Middle Eastern and North African economies coping well with global crisis: IMF

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The International Monetary Fund (IMF) today said that economic growth in the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region is projected to decline from 5.7 per cent in 2008 to 2.6 per cent in 2009.

Releasing the IMF's 'May 2009 Economic Outlook for the Middle East and Central Asia' today at the Dubai International Financial Centre (DIFC), Masood Ahmed, Director of IMF's Middle East and Central Asia Department, said: "The Middle East and North Africa will be negatively affected by the current global economic crisis, but it is likely to fare better than many others. This is in part due to prudent financial and economic management, and in part to the fact that oil exporters in the region can draw upon their large reserves to cushion the impact of the global slowdown for their own economies and for the economies of their neighboring countries with whom they have growing economic links."

Ahmed said the global crisis is affecting the MENAP region in three indirect ways. "The sharp drop in oil prices is shrinking revenues for oil exporters as well as import costs for oil importers; the contraction in global demand, trade, and related activity is lowering exports, tourism, and remittances; and the tightening of international credit markets and lower investor appetite for risk, is slowing down capital inflows, depressing local asset prices, and reducing investment," he added.

The IMF presentation was mainly focused on the implications of the global economic financial crisis on the region, the measures adopted by the various countries in response to these shocks, and the IMF view on policies needed to mitigate the impact of the global slowdown.

Dr. Nasser Al Saidi, Chief Economist of the DIFC Authority said: "The Middle East and North Africa region has not been spared from the financial contagion effects of the global financial crisis or the real consequences resulting in lower commodity prices, shrinking trade and tourism flows and diminished foreign direct investment. The IMF’s assessment and outlook imply that our region is proving resilient and is likely to recover earlier than the more advanced countries. In the GCC, lower interest rates with monetary easing, accompanied by a counter-cyclical fiscal policy response based on sustained investment spending, along with related preemptive measures boosted liquidity, and supported the banking and financial sector. This sound policy response, vast financial reserves resulting from an accumulation of current account and fiscal surpluses, helped restore consumer and investor confidence and in turn have boosted the resilience of the economies in the region to the crisis. Structural change and economic diversification over the past decade along with the growing trade and investment links to Asia and emerging markets will underpin recovery over the coming quarters. However, our countries should consolidate and institutionalize the new economic policy measures and tools developed to respond to the crisis. We need to build policy making and implementation capacity, accelerate reforms and strengthen banking and financial market supervision and regulation. In particular, a policy priority should be to develop local currency money and financial markets to support greater economic integration and Gulf Monetary Union. We should not miss the historical opportunity available to us to confirm the new position of the GCC countries in the new global financial architecture."

The IMF presentation was followed by a panel discussion and a Q&A session on the outlook for the region involving other senior economists and analysts from the region. with a focus on economic and financial developments in Saudi Arabia, Kuwait and the UAE.  The panel discussion was chaired by Dr. Nasser Al Saidi.