Information about Middle East Oriente Medio
Front Matter

Front Matter

International Monetary Fund. Middle East and Central Asia Dept.
Published Date:
May 2010
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© 2010 International Monetary Fund

Cataloging-in-Publication Data

Regional economic outlook: Middle East and Central Asia. – [Washington, D.C.] : International Monetary Fund, 2010.

  • p. ; cm. – (World economic and financial surveys, 0258-7440)
  • “May 10.”
  • ISBN 978-1-58906-920-6

1. Economic forecasting – Middle East 2. Economic forecasting – Asia, Central 3. Middle East – Economic conditions 4. Asia, Central – Economic conditions. I. International Monetary Fund II. Series: World economic and financial surveys.

HC415.15.R445 2010

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The Middle East and Central Asia Regional Economic Outlook (REO) is prepared biannually by the IMF’s Middle East and Central Asia Department (MCD). The analysis and projections contained in the MCD REO are integral elements of the Department’s surveillance of economic developments and policies in 30 member countries. It draws primarily on information gathered by MCD staff through their consultations with member countries.

The analysis in this report was coordinated under the general supervision of Masood Ahmed (Director of MCD). The project was directed by Ratna Sahay (Deputy Director in MCD) and Ralph Chami (Chief of MCD’s Regional Studies Division).

The primary contributors to this report are Yasser Abdih, Adolfo Barajas, Tobias Rasmussen, and Axel Schimmelpfennig. Other contributors include Ali Al-Eyd, David Amaglobeli, Serhan Cevik, Raphael Espinoza, Harald Finger, Heiko Hesse, Sissi Huang, Nadeem Ilahi, Dima Jardaneh, May Khamis, Alina Luca, Liliya Repa, Gabriel Sensenbrenner, and Niklas Westelius.

Jaime Espinosa and Anjali Garg provided research assistance and managed the database and the computer systems. Christine Ebrahimzadeh provided editorial guidance. Sonia Lowman was responsible for word processing and layout. Jasmine Lief was responsible for document management. Joanne Blake and Julia Lutz of the External Relations Department edited the manuscript and managed the production of the publication.

Assumptions and Conventions

A number of assumptions have been adopted for the projections presented in the Regional Economic Outlook: Middle East and Central Asia. It has been assumed that established policies of national authorities will be maintained; that the price of oil will average US$80 a barrel in 2010 and US$83 in 2011; and that the six-month London interbank offered rate (LIBOR) on U.S. dollar deposits will average 0.5 percent in 2010 and 1.7 percent in 2011. These are, of course, working hypotheses rather than forecasts, and the uncertainties surrounding them add to the margin of error that would in any event be involved in the projections. The 2009 data in the figures and tables are estimates. These estimates for 2009 and projections for 2010 and 2011 are based on statistical information available through April 9, 2010.

The following conventions are used in this publication:

  • In tables, ellipsis points (…) indicate “not available,” and 0 or 0.0 indicates “zero” or “negligible.” Minor discrepancies between sums of constituent figures and totals are due to rounding.
  • An en dash (–) between years or months (for example, 2008–09 or January–June) indicates the years or months covered, including the beginning and ending years or months; a slash or virgule (/) between years or months (for example, 2008/09) indicates a fiscal or financial year, as does the abbreviation FY (for example, FY2009).
  • “Billion” means a thousand million; “trillion” means a thousand billion.
  • “Basis points (bps)” refer to hundredths of 1 percentage point (for example, 25 basis points are equivalent to ¼ of 1 percentage point).

As used in this publication, the term “country” does not in all cases refer to a territorial entity that is a state as understood by international law and practice. As used here, the term also covers some territorial entities that are not states but for which statistical data are maintained on a separate and independent basis.

This report on the Regional Economic Outlook: Middle East and Central Asia is available in full on the IMF’s Internet site,

Inquiries about the content of the Regional Economic Outlook: Middle East and Central Asia should be sent by mail or e-mail (telephone inquiries cannot be accepted) to:

Regional Economic Outlook

Middle East and Central Asia Department

International Monetary Fund

700 19th St., N.W.

Washington, D.C. 20431, U.S.A.


Country and Regional Groupings

The May 2010 Regional Economic Outlook: Middle East and Central Asia (REO), covering countries in the Middle East and Central Asia Department (MCD) of the International Monetary Fund (IMF), provides a broad overview of recent economic developments in 2009 and prospects and policy issues for the remainder of 2010 and 2011. To facilitate the analysis, the 30 MCD countries covered in this report are divided into two groups: (1) countries of the Middle East, North Africa, Afghanistan, and Pakistan (MENAP)—which are further subdivided into oil exporters and oil importers; and (2) countries of the Caucasus and Central Asia (CCA). The country acronyms used in some figures are included in parentheses.

