Monday, Feb 09, 2009
Gulf News Dubai: Economic growth of Gulf countries is set to slow by almost half to 3.5 per cent this year as the Middle East earns about $300 billion less from crude oil exports, the International Monetary Fund (IMF) said yesterday.
The IMF expects the region's oil exporters to grow at 3.6 per cent this year, down from 6.8 per cent in 2008.
Speaking in Dubai yesterday, Masoud Ahmad, director of the IMF's Middle East and Central Asia Department, said: "The decline in oil prices and Opec production cuts are projected to reduce oil export receipts by almost 50 per cent in 2009. This implies a loss of government revenue to the tune of $300 billion compared to 2008. Nevertheless, most governments - especially those in the GCC - have so far indicated that they will maintain their spending and investment plans."
According to the IMF forecast, Gulf countries are likely to post fiscal deficits amounting to 3.1 per cent of gross domestic product, compared with surpluses of 22.8 per cent of GDP in 2008.
Continued investment spending by Middle Eastern oil exporters is cushioning the impact of the global financial crisis on the entire region.
Discussing the economic outlook for the economies of the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) at the Dubai International Financial Centre, the IMF regional director said that the impact in terms of growth is being seen but it is more muted, thanks also to a stronger starting position in some countries.
"As a result sharp decline in oil prices, oil exporters' current account surplus of around $400 billion in 2008 is expected to turn into a deficit of $30 billion in 2009. For most countries, this deterioration is from a position of significant strength, and thus can comfortably be sustained by the large stock of reserves," Ahmad said.
"Thus, by continuing to spend, oil-exporting countries are contributing substantially to supporting global demand and are acting as stabilisers during the global downturn" he added.
Emerging markets and developing countries in the region are projected to slow to 3.6 per cent in 2009, from 6.3 per cent in 2008. The global slowdown will clearly have a significant impact on growth through lower exports, tourism, remittances, and higher cost of credit. However, spending by oil exporters will soften this impact on countries that have strong trade and investment links with them, the IMF said.
"Because of the relatively high public debt ratios and the much more difficult financing outlook, the scope for counter-cyclical policies is limited for most of the emerging markets."
Acknowledging that the global economy is going through its most severe economic crisis since the Great Depression with global growth projected to be only 0.5 per cent during 2009 the IMF official said the countries in the region face the risk of lower spending.
"If asset price corrections deepen and the impact of asset price corrections feed through to corporate and, ultimately, bank balance sheets, some financial institutions may be under stress," Ahmad said.
Dubai Gulf countries facing a significant slowdown in their economic growth in 2009 should keep up their fiscal spending using their accumulated surpluses while keeping the financial system liquid through monetary policy, according to leading economists.
Economists participating at a panel discussion in Dubai International Financial Centre following a presentation on Implications of Recent Global Economic Developments on the Outlook for the Region by the International Monetary Fund, said the extent of the slowdown would depend on the fiscal response in the region's oil-exporting countries.
"As long as oil exporters in the region maintain their spending and investment plans, the impact of the global slowdown on their own growth, and on the prospects for the region, will be partly cushioned," Masoud Ahmad, Director Middle East and Central Asia Department of the IMF, said.
"Economies in the Middle East and North Africa have suffered from financial contagion effects and from the impact of the global growth slowdown on oil prices. However, the policy response of the authorities, the cushion of accumulated international reserves and sustained government investment spending has added to the resilience of the economies to the global economic and financial crisis," said Dr. Nasser Saidi, Chief Economist of the DIFC Authority, said.
Participating in the discussion, economists with leading investment banks and Dubai government called for proactive steps from government agencies, private sector and financial institutions to deal with the situation. "Effective communication and building confidence is key to the success of any recovery initiative. The private sector needs to be effectively engaged," Tim Fox, Chief Economist of Emirates National Bank, said.
Economists in general agreed that the region is not facing any systemic risk. However, urged policy makers to engage in contra cyclical measures to boost spending and liquidity in the economy.
© Gulf News 2009. All rights reserved.
