IMF Lowers Mideast Growth, Citing Conflict and Oil Supply Cuts
(Bloomberg) -- The International Monetary Fund lowered its economic-growth projections for the Middle East and North Africa, citing conflicts, geopolitical uncertainty and oil-production cuts.
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Growth this year is expected to be 2.1%, according to the Washington-based lender’s regional economic outlook published Thursday, down from a 2.7% estimate in April. The IMF slightly decreased its forecast for next year to 4%.
If ongoing conflicts persist or spread, there could be “lasting economic losses,” the IMF said in the report. “Economies implementing crucial structural reforms could face rising social discontent and political resistance, hindering policy execution and constraining growth.”
Last week, the IMF lowered its global growth forecast for next year to 3.2% and warned of worsening risks from wars and trade protectionism. The lender did credit central banks for taming inflation without sending nations into recession.
“The economy is recovering but in a high uncertainty environment,” Jihad Azour, the IMF’s director for the Middle East, North Africa and Central Asia, said in an interview.
He said the fighting between Israel and Iran-allied militant groups and the civil war in Sudan — the region’s worst conflicts — were having a “ripple effect.”
“Any escalation could have a larger implication on the region,” he said.
Another factor that may weigh on regional growth is the extension of production cuts by OPEC+, according to Azour. The oil exporters’ group includes Saudi Arabia, the United Arab Emirates and Iraq.
The alliance — led by the Saudis and Russia — may begin output increases in December, as it gradually revives supplies halted since 2022. But it has already delayed the restart, originally scheduled for October, amid weakening oil demand in China and swelling production among other countries.
Those cuts led the IMF to slash its growth projections for Saudi Arabia, the largest economy in the region, multiple times last year.
Still, “growth of the non-oil sector in the Gulf Cooperation Council has been resilient and has been driving the growth for the last couple of years,” said Azour, referring to the six-nation grouping.
Another worry for the IMF is the region’s inability to attract sufficient foreign direct investment, according to Azour, along with high levels of debt in mid-income economies.
He said economic uncertainty is set to remain elevated as long as regional wars continue.
“The uncertainty is extremely high and the impact of the uncertainty is differentiated,” said Azour, “For certain countries, those in conflict, what they need is immediate support and emergency assistance.”
Other states around the conflict zone including Egypt, Jordan and Iraq “need to be protective to preserve their macroeconomic stability,” he said.
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