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IMF / OIL PRICES WARNING
STORY: IMF / OIL PRICES WARNING
TRT: 02:15
SOURCE: IMF
RESTRICTIONS: NONE
LANGUAGE: ENGLISH / NATS
DATELINE: 21 OCTOBER 2015, WASHINGTON DC, USA /FILE
FILE – DATE AND LOCATION UNKNOWN (MIDDLE EAST)
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21 OCTOBER 2015, WASHINGTON DC, USA
2.\tSOUNDBITE (English) Masood Ahmed, Director of the Middle East and Central Asia Department, IMF:
"Most experts believe that low oil prices will be with us for many years to come. This means that the countries of the GCC and other countries like Iran, Algeria, and Iraq will need to adjust, cut back their spending more consistent with a lower level of oil revenues. Fortunately, many of these countries have built up financial savings over the past decade which will enable to do this gradually and in a deliberate way. Even so, the process is going to be a difficult one and it will put some downward pressure on the level of economic activity in these countries. This is all the more reason to facilitate and encourage the private sector in these countries to expand and create jobs, especially for young people."
FILE – DATE AND LOCATION UNKNOWN (MIDDLE EAST)
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21\tOCTOBER 2015, WASHINGTON DC, USA
4.\tSOUNDBITE (ENGLISH), Masood Ahmed, Director of the Middle East and Central Asia Department, IMF:
"The humanitarian costs of conflicts is both horrendous and are well documented. But there is also an economic cost. Hosting over two million refugees is a very big cost for small countries like Jordan or Lebanon. And now countries beyond the region are beginning to see inflows of refugees. Finding a solution to the refugee crisis requires a concerted international effort with many dimensions but must include humanitarian assistance as well as financial support for the countries in the region that are the most impacted. And once the conflicts stop, then they will need major effort to rebuild these economies and their infrastructure, and thus to contribute to improving the lives of ordinary people throughout the Middle East and North Africa."
FILE – DATE AND LOCATION UNKNOWN (MIDDLE EAST)
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The Middle East, North Africa, Afghanistan, and Pakistan region as a whole continues to see subdued growth, owing to spreading and deepening regional conflicts as well as lower oil prices, the IMF said in its latest regional assessment.
The IMF’s Regional Economic Outlook for the Middle East and Central Asia, released on October 21, projects that growth this year will be modest, at 2½ percent. Economic activity could pick up to 4 percent next year, however, if regional conflicts ease and sanctions on Iran are alleviated, the report said.
The region’s current circumstances make economic diversification away from oil all the more urgent, as low oil prices are likely to persist, the report emphasizes.
Two key factors are shaping the region’s outlook, IMF Middle East and Central Asia Department Director Masood Ahmed said.
First, conflicts are both spreading and deepening, exacting a horrendous human toll on the region as well as a significant impact on economic activity. Syria’s GDP has declined by 45-60 percent of GDP since the start of the conflict, while Yemen’s has dropped by nearly 30 percent in the past year.
These conflicts have given rise to large numbers of displaced people and refugees, on a scale not seen since the early 1990s. “The humanitarian costs of conflicts is both horrendous and are well documented. But there is also an economic cost. Hosting over two million refugees is a very big cost for small countries like Jordan or Lebanon. And now countries beyond the region are beginning to see inflows of refugees,” Ahmed said. Also, the conflicts are having other cross-border spillover effects, including setbacks to trade and tourism, worsening security, and deteriorating investor confidence.
Ahmed called for a “concerted effort” by the international community to help refugees and stabilize the affected countries, while providing additional financing to countries hosting large numbers of refugees.
“Finding a solution to the refugee crisis requires a concerted international effort with many dimensions but must include humanitarian assistance as well as financial support for the countries in the region that are the most impacted. And once the conflicts stop, then they will need major effort to rebuild these economies and their infrastructure, and thus to contribute to improving the lives of ordinary people throughout the Middle East and North Africa,” he added.
The second factor shaping the region’s outlook is the slump in oil prices. Ahmed noted “Most experts believe that low oil prices will be with us for many years to come. This means that the countries of the GCC and other countries like Iran, Algeria, and Iraq will need to adjust, cut back their spending more consistent with a lower level of oil revenues.
For the region’s oil exporters, the fall in prices has led to large export revenue losses, amounting to a staggering $360 billion this year alone. While many countries are drawing on their fiscal cushions and are starting to consolidate their budget positions, fiscal deficits are still expected to average nearly 13 percent in oil-exporting countries this year.
Over the medium term, putting fiscal positions on a stronger footing will require efforts to streamline spending, reform energy pricing, and broaden non-oil revenue sources.
“Fortunately, many of these countries have built up financial savings over the past decade which will enable to do this gradually and in a deliberate way. Even so, the process is going to be a difficult one and it will put some downward pressure on the level of economic activity in these countries. This is all the more reason to facilitate and encourage the private sector in these countries to expand and create jobs, especially for young people,” Ahmed emphasized.
The region’s oil-importing countries should experience a pickup in growth averaging about 4 percent in 2015-16, the report said. Lower oil prices have been a boon, and progress in implementing reforms, advancing political transitions, and improving euro area growth have also played important roles. But the picture is not universally rosy, as some oil-importing countries (such as Lebanon, Jordan, and Tunisia) are being profoundly impacted by intensifying regional conflicts, which are more than offsetting the benefits from lower oil prices.
Moreover, there are risks to the outlook for this group. Slower growth in the Gulf Cooperation Council countries could lead to lower remittances; borrowing costs—and risk aversion—are likely to increase as liquidity tightens in global and regional markets, while the likely slowdown in emerging markets could impact exports.
There are a number of steps oil-importing countries could take to seize this moment of lower oil prices and strengthen their economies. “Lifting economic prospects in a sustainable and inclusive manner will require raising public investment and implementing structural reforms to fuel private sector-led growth, especially in the areas of governance, the business climate, labor markets, and access to finance,” the report said.
Finally, regarding developments surrounding the Islamic Republic of Iran, Ahmed said that “With the easing of international sanctions, the country’s economic prospects have improved substantially and, through increased trade and investment, benefits are expected to flow to its economic partners as well. The country’s growth could reach 4 percent in the medium term, or even higher if the easing of sanctions is accompanied by domestic economic reforms to ensure macroeconomic stability and promote inclusive growth.”
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