IMF: Mideast, N. Africa economies rebound

Oil exporters projected to pull ahead by increasing capital inflows and oil prices, despite worries about Europe’s debt crisis.

May 25, 2010 23:45
2 minute read.
In a photo provided by the Departmeent of Defense,

gates in abu dhabi 58. (photo credit: ASSOCIATED PRESS)


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CAIRO – Mideast and North African oil exporters will see a “strong recovery” in 2010, pulled ahead by increasing capital inflows and oil prices, the International Monetary Fund said Tuesday, even as it lowered its projection for the countries’ growth amid a sharp drop in oil prices and worries about Europe’s debt crisis.

In a report on the region, the IMF also warned that concerns remained about the banking sector in these nations, mainly stemming from slow credit growth.

The IMF said MENA oil exporters were projected to see a combined growth rate of 4.2 percent, down slightly from the 4.5% growth it had projected last month in its World Economic Outlook. Since that report’s release, crude prices have plummeted more than 20% amid concerns that Europe’s debt crisis could undercut the global economic recovery currently under way.

“Growth is gathering momentum in 2010, helped by the pickup in capital inflows and resurgence in domestic consumption,” IMF Middle East and Central Asia director Masood Ahmed said. “However, this positive perspective is clouded by some stress in the banking system and lethargic credit activity across the region.”

MENA exporters, which include OPEC nations Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Libya and Algeria, account for about 30% of the world’s supply of oil. But their economies were hard hit when the global economic meltdown battered oil prices. Crude only began to rebound last year.

The IMF said the combined current-account surplus of MENA oil exporters fell to $53 billion in 2009 from $362b. in 2008.

The drop came at a time when global credit markets were drying up, draining with them the sources of ready cash on which some of the countries had relied to fuel their growth.

The default worries that emerged last year linked to Dubai World, a conglomerate owned by the UAE sheikhdom of Dubai, offered one of the first and most compelling examples of the debt challenges confronting some Gulf nations.

While they enacted aggressive stimulus packages, their reliance on oil has left them vulnerable to volatility in the crude futures market.

The benchmark crude oil contract for July delivery fell below $68 a barrel Tuesday, dragged down by declining share prices and fears of weaker global economic growth.

That has put crude below the comfort zone of the Organization of the Petroleum Exporting Countries – the producer bloc that has, for over a year, resisted changing its official output quotas for fear that a drastic reduction in output to shore up prices could further jeopardize economic recovery efforts worldwide.

“The big picture for oil exporters is that after a difficult year, economic prospects of the region are now beginning to look brighter on a variety of fronts, but there are a couple of areas of policy challenges,” Ahmed said.

The report pointed to sluggish credit growth to the private sector, losses on nonperforming loans that have yet to be fully recognized, and the delicate balancing act of phasing out stimulus measures.

Beyond this year, the stimulus measures “should be gradually unwound to avoid additional fiscal pressures, in particular for countries that already have high levels of debt,” Ahmed said.

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