MENAP oil exporters comprise Algeria (DZA), Bahrain (BHR), Iran (IRN), Iraq (IRQ), Kuwait (KWT), Libya (LBY), Oman (OMN), Qatar (QAT), Saudi Arabia (SAU), Sudan (SDN), the United Arab Emirates (U.A.E.), and Yemen (YMN).

MENAP oil importers comprise Afghanistan (AFG), Djibouti (DJI), Egypt (EGY), Jordan (JOR), Lebanon (LBN), Mauritania (MRT), Morocco (MAR), Pakistan (PAK), Syria (SYR), and Tunisia (TUN).

CCA countries comprise Armenia (ARM), Azerbaijan (AZE), Georgia (GEO), Kazakhstan (KAZ), the Kyrgyz Republic (KGZ), Tajikistan (TJK), Turkmenistan (TKM), and Uzbekistan (UZB).

In addition, the following geographical groupings are used:

The CIS (Commonwealth of Independent States) comprises Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, the Kyrgyz Republic, Moldova, Mongolia, Russia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan. Georgia and Mongolia, which are not members of the CIS, are included in this group for reasons of geography and similarities in economic structure.

The GCC (Gulf Cooperation Council) comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.

The Maghreb comprises Algeria, Libya, Mauritania, Morocco, and Tunisia.

The Mashreq comprises Egypt, Jordan, Lebanon, and Syria.


Economic prospects for the countries of the Middle East and Central Asia are improving along with the global recovery, although the latter remains fragile. Growth in the region—comprising the (1) Middle East, North Africa, Afghanistan, and Pakistan (MENAP) oil exporters; (2) MENAP oil importers; and (3) Caucasus and Central Asia (CCA)—will gather momentum in 2010, but stay below precrisis levels. While the impact on the region of the Dubai crisis and the unfolding events in Greece has been limited so far, a repricing of sovereign debt cannot be ruled out, adding an element of uncertainty to the outlook.

Dealing with the legacy of the global economic crisis will be the priority in 2010. In some MENAP oil exporters, bank balance-sheet strains emerged during the crisis, and country-specific solutions to address these strains will need to be found. As unemployment continues to rise in the MENAP oil importers, the need to raise growth and competitiveness will take center stage, against the backdrop of a weak pickup in external demand and tight competition from other emerging markets. In the CCA, the priority is to repair bank balance sheets as a prerequisite for a recovery in credit.

MENAP Oil Exporters: Emerging from the Crisis

The MENAP oil exporters were hit hard in 2009. In the first part of the year, crude oil prices plummeted to US$40 per barrel, real estate and asset prices plunged, and external financing dried up. The oil exporters’ combined current account surplus fell to US$53 billion in 2009, after having risen more than tenfold in the previous decade to US$362 billion in 2008. Oil GDP contracted by 4.7 percent in 2009, but a massive step-up in government spending along with central bank liquidity support and capital injections into the banking sector helped mitigate the impact of the crisis on the non-oil sector, which grew by 3.6 percent. Overall, these economies grew by 1.5 percent in 2009.

A resumption of capital inflows and the rebound in crude oil prices, to more than US$80 per barrel by the end of last year, have aided the recovery in these countries. International reserve positions are improving again—by an estimated US$46 billion in 2010. Higher oil prices and output are projected to boost oil exports by 31 percent, to US$682 billion, more than double the current account surplus, to US$140 billion, and boost oil-GDP growth to 4.3 percent in 2010. Moreover, many governments—most notably in Saudi Arabia—are planning to expand spending. This stimulus will continue to buoy domestic non-oil-sector activity, projected to grow by 4.1 percent in 2010, and sustain positive spillovers to the global economy as well as neighboring countries through trade and remittances.

Strong oil demand underpins a promising outlook for the medium term. In 2011, the recovery is expected to strengthen further, with overall GDP growth reaching 4.5 percent. Although growth is slated to remain well below precrisis levels, it is more likely to be sustainable in the long run.

For many MENAP oil exporters, an important impediment to a stronger recovery is sluggishness in private-sector credit. In previous years, vigorous credit growth was driven by high leverage, expanding external funding, rapid deposit growth, and surging asset prices, all of which reversed during the crisis, leading to considerable strains on bank balance sheets. To revive credit, banks will need to repair their balance sheets by recognizing losses and, in some cases, governments will need to support this by requiring greater transparency and enhancing regulatory clarity. Over the medium term, local debt and equity markets will need to be developed in order to provide alternatives to bank finance.

MENAP Oil Importers: Slowly Gaining Traction

MENAP oil importers have limited financial and trade ties, and positive spillovers from fiscal expansions in the MENAP oil exporters have offset the impact of the global slowdown. Thus, overall growth fell only modestly to 3.8 percent in 2009, from 5 percent in 2008. With trade rebounding since mid-2009 and investment and bank credit beginning to pick up, growth is estimated to increase marginally to 4.1 percent in 2010 and 4.8 percent in 2011. These growth rates, however, are below the average for emerging and developing countries, and, more importantly, insufficient to create the jobs needed in a region where the working-age population is projected to increase by a quarter in the next decade.

