Oil importing countries in the region will continue to see external and domestic economic pressures in 2012, a top International Monetary Fund (IMF) official said.
Masood Ahmed, director of the IMF’s Middle East and Central Asia Department, explained that external pressures include high commodity prices and the slow growth of these countries’ traditional markets, particularly Europe, in addition to increasing financing costs due to financial markets risk aversion policies.
Domestically, oil importing countries are seeing continued social demands for spending, the IMF official said. “With pressures from outside and increasing demands for spending the fiscal situation for a number of these countries in the region will be under strains.”
He highlighted the need to ensure that there is adequate financing for these countries, particularly those going into political transition, for the next 15 months, adding estimated external financing needs are around $50 billion.
Due to current debt risks in the world, capital markets will likely prefer to provide only a small part of these funds and what they offer will be at a higher cost, Ahmed indicated.
“The IMF is ready to do its part as it could allocate about $35 billion to the region’s oil importers if they were to request help,” he remarked at a meeting with journalists from the region on the sidelines of the annual meetings of the IMF and the World Bank, which started on Friday in Washington.
Alongside financing, Ahmed said market access for the exports of oil importing countries will be a key point to improve their economies in the medium term.
However, the IMF official stated that as the world is willing to help these countries overcome financial difficulties, the countries themselves have to take some difficult fiscal choices in the way they design their additional spending measures to maximise short-term impact while limiting long-term social liability.
According to the recently released IMF’s World Economic Outlook report, the Middle East and North Africa (MENA) economic growth rate is expected to be around 4 per cent this year and 3.6 per cent next year.
The report projected the economies of oil exporting countries in MENA to grow by 4.9 per cent in 2011, but to see slower growth pace next year at 3.9 per cent.
The strong economic performance of oil exporting countries is currently one of the strengths of the MENA region, as these countries continue to benefit from high oil prices and their increasing production of oil to compensate the shortfall in Libya, according to Ahmed, who said the additional financial resources of oil producers, which have been spent on the non-oil parts of their economies, will have a spillover benefit to neighbouring countries in terms of flow of investments and remittances as well as direct financial assistance.