The International Monetary Fund said capital inflows to the Middle East and Central Asian countries helped to finance current account and fiscal deficits, allowing for more gradual policy adjustments.
In the Regional Economic Outlook: Middle East, North Africa, Afghanistan and Pakistan, released Monday, the lender said the governments need to seize the benefits of capital inflows mitigating risks emanating from the global financial market volatility. However, the fund noted that the region is twice as sensitive to global risk compared to other emerging market economies.
The IMF said ensuring fiscal sustainability, utilizing macro-prudential tools, allowing for more flexible exchange rates can help contain the risks from capital flow volatility.
According to the lender, impact on economic growth in the region from global headwinds remained muted so far. Nonetheless, growth remains too low to meet the needs of growing populations, and risks to the outlook have increased.
Oil exporters of Middle East, North Africa, Afghanistan, and Pakistan, or MENAP, are forecast to shrink 1.3 percent this year before expanding 2.1 percent in 2020. Lower oil prices are weighing on growth and macroeconomic balances.
Meanwhile, oil importers of the region are expected to grow 3.6 percent this year and 3.7 percent in 2020. Lebanon is forecast to grow just 0.2 percent this year and 0.9 percent in 2020.
The lender said elevated public debt is holding down growth and creating fiscal strains in MENAP oil importers.
Growth in Gulf Cooperation Council (GCC) countries was projected to be 0.7 percent in 2019, down from 2 percent in 2018. However, growth in 2020 was forecast to rebound to 2.5 percent.
Iran’s economy has entered a steep recession. Output is expected to shrink by 9.5 percent this year as US sanctions have continued to tighten. At the same time, other non-GCC oil exporters show a mixed growth outlook.
Real GDP growth is expected to average about 2.3 percent for non-GCC oil exporters during 2021-24.
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