Gulf News Dubai: Economic growth of Gulf countries is set to slow by almost half to 3.5 per cent this year as the Middle East earns about $300 billion less from crude oil exports, the International Monetary Fund (IMF) said yesterday.
The IMF expects the region's oil exporters to grow at 3.6 per cent this year, down from 6.8 per cent in 2008.
Speaking in Dubai yesterday, Masoud Ahmad, director of the IMF's Middle East and Central Asia Department, said: "The decline in oil prices and Opec production cuts are projected to reduce oil export receipts by almost 50 per cent in 2009. This implies a loss of government revenue to the tune of $300 billion compared to 2008. Nevertheless, most governments - especially those in the GCC - have so far indicated that they will maintain their spending and investment plans."
According to the IMF forecast, Gulf countries are likely to post fiscal deficits amounting to 3.1 per cent of gross domestic product, compared with surpluses of 22.8 per cent of GDP in 2008.
Continued investment spending by Middle Eastern oil exporters is cushioning the impact of the global financial crisis on the entire region.
Discussing the economic outlook for the economies of the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) at the Dubai International Financial Centre, the IMF regional director said that the impact in terms of growth is being seen but it is more muted, thanks also to a stronger starting position in some countries.
"As a result sharp decline in oil prices, oil exporters' current account surplus of around $400 billion in 2008 is expected to turn into a deficit of $30 billion in 2009. For most countries, this deterioration is from a position of significant strength, and thus can comfortably be sustained by the large stock of reserves," Ahmad said.
"Thus, by continuing to spend, oil-exporting countries are contributing substantially to supporting global demand and are acting as stabilisers during the global downturn" he added.
Emerging markets and developing countries in the region are projected to slow to 3.6 per cent in 2009, from 6.3 per cent in 2008. The global slowdown will clearly have a significant impact on growth through lower exports, tourism, remittances, and higher cost of credit. However, spending by oil exporters will soften this impact on countries that have strong trade and investment links with them, the IMF said.
"Because of the relatively high public debt ratios and the much more difficult financing outlook, the scope for counter-cyclical policies is limited for most of the emerging markets."
Acknowledging that the global economy is going through its most severe economic crisis since the Great Depression with global growth projected to be only 0.5 per cent during 2009 the IMF official said the countries in the region face the risk of lower spending.
"If asset price corrections deepen and the impact of asset price corrections feed through to corporate and, ultimately, bank balance sheets, some financial institutions may be under stress," Ahmad said.
Dubai Gulf countries facing a significant slowdown in their economic growth in 2009 should keep up their fiscal spending using their accumulated surpluses while keeping the financial system liquid through monetary policy, according to leading economists.
Economists participating at a panel discussion in Dubai International Financial Centre following a presentation on Implications of Recent Global Economic Developments on the Outlook for the Region by the International Monetary Fund, said the extent of the slowdown would depend on the fiscal response in the region's oil-exporting countries.
"As long as oil exporters in the region maintain their spending and investment plans, the impact of the global slowdown on their own growth, and on the prospects for the region, will be partly cushioned," Masoud Ahmad, Director Middle East and Central Asia Department of the IMF, said.
"Economies in the Middle East and North Africa have suffered from financial contagion effects and from the impact of the global growth slowdown on oil prices. However, the policy response of the authorities, the cushion of accumulated international reserves and sustained government investment spending has added to the resilience of the economies to the global economic and financial crisis," said Dr. Nasser Saidi, Chief Economist of the DIFC Authority, said.
Participating in the discussion, economists with leading investment banks and Dubai government called for proactive steps from government agencies, private sector and financial institutions to deal with the situation. "Effective communication and building confidence is key to the success of any recovery initiative. The private sector needs to be effectively engaged," Tim Fox, Chief Economist of Emirates National Bank, said.
Economists in general agreed that the region is not facing any systemic risk. However, urged policy makers to engage in contra cyclical measures to boost spending and liquidity in the economy.
© Gulf News 2009. All rights reserved.
