‘Oil importing countries escape effects of global crisis’
ISLAMABAD: Oil importing countries including Pakistan have largely escaped the direct effects of the global crisis because of the positive impact of lower oil prices and their limited links to global financial markets.
However, as the worldwide recession has deepened these countries face weaker prospects for exports, foreign direct investment, tourism, and remittances.
An International Monetary Fund (IMF) Regional Economic Outlook for Middle Eastern oil importing countries—Afghanistan, Djibouti, Egypt, Jordan, Lebanon, Mauritania, Morocco, Pakistan, Syria, and Tunisia—revealed.
Regional Economic Outlook says that growth in Middle East and North Africa would slow to 2.6 percent in 2009. Growth in the region could slow to 2.6 percent in 2009 from 5.7 percent in 2008 before recovering to about 3.6 percent in 2010.
“Given the global reach of the current economic crisis, countries in the Middle East and North Africa have also been impacted negatively. However, they are likely to fare better than countries in other regions of the world—in part because of prudent financial and economic management, but also because oil exporters in the region can draw upon their large reserves,” said Masood Ahmed, Director of the IMF’s Middle East and Central Asia Department, at a briefing in Dubai, which focused on the outlook for Middle East and North Africa, Afghanistan, and Pakistan.
These reserves will help “cushion the impact of the global slowdown in their own economies and the economies of their neighboring countries with which they have growing economic links,” added Ahmed
Nearly all the region’s 22 countries will be affected by the global crisis in important but different ways, the report notes. The Middle East’s oil-exporting countries—Algeria, Bahrain, Iran, Iraq, Kuwait, Libya, Oman, Qatar, Saudi Arabia, Sudan, the United Arab Emirates, and Yemen—are feeling the impact mainly through the sharp fall in oil prices and the tightening of credit conditions.
Amid high oil prices and strong investor interest the region, these countries grew by nearly 6 percent per year between 2004 and 2008. With lower global demand for oil, however, GDP growth rates are forecast to decline to 2.3 percent in 2009 from 5.4 percent in 2008.
Oil importers also face slowdown: This group has mainly been affected by slowdown in their trading partners—Europe, the United States, and GCC countries—which has led to a fall in exports and foreign direct investment, according to the report. Tourism and remittances are also likely to be affected, although the data so far show them to be quite resilient.
Oil-importing countries that trade mainly with the GCC could be protected to some degree by oil exporters’ continued spending. But a protracted recession in trading partners could have a significant impact on the growth of oil importers, and unemployment and poverty could rise, Ahmed said. The projected fall in inflation to 9.7 percent in 2009 from 14.4 percent in 2008 for this group of countries should alleviate some of the pressure on the poor.
Countries in this group represent a range of different economic structures and levels of development, and depend upon different types of foreign inflows. Some countries are better integrated with world financial markets (for example, Egypt, Jordan, Lebanon, and Pakistan), but others, such as Afghanistan, are more dependent on official development assistance.
Policy challenges: Given the region’s unique characteristics, economic policy should concentrate on the following key measures, Ahmed stressed: Maintain or increase public spending where possible. Countries where public debt levels are not a concern would do well to maintain or enhance public spending. This is true for most oil exporters, but also for countries like Morocco, Syria, and Tunisia.