DUBAI: Mideast economies are likely to grow roughly twice as fast over the next two years as they did in 2009, but the region must do more to diversify its economies and create jobs, the International Monetary Fund said Sunday. The Washington-based body forecasts the economy will grow by 4.2 percent this year and 4.8 percent next year in the 22-nation region stretching from North Africa through Pakistan — still short of 5.7 percent seen ahead of the 2008 global credit crunch. That compares with growth of 2.3 percent last year as the region struggled with lower oil revenues and other effects stemming from the global economic crisis. Overall, the IMF said in its latest regional economic outlook that the Middle East is enjoying "a generally robust recovery" thanks to higher oil prices and government policies designed to mitigate the effects of the worldwide downturn. But it said more must be done to boost private-sector job creation, particularly in countries such as Egypt, Jordan and Syria with large youth populations and chronic unemployment. "There is now a recovery happening in the emerging markets in the region," Masood Ahmed, the IMF's Mideast and Central Asia director, said at a forum in Dubai. "But they are not growing fast enough to create the jobs they need." The region's generally poorer oil-importing countries — many of which depend on tourism, trade and worker remittances from their richer neighbors — are expected to see their economies grow 5 percent this year, up from 4.6 percent in 2009, the IMF said. On a per capita basis, though, their growth significantly lags behind that of other parts of the developing world, the IMF said. That presents major challenges in creating jobs for their young and fast-growing societies, where unemployment averages about 11 percent. Providing enough jobs for the region's oil-importing countries' unemployed and up-and-coming workers over the next decade would require growth of at least 6.5 percent, the IMF estimates. That, according to the IMF, means creating more than 18 million jobs just in the oil-poor parts of the Arab world alone. The IMF expects Saudi Arabia's GDP growth of 3.4 percent in 2010 and 4.5 percent next year, and for the United Arab Emirates to grow by 2.4 percent and 3.2 percent respectively, repeating forecasts from its World Economic Outlook earlier this month. Nasser Saidi, chief economist of the Dubai International Financial Center, a banking hub, said government policies that encourage the growth of small businesses and family-run firms would help create jobs while reducing dependence on bloated state bureaucracies. "The jobs are not going to be generated in the public sector," he said. Because of increased oil prices, the IMF estimates the Gulf states and other oil-exporting countries in the region will see their combined current-account surplus rise to $150 billion next year, up from just $70 billion last year, giving them more leeway to spend. However, economic growth outside the energy sector remains sluggish. The IMF called on oil-exporting nations to reduce their dependence on crude by diversifying their economies and to tackle lingering problems uncovered by the financial crisis, such as the immense debt load carried by Dubai state-linked firms. Ahmed and other bankers said improving financial transparency remains a priority in the Gulf. The IMF report includes oil exporters Algeria, Bahrain, Iran, Iraq, Kuwait, Libya, Oman, Qatar, Saudi Arabia, Sudan, the United Arab Emirates and Yemen, and oil importers Afghanistan, Djibouti, Egypt, Jordan, Lebanon, Mauritania, Morocco, Pakistan, Syria and Tunisia. Non-oil activity in crude-exporting countries is set to pick up, although more gradually, with lackluster private demand offset by supportive policies, the IMF said. "In many countries, accommodative fiscal and monetary policies will continue to be appropriate over the coming year, but with a closer eye on emerging inflationary pressures," the IMF said. "... some, including Saudi Arabia, are seeing inflation picking up, which may call for a tempering of stimulus in 2011," it said, adding the Saudi stimulus would start to be unwound with a 5 percentage point cut in the non-oil primary deficit. Flexibility of monetary policy is limited in most Gulf Arab countries by their currency pegs to the dollar, which makes government spending policies a key tool to steer economies of the GCC, the world's top oil exporting region. "The challenge for monetary policy is to balance the need to support a revival of credit growth while mitigating a potential resurgence of inflation," the fund said. Inflation in Saudi Arabia, the biggest Arab economy, climbed to an 18-month high of 6.1 percent in August, mainly on rising food and housing costs, factors outside the central bank's reach. In the United Arab Emirates, its debt-laden member Dubai faces short-term challenges, while neighboring Abu Dhabi has substantial fiscal buffers, the IMF said. "In the absence of additional financing for Dubai from Abu Dhabi, the United Arab Emirates' non-oil primary deficit is projected to decline by about 12 percentage points of non-oil GDP over 2010-11," it said. The IMF also said that banking system development in oil exporting countries required continued attention with nonperforming loans remaining elevated in a number of countries, urging to strengthen regulatory frameworks and supervision.
