IMF Raises GCC Growth to 7.8%
|April 29, 2011||Filled under Iraq Daily News|
DUBAI — The International Monetary Fund on Wednesday raised its 2011 projection for GCC growth to 7.8 per cent from 5.2 per cent, and said high oil prices would also boost the six-nation group’s current account surplus growth by 124 per cent to $304 billion.
The Washington-based fund said GCC’s growth would gain increased momentum from Qatar, growing at 20 per cent, and Saudi Arabia at 7.5 per cent. The UAE will grow by 3.3 per cent, the Fund said.
Overall, GCC’s nominal GDP is estimated to reach $1.402 billion in 2011 from $1.084 billion in 2010. UAE’s nominal GDP is estimated to reach $363.8 billion in 2011 from $301.9 billion in 2010.
Consumer price inflation in the GCC is forecast to soar by 5.3 per cent while its pace will be slower in the UAE at 4.5 per cent, the multilateral lender said in its Regional Economic Outlook released on Wednesday in Dubai.
In the Middle East and North Africa region, inflation was expected to increase to an average of 102 per cent as concerns about food security rise.
“Some governments, particularly in the GCC (Kuwait, Qatar, Saudi Arabia, the UAE), will need to carefully monitor the impact of expansionary fiscal spending on aggregate demand to prevent a resurgence of inflationary pressures,” it said.
The IMF gave a separate projection for the GCC non-oil growth and said it is set to accelerate by more than one per cent to 5.3 per cent in 2011.
The IMF’s overall economic growth forecast for GCC — up from five per cent in 2010 — is far rosier than the outlook for the rest of the Middle East region as “oil production expands to stabilise global oil supply in the face of supply disruptions elsewhere.”
Average real gross domestic product, or GDP growth, for Middle East oil exporters in general, excluding Libya, is projected to reach 4.9 per cent in 2011 compared with 3.5 per cent in 2010 and its previous estimate of 4.5 per cent, the IMF said. For most oil exporters, the expected increase in oil prices—from $79 per barrel to $107 per barrel— and production volumes will lead to higher growth in 2011 and stronger ﬁscal and external balances, the report said.
While current account surplus of oil exporters in the Middle East is estimated to increase from $172 billion to $378 billion (excluding Libya), the GCC region alone will account for $304 billion in current account surplus in 2011, up from $136 billion in 2010, reflecting an increase of 124 per cent.
“The changes in motion in the Middle East and North Africa are historic. Over time, they could give a boost to the economies in the region by setting a more inclusive growth agenda, improving governance, and providing greater and more equal opportunity for its young and growing population,” Masood Ahmed, Director of the IMF’s Middle East and Central Asia Department, said. He was speaking at the launch conference of the report.
“However, the near-term outlook is challenging, and the immediate priority for oil-importing countries in particular is to maintain social cohesion and macroeconomic stability in the face of multiple pressures,” he added.
Two developments mark the IMF’s outlook for the region: unrest in parts of the Arab world and the surge in global fuel and food prices. As a result, the near-term economic outlook is subject to unusually large uncertainties stemming from the fluid political and security situation in a number of countries.
“Growth is likely to be uneven in 2011, but the GCC as a group is racing ahead. Bahrain, Iran, Libya, Sudan, and Yemen are likely to be negatively affected but the rest are expected to grow well above trend,” Ahmed said.
“We are in the midst of a period of momentous change, of risk and uncertainty but also of promise and opportunity. Recent events have uncovered demographic, political, governance and economic vulnerabilities in a number of MENA countries,” said Dr Nasser Saidi, Chief Economist and Head of External Relations at DIFC.
He said the recent surge in inflation has exacerbated these vulnerabilities. “Economic policy should address these vulnerabilities through structural reforms aiming at raising growth rates through more inclusive growth with greater “pull up” effects, with job creation and higher productivity growth based on a growing role for the private sector, including through participation in infrastructure and development projects. We have the natural and financial resources to implement reforms and improve governance.”
Saidi said higher energy prices would allow the GCC countries to play a key role in greater regional integration and as an engine of growth for the non-oil MENA countries. “We will need to ensure that the strides made by the region’s governments in recent years towards economic liberalisation, diversification and integration are not rolled back for short-term popular gains.”
The IMF’s outlook for oil importers is mixed. For Egypt and Tunisia, this year’s growth is projected to be 2½-4 percentage points lower than in 2010, reflecting disruptions to economic activity during the protests, a decline in tourism, and lower investment.
Political uncertainty is also weighing on Lebanon’s economy, and growth in Pakistan is still held back by the effects of last year’s floods. In most other countries, however, growth has continued to pick up, with Jordan, Mauritania, and Morocco benefiting from high prices for phosphate and iron ore.
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