to be appropriate over the coming year, but with a closer eye on emerging inflationary pressures,” the IMF said.
“… some, including Saudi Arabia, are seeing inflation picking up, which may call for a tempering of stimulus in 2011,” it said, adding the Saudi stimulus would start to be unwound with a 5 percentage point cut in the non-oil primary deficit.
Flexibility of monetary policy is limited in most Gulf Arab countries by their currency pegs to the dollar, which makes government spending policies a key tool to steer economies of the GCC, the world’s top oil exporting region.
“The challenge for monetary policy is to balance the need to support a revival of credit growth while mitigating a potential resurgence of inflation,” the fund said.
Inflation in Saudi Arabia, the biggest Arab economy, climbed to an 18-month high of 6.1 percent in August, mainly on rising food and housing costs, factors outside the central bank’s reach.
In the United Arab Emirates, its debt-laden member Dubai faces short-term challenges, while neighbouring Abu Dhabi has substantial fiscal buffers, the IMF said.
“In the absence of additional financing for Dubai from Abu Dhabi, the United Arab Emirates’ non-oil primary deficit is projected to decline by about 12 percentage points of non-oil GDP over 2010-11,” it said.
The IMF also said that banking system development in oil exporting countries required continued attention with nonperforming loans remaining elevated in a number of countries, urging to strengthen regulatory frameworks and supervision.