The International Monetary Fund (IMF) just published its Regional Economic Outlook for the Middle East and warned against the slowing economic growth and the trade tensions which are affecting the Middle East economic situation and dimming its prospects for the future.
The report, which is published each spring by the IMF’s Middle East and Central Asia Department, highlights how the volatile oil prices are affecting certain countries while high public debt levels are affecting others.
The economic growth for the oil exporters is expected to fall to 0.4 percent in 2019 from 0.6 percent in 2018. This is primarily due to the expected Iranian economic contraction which will likely be caused by the renewal of economic sanctions by the United States. Oil-importing countries would grow 3.6 this year, a fall from 4.2 percent last year, though that figure is expected to bounce in the future.
The IMF also recommended that oil producers diversify their production and maintain their pace of fiscal adjustment in order to diminish their dependence on oil.
Social Tensions on the Rise
Besides highlighting the slowing economic growth in the MENA region, the IMF emphasized the growing social tensions which they believe poses difficulties for policymakers since they have to figure out how to ensure macroeconomic stability and face medium-term growth challenges.
The IMF’s Reported Social Unrest Index reached its highest level in some Middle East countries. The IMF attributes this to social unrest and the governments’ inability to deal with economic inequalities and social dissatisfaction. The index is measured taking into account the share of articles in major news sources that include key terms related to social unrest.
In order to deal with this situation successfully the IMF recommends that the struggling countries focus on promoting and implementing the right reforms that would stimulate the economic growth, specifically in the private sector.