GROWTH IN the Middle East will fall by 50 per cent this year, the International Monetary Fund (IMF) has forecast, as it encouraged countries in the region to boost government spending to stimulate their economies.
The economies of the world’s three biggest oil producers, Saudi Arabia, the United Arab Emirates and Kuwait, will contract as lower energy prices force production cuts and tighter credit availability squeezes the private sector, the Washington-based lender with 185 member nations said in its Regional Economic Outlook report.
Middle Eastern countries were hurt by the first simultaneous recession in six decades in the US, Japan and Germany as oil prices plummeted by about $90 a barrel from a record high in July of $147.47 a barrel and international banks stopped lending to local companies. The region’s oil importers have also been hit by falling foreign investment.
“Our basic point has been that you save for a rainy day,” Masood Ahmed, Middle East director for the IMF, said at a conference in Dubai. “It’s certainly raining.”
Saudi Arabia, the biggest Arab economy and world’s largest oil exporter, said it would have a 65 billion-riyal (€12.7 billion) deficit this year as the kingdom maintains fiscal spending to build infrastructure and create jobs.
The Saudi government plans to spend $400 billion (€293 billion) over the next five years to stimulate the economy.
For the region as a whole, gross domestic product is projected to grow 2.6 per cent this year, down from 5.7 per cent in 2008, the IMF said. Saudi Arabia will have a decline in economic growth of 0.9 per cent, compared with a 4.6 per cent increase last year.
The drop in oil prices has most directly affected the oil-exporting countries, whose oil revenues in 2009 will be less than half what they were in 2008, the IMF said.
The tightening of international credit markets and lower investor appetite for risk is affecting capital inflows, depressing asset prices and reducing investments in these countries. – (Bloomberg)
