Oil Cuts, Gaza Conflict Hit Mideast Growth, IMF Warns

The region faces multiple challenges as it recovers from the pandemic and geopolitical tensions

by Victor Adetimilehin

The Middle East and North Africa (MENA) region is expected to see slower economic growth in 2024 due to oil production cuts and the escalating conflict in Gaza, the International Monetary Fund (IMF) said on Sunday.

The IMF’s latest regional economic report projects that the MENA region’s GDP growth will decline to 2.9% this year, down from 3.2% in 2023. This is lower than the global average of 3.5% and the emerging market average of 4.1%.

The IMF attributed the downward revision to two main factors: the extension of the OPEC+ agreement to reduce oil output until April 2024, which affects the oil-exporting countries in the region; and the worsening humanitarian and economic situation in Gaza, which has been under Israeli blockade since 2007 and has faced repeated Israeli attacks since May 2024.

The IMF’s managing director, Kristalina Georgieva, told the Arab Fiscal Forum in Dubai that the oil cuts were necessary to stabilize the global oil market, but they also posed a challenge for the oil-dependent economies in the region.

She urged the oil exporters to diversify their sources of income and invest in renewable energy, digitalization, and human capital. She also called for more regional cooperation and integration to boost trade and investment.

“The region has a tremendous opportunity to leapfrog into the new economy of the 21st century,” she said.

Georgieva also expressed concern about the impact of the Gaza conflict on the neighboring countries, especially Egypt and Jordan, which have seen a drop in tourism revenues and an increase in refugee inflows.

She said that, once the parties reach a lasting ceasefire, the IMF would provide the affected countries with financial and technical assistance and support the reconstruction efforts in Gaza.

She stressed the need for a political solution to the Israeli-Palestinian conflict, which she said was “a source of instability and suffering for the people of the region and the world.”

The IMF report also highlighted the uneven and fragile recovery of the region from the COVID-19 pandemic, which caused a sharp contraction of 3.4% in 2020.

The report said the region’s growth prospects depended on the speed and effectiveness of the vaccination campaigns, the fiscal and monetary policies, and the structural reforms.

It warned that the region faced several risks, such as new variants of the virus, social unrest, geopolitical tensions, and environmental shocks.

The report recommended that the countries in the region maintain an accommodative fiscal stance to support the recovery while ensuring debt sustainability and transparency.

It also advised them to enhance their social protection systems, improve their business environments, and foster inclusive and green growth.

The report said the region had the potential to achieve a more prosperous and resilient future if it addressed its long-standing challenges and seized the emerging opportunities.

“The region can build back better, stronger, and fairer,” it concluded.

Source: Reuters

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