The International Monetary Fund (IMF) has predicted that the Middle East and North Africa (MENA) region’s economy will experience a deceleration of growth, with a rate of 3.1% in 2023, as opposed to the 5.3% recorded in the previous year. This drop in growth can be attributed to a myriad of factors, including OPEC+ production cuts, global financial conditions, and tight macroeconomic policies that have created a complex and perplexing economic environment. Despite these challenges, the economies of the UAE and Saudi Arabia are expected to maintain their robust growth. However, the IMF has also warned of the potential for an escalation of the Ukraine war, which could trigger high volatility in the commodities market and amplify the risks of social unrest across the MENA region.
MENA Oil Exporters to Experience the Most Significant Decline in Growth
The deceleration of growth in the MENA region is expected to be felt most acutely by the MENA oil exporters. These countries will see the most substantial drop in growth, from 5.7% in the previous year to 3.1% in 2023. This is due to a focus on non-hydrocarbon activities, as they remain the main driver of growth in the region. Emerging markets in the MENA region are also predicted to experience a decline in growth, with a drop from 5.1% in the previous year to 3.4% in 2023. Meanwhile, low-income countries in the region are expected to experience only a modest growth rate of 1.3%. It is worth noting that these projections were made before the OPEC+ oil production cuts were announced, which could further complicate the economic outlook of the region.
IMF Recommendations for the MENA Region’s Economies
In light of the complex economic environment, the IMF has recommended that regional economies adopt policies that prioritize maintaining or regaining price stability through monetary policies, bolstering potential growth, enhancing resilience, inclusion, and building social safety nets through structured reforms. Moreover, the IMF has stressed the importance of bank supervisors ensuring that banks have governance and risk management that align with their risk profiles, including adequate capital adequacy and liquidity stress tests. These recommendations come amidst a perplexing and rapidly changing economic landscape that requires dynamic and flexible policies to respond to the emerging challenges.
Lowered Global Economic Growth Estimates Due to Geopolitics, Monetary Tightening, and Inflation
The IMF has also lowered its global economic growth estimate for this year by 0.1 percentage points to 2.8%, which is a reflection of the complex and challenging global economic environment. This estimate was revised due to geopolitical factors, monetary tightening, and inflation, which have created a high degree of uncertainty and unpredictability in the global economic landscape. Furthermore, the IMF has predicted that the global economy will grow by 3% in 2024, which is a 0.1 percentage point decline from the previous estimate, indicating that the global economy continues to face a burst of economic headwinds and volatility that pose significant challenges to its growth prospects.
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