Decreased foreign direct investment, poor growth prospects and tight finance are some of the adversities MENA countries face in 2011 and 2012 according to IMF Middle East and Central Asia Department director Oil importing economies of the Middle East and North Africa (MENA) are facing increasing external and domestic pressures to their growth prospects, according to the IMF Middle East and Central Asia Department director, Masood Ahmed. To start with, the risk of a prolonged slowdown in the global economy and the economic troubles in various areas around the globe will affect foreign direct investmentand tourist flows into these economies,said Ahmed during a press briefing on the developments and outlook for the region. Moreover, they have to put up with higher food and fuel prices. However, it does not end there.Growing risk aversion in financial markets has raised their cost of finance and they are suffering slow growth in their traditional [export] markets, particularly Europe. MENA countries are also being affected by the spill over from conflict countries such as Syria, Libya and Yemen. “These economies are contracting; that had not been anticipated and is having an effect on the region,” Ahmed said. Domestically these countries have seen continued demand for social spending, putting their fiscal situation under strain. Such pressures will continue during the course of the year, particularly in countries going through political transition, according to Ahmed. “The pace of transition will define how quickly this is alleviated.” The IMF has estimated an average growth rate of 1.4 per cent in 2011 and 2.6 in 2012 for MENA oil importers, down from 4.5 per cent in 2010. According to Ahmed, what is important over the next 15 months is to ensure adequate financing for these countries. It is estimated they need some $50 billion in 2012. Capital markets are likely to provide only a small fraction of this amount, because of their current risk aversion. Ahmed adds that official financial support will also be needed. The IMF stands ready to help with $35 billion should they request it, he said. Apart from financing difficulties,Ahmed believes MENA countries market access for exports will be very important in the medium term because of its key role in building the kind of private-sector based economies that will become self-sustaining and competitive. Moreover, he highlighted the importance of easing the rules for labour mobility. These countries are facing difficult policy choices, he said, including fiscal choices in the way they design their spending which is necessary for social consensus. The way they design these policies to maximise the short-term impact while limiting the long-term social liabilities is important. He gave the example of moving away from a generalised system of subsidies to a targeted system.
