IMF says Oil Producing Countries in MENAP Could Benefit from Rising Crude Prices
Last updated on December 3rd, 2018
A latest outlook from International Monetary Fund (IMF) says that the major oil producing countries in Middle East and its neighbors might benefit from higher crude prices in 2019. However, there are several uncertainties in the region.
The latest regional economic outlook by IMF for the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region was published this week. It warns that “multiple and intertwined risks cloud the outlook of the MENAP region.”
“These include a faster-than-anticipated tightening of global financial conditions, escalating trade tensions that could affect global growth and hurt key MENAP trading partners, geopolitical strains, and spillovers from regional conflicts,” the report said.
IMF said that these risks could prompt deterioration in financial market sentiment and greater financial market unpredictability, “aggravating the financing challenges for countries with high levels of debt or large refinancing needs.”
Traditionally, the Oil producing countries in the Middle East have majorly relied on oil exports for generating government revenues. However, the instability in oil markets and imbalances in the demand and supply, has forced several countries, mainly in the Gulf, to diversify their economies away from oil and create employment in other sectors of the economy.
IMF has also encouraged countries to commit to further reforms, in its latest summary on the MENAP region’s outlook. It said, “The outlook and the rising risks underscore the need to intensify efforts to raise growth to levels that generate enough jobs for the benefit of all. In this context, countries should expand access to finance, strengthen governance, improve education outcomes, and enhance labor market flexibility, particularly in the Gulf Cooperation Council (GCC).”
The Fund also said that in order to ensure the future fiscal adjustment to be growth-friendly and equitable, the countries need to both prioritize expenditure on “growth-enhancing and high-quality investment in human capital and physical infrastructure, while sustaining well-targeted social spending.”
According to CNBC, on Tuesday the director of the Middle East and Central Asia at the IMF, Jihad Azour said that the MENAP report comes amid an uncertain global growth outlook.
He said, “Global conditions are changing in terms of the risk metrics. Although we’re still enjoying a high level of growth, that growth is plateauing.”
Despite the IMF warnings, the growth prospects for MENAP region’s oil exporters and importers appear resilient.
Referring to the US sanctions on Iran, one of the major oil producing countries, the Fund said, “Overall, despite a significantly weaker outlook for Iran given the re-imposition of sanctions, oil-exporting countries are projected to grow at 1.4 percent in 2018 and 2 percent in 2019.”
On the other hand, growth in GCC countries — Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain, and Oman — is expected to recover to 2.4 percent in 2018 and 3 percent in 2019.
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