The International Monetary Fund is the central bank of the world and also near to a world government in outlook and intent, so it is as much a political as an economic body. Thus its economic forecasts are often so coloured with political input that they become economical with the truth.
Consider the latest half-year report on this region. Egypt we are told saw its growth rate decline from 5.1 to 1.8 percent last year. Decline? They had a revolution and the biggest source of foreign income, tourism was decimated. If 2011 was not a recession in Egypt then elephants really can fly.
Oil boom
Still the general message from the IMF presentation in the Dubai International Financial Centre was pretty easy to grasp among the graphs. The Oil Exporting countries of the region are having a great time while The Oil Importers are not only paying high prices for oil but the true cost of the events of the Arab Spring.
The IMF now likes to talk instead of economies in transition and the Oil Exporters. The latter rank as perhaps among the most stable economies of the world, the others are at the other extreme.
Into what are these nations transforming? Will post-revolutionary regimes really be able to put bread on the table? Can they meet the aspirations that they have stirred in local populations?
It is all very well for these countries to plead nicely in economic forums for assistance from the Oil Exporters. DIFC chief economist Dr. Nasser Saidi argues cogently for an Arab Development Bank. But to ask regimes that do not want an Arab Spring transition in their own economies to support such action in others is a bit rich.
Reading between the lines the IMF half-year report seems to be concluding what is blindingly obvious. It is going to take much longer for the transition economies to sort themselves out, politically, socially and economically. Poverty, chaos and anarchy seem to be the interim result.
Downside risk
Meantime the Oil Exporters are having a ball. High oil prices and high oil revenues are set to continue. There is an increase in downside risk, something the IMF sees as its specialty. It is possible that the world sinks into a deep recession with low oil prices but not very likely.
Oil prices are well supported by supply and demand fundamentals and, not something central banks like to discuss much, all the money printing that is happening all over the world. After all it was money supply inflation that kept oil prices high in the late 1970s not the weak global economy.
Oil Importing countries of this region will struggle. One reason for the better than you might expect figures for GDP last year is the massive $200 billion being spent on fuel subsidies. That leaves a $50 billion hole in national accounts that will be increasingly hard to fill by borrowing.
For Oil Exporters the outlook for 2012 is ‘positive’ in a classic understatement from the IMF. Gross exchange reserves will top $1 trillion. True, public spending has shot up meaning that there is a high breakeven point for the oil price. But that is also a shot in the arm for domestic spending, tourism and real estate.
Libyan GDP will bounce back from the revolution with a 76.3 percent surge, followed by Iraq at 11.1 percent. Saudi Arabia, Qatar and Kuwait all come with six percent gains in GDP and the UAE 2.3 percent, a figure ArabianMoney will guarantee has to be revised upwards later. And the rosy picture rolls over into 2013.
