Modest recovery in oil prices is unlikely to improve growth prospects for Middle East oil exporting economies, with projected average growth hovering at 3.3 percent for 2016, according to the International Monetary Federation (IMF).
Most oil exporters continue to tighten fiscal policy in response to lower oil revenues and liquidity in the financial sector continues to decline. Meanwhile, many countries in the region also remain affected by geopolitical conflict, the IMF said in its latest World Economic Outlook.
However, there are substantial variations in growth prospects within the seven oil exporting Middle East and North Africa (MENA) economies examined in the report.
The largest economy, Saudi Arabia, is projected to grow at a modest 1.2 percent this year in the face of fiscal consolidation, before picking up to 2 percent next year.
The UAE’s economic growth is also expected to be modest at 2.3 percent, picking up marginally to 2.5 percent in 2017, while growth projections for Qatar and Kuwait are similar, at 2.6 percent and 2.5 percent respectively. 2017 forecasts for Qatar and Kuwait stand at 3.4 percent and 2.6 percent respectively, the IMF added.
Outside the GCC, growth prospects are more optimistic but they follow lower growth in the previous year. The IMF puts Iraq’s projected growth at 10.3 percent for 2016 based on higher than expected oil production this year.
The country saw negative growth of -2.4 percent in 2015, and, going into 2017 and beyond, growth is expected to be held back by continued security challenges and lower investment in the oil sector hampering production.
Iran’s outlook – 2.4 percent for 2016 – has been boosted by higher oil production this year following the repeal of sanctions, the IMF said. In 2015 growth was flat at 0.4 percent and it is expected to drop to 4.1 percent in 2017.
The IMF said growth dividends for Iran are likely to materialise only gradually with reintegration into global financial markets. The report said: “Recent reforms and lower oil prices have helped improve macroeconomic stability in the oil-importing countries of the region.
“Yet, growth remains fragile due to security concerns, social tensions, and lingering structural impediments. “Continued reform, progress, less fiscal drag, and gradual improvements in external demand are expected to support the recovery.”