However, the current account surpluses would significantly grow in the course of next five years to a range between $600-1000 billion, said Masood Ahmed, Director of IMF's Middle East and Central Asia department, while speaking to reporters after the 'World in 2010: Building a New World Order' conference.

Talking about the economic growth of the oil-rich region, Ahmed said that the GCC would post a non-oil growth of 3 per cent this year, only to better next year at 4.5 per cent.

The IMF official was hopeful that a part of GCC's current account surpluses would be invested in the global economies through the Sovereign Wealth Funds, which have emerged as long-term players. The director for Middle East at IMF feared the risk of assets price bubble, as investors are seen returning to the emerging markets in search of better yields.

"The central banks and other regulators have learnt from the crisis that the price to dealing with the asset price bubble turned out to be high," Ahmed said. Sharing his views at a session on 'The Changing Face of Capitalism,' the IMF director said that global economic recovery over the next two years would be weak, with emerging markets likely to carve out a greater role for themselves in global governance as they lead the recovery process.

"If you compare 2010 and possibly even 2011 to the period of 2007 and 2008, overall economic recovery will be pretty weak," Masood Ahmed said.

"It will seem weak, both in terms of the pace in which output will pick up, and in terms of unemployment," Ahmed said.

Emerging markets -- which are expected to contribute about two-third's of the world's growth next year -- should gain stronger institutional decision-making powers in informal, policy advisory groupings such as the Group of Twenty, he said.

"The role and importance of emerging markets is changing in a qualitative and irrevocable way," he said, adding that developing nations will increasingly get a bigger say in institutional decision-making.

He said that the IMF meetings last month at Istanbul agreed to give five per cent more representation to underrepresented emerging economies and developing nations, to have a better say in the formulation of financial policies.

"In the next couple of years, I think you will see a shift in the voting structure of the IMF," Ahmed said, adding that a shift in focus to emerging markets "also means that an institution like the IMF,  where all countries are members, could be a way for smaller countries that are not members of the G-20, to have their perspective fed in."

The oil-exporting nations of the Middle East, which will see their recovery pick up as oil prices rebound, will contribute to the global recovery process and global institutions "need to think how best the perspective of the region has to be fed into these debates."

"People here [in the Middle East] are active players because of oil surpluses that will be invested in and out the region." Saudi Arabia has a key role as a member of the G20, he said.

By Haseeb Haider

© Khaleej Times 2009

 

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