The growth of the Middle East and North African nations is estimated downside facing threats of possible sharp downturn in global activity and further political unrest in the region, the International Monetary Fund said Wednesday.
In its twice-yearly report, Regional Economic Outlook for the Middle East and Central Asia, the IMF said the region's real GDP is expected to grow by 3.9 percent this year and 3.7 percent in 2012, compared with the 4.4 percent growth rate in 2010.
IMF expects the average real GDP growth for oil importing countries, including Egypt and Tunisia, to drop from 4.33 percent achieved in 2010 to below 2 percent in 2011. The recovery in 2012 is also expected to be weaker than previously anticipated, with the growth rate projected at just over 3 percent.
The report said that although the benefits of the anti- government protests in the Arab world are indisputable over the longer term, the political and economic transformations are advancing slowly and are expected to extend well into 2012. With global activity and confidence weakening, there is a marked increase in economic uncertainty in the region.
"The year ahead will be challenging for many countries, with continued political uncertainty, a deteriorating global economic outlook, and higher financing costs impeding a quick economic recovery," said Masood Ahmed, director of the IMF's Middle East and Central Asia Department.
The report highlighted the sizable declines in tourism and capital inflows as a cause for the weakening in external reserves for oil importers. Fiscal deficits are expected to widen by about 1.5 percent of GDP in 2011-2012.
This oil-importer group includes Afghanistan, Djibouti, Egypt, Jordan, Lebanon, Mauritania, Morocco, Pakistan, Syria, and Tunisia.
The oil-exporting countries, including Algeria, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, Sudan, the UAE and Yemen, benefited from continued high energy prices. Their real GDP growth is expected to pick up in 2011 to reach almost 5 percent, then fall back to about 4 percent in 2012, according to the report.
For the Gulf Cooperation Council (GCC) countries, who have stepped up production temporarily in response to higher oil prices and shortfalls in production from Libya, growth continues to be projected at more than 7 percent.
With increased fiscal budgetary room, many countries intensified their expenditures on investments and social programs and escalated their spending and support to the non-oil sector, which is projected to grow at 4.5 percent during 2011 to 2012.
But at the same time, downside risks clout the outlook, most notably a possible sharp downturn in global activity resulting from advanced economies' difficulties in effectively addressing their debt and fiscal challenges.
"A downturn in key emerging market trading partners, and further political unrest in the region, could also dampen growth prospect for the oil-exporting countries," the report said.
Nasser Saidi, chief economist at Dubai International Financial Centers, said reforms to ensure inclusive medium-term growth are needed in the region, thus enabling the establishment of strong institutions to stimulate private sector activity and avoid potential crowding-out. It will also open up greater access to economic opportunities and address chronically high unemployment, especially for youths.