May 07--Oil production and exports poised to respond to global economic recovery
Dr Abdulrazak Al Faris, chief economic councilor of the Dubai Economic Council (DEC); Dr Masood Ahmed; Dr Mohamed Lahouel, chief economist of the Department of Economic Development -- Dubai; Dr Ibrahim Elbadawi, director of macroeconomics and forecasting at the DEC; and Ashok Aram, chief executive officer for the Middle East and North Africa at Deutsche Bank during the panel discussion 'GCC Countries Amid a Turbulent Global Economy: Options for the Future' at the Regional Economic Outlook Update Report launch conference in Dubai on Tuesday. -- KT photo by Juidin Bernarrd
The International Monetary Fund has said economies in the Middle East, North Africa, Pakistan and Afghanistan, or Menap, are showing signs of improvement and the region's tepid growth in 2013 for oil-exporting nations is expected to improve as oil production and exports respond to global economic recovery.
Masood Ahmed, director of the IMF's Middle East and Central Asia department, said high levels of public capital spending and accelerating private sector credit continue to support the non-oil economy of the region.
"Growth is expected to strengthen this year in line with an improved global outlook especially in the euro area and United States. The gross domestic growth in Menap oil exporters will rise from two per cent in 2013 to 3.5 per cent this year as non-oil activity remains robust and oil production stabilises," Ahmed said during a presentation to launch the regional economic outlook update for the Middle East and North Africa here on Tuesday.
He said Iran's economy is expected to stabilise in 2014 after recent improvements in the outlook, particularly on the external front, and on the back of impetus provided by the past real exchange rate depreciation.
He said the Syrian crisis has led to heightened risks for regional stability, with adverse socio-economic, political and security implications for neighbouring countries including Jordan, Lebanon, Iraq and Turkey. The IMF report also said that the Syrian economy has been devastated by the conflict, as GDP is estimated to have contracted by over 40 per cent since the start of the conflict, and over half of the labour force has become unemployed.
"The Syrian neighbours are affected in some ways due to the Syrian crisis as it hit regional and transit trade as well as tourism in the region," he said. Ahmed also mentioned some risks that can weigh on the region's economic prospects in the coming months. He said low inflation in the euro area and Japan, geopolitical tensions such as the Russia-Ukraine crisis, further growth disappointment in emerging markets and normalisation of monetary policy in advanced economies may affect the growth prospects in the region.
"Weak confidence and, in some cases, large public deficits, will continue to weigh on the region's economic prospects. Deeper economic transformations are necessary to ensure robust and inclusive growth and creation of enough jobs for the rapidly-growing labour force in the region," he said.
"With investors increasingly differentiating across emerging markets, the large buffers and low financing requirements of the GCC countries put them in a position of relative strength. Qatar and the UAE in particular have benefitted from their status as regional safe havens," according to the report.
The report further said tighter financial conditions may affect Bahrain and the UAE (particularly Dubai). In Bahrain, where fiscal vulnerabilities led to a downgrade in the sovereign rating, sovereign borrowing costs would rise. Debt rollover might also be affected for some of Dubai's government-related entities that rely on external financing, it added.
According to the report, oil and gas output is expected to remain broadly stable in 2014. GCC production will rise owing to strengthening global demand, challenges in restoring oil production in the non-GCC countries (particularly Libya), and a decline in global oil inventories caused in part by cold weather in North America.
However, a future recovery in non-GCC oil production and ongoing growth from unconventional sources in North America may weigh on GCC oil output and global oil prices. Futures markets suggest the price of crude could decline by about $6 per barrel between 2013 and 2015.
Secretary General of Dubai Economic Council Hani Al Hamli said the UAE government had reduced its dependence on oil and launched various initiatives to develop high value-added sectors i.e trade, tourism, financial and logistic services.
"The government also went on spending on the infrastructure, social services like education and health to improve the living standards of the population," he said.
Al Hamli said shift to knowledge-based economy is a key to move forward to create more jobs and bring economic stability in the region.
"Public-private partnership is a must in the implementation of infrastructure projects in the country."
Ahmed said oil-exporting countries face a longer-term challenge of reducing reliance on oil. "There is one in three chances that oil prices may hit the $80-$100 range due to geopolitical tensions, and it is better to prepare for uncertainty. Increased oil supply from unconventional sources and rising energy efficiency are also placing downward pressures on oil prices, which are also volatile due to fluctuations in expectations of global demand growth and geopolitical risks," he said.