Credit growth—which fell to a weighted average of 2 percent in the year to October 2009 from almost 20 percent before the crisis—remains low. And the resurgence of capital inflows witnessed in other emerging markets is not yet evident in most MENAP oil importers. Continued weakness in European demand, appreciated exchange rates, and competition from other emerging markets, especially Asia, constrain the potential for export-led growth. Consequently, enhancing competitiveness to raise growth rates and generate employment will be key challenges in this region. Additional efforts to create a more business-friendly environment for foreign and local investments, liberalize the financial sector, and develop local capital markets will help meet this goal.

High debt levels in several countries limit the scope for fiscal stimulus. And for the most part, little space remains for additional monetary stimulus, given relatively high inflation in much of the region and international interest rates having begun to rise.

The CCA: Incipient Recovery

The global economic downturn took a toll on the CCA, though countercyclical fiscal and monetary policies and donor support provided some offset. With exports and remittances falling sharply, energy importers were hit hardest—Armenia suffered the largest drop in growth, from 6.8 percent in 2008 to – 14 percent in 2009, as a construction boom faltered. In Georgia, the contraction of 4 percent was less severe, partly because the slowdown had already started in 2008. In the Kyrgyz Republic and Tajikistan, growth also fell in 2009, but stayed positive at 2 to 3 percent. The CCA energy exporters fared better, and their growth declined only moderately—from 6.6 percent in 2008 to 4.7 percent in 2009—but was substantially lower than the 12.6 percent rate recorded in 2007. Kazakhstan was affected markedly by international financial market turbulence, evidenced by a net outflow of private portfolio capital of US$5 billion since the beginning of the crisis.

Across the CCA, there are signs of recovery. Exports have begun to pick up, the decline in remittances appears to be slowing or reversing, and capital inflows have turned positive. In light of these developments, growth for the CCA is projected to rise to 4.3 percent in 2010. Growth remains weaker in the energy importers, where it is projected at about 2 to 4 percent. In all four energy importers, fiscal constraints loom large, and additional donor support would be needed to help create the fiscal room needed if the recoveries were to falter. Growth is expected to be strongest in the energy exporters, with projections ranging from 2 to 3 percent for Azerbaijan and Kazakhstan to 8 percent in Uzbekistan and 12 percent in Turkmenistan.

A common challenge across most CCA countries is to revive private-sector credit growth. CCA banking systems were adversely affected by the global crisis, and credit growth has slowed sharply and even turned negative in real terms in a number of countries, compared with the meteoric increases, ranging from 40 to 80 percent, in the period immediately prior to the crisis. Policies to restore credit growth should aid banks to repair balance sheets and, under particular circumstances, provide liquidity and capital injections. In the medium term, macroeconomic and macroprudential policies should promote dedollarization—high levels of dollarization of 40 to 80 percent were a key transmission channel of the global crisis to the region—and develop local debt markets to provide a more diversified funding base for banks.

World Economic Outlook1

The global recovery has evolved better than expected—tepidly in many advanced economies but solidly in most emerging and developing economies. In 2010 and 2011, world output is expected to rise by about 4¼ percent, following a ½ percent contraction in 2009 (see table). Policy support was essential to kick-start the recovery. Monetary policy has been highly expansionary, and supported by unconventional liquidity provision. Fiscal policy provided a major stimulus in response to the deep downturn.

Among advanced economies, the United States is off to a better start than Europe and Japan. Among emerging and developing economies, emerging Asia is in the lead. Growth is also solidifying in key Latin American economies but continues to lag behind in many emerging European and various Commonwealth of Independent States countries. Sub-Saharan Africa is weathering the global crisis well, and its recovery is expected to be stronger than following past global downturns.

Overview of the World Economic Outlook Projections(Percent change)
Year over Year
World output3.0-
Advanced economies0.5-
Of which: United States0.4-
European Union0.9-
Emerging and developing economies6.
Of which: MENAP4.
Commonwealth of Independent States5.5-
Of which: Russia5.6-
World trade volume (goods and services)2.8-
Commodity prices
Sources: IMF, World Economic Outlook and Regional Economic Outlook (April 2010).

Simple average of prices of U.K. Brent, Dubai, and West Texas Intermediate crude oil. The average price of oil in U.S. dollars a barrel was $61.78 in 2009; the assumed price based on future markets is $80 in 2010 and $83 in 2011.

Average (measured in U.S. dollars) based on world commodity export weights.

Sources: IMF, World Economic Outlook and Regional Economic Outlook (April 2010).

Simple average of prices of U.K. Brent, Dubai, and West Texas Intermediate crude oil. The average price of oil in U.S. dollars a barrel was $61.78 in 2009; the assumed price based on future markets is $80 in 2010 and $83 in 2011.

Average (measured in U.S. dollars) based on world commodity export weights.

Countries that are off to a strong start are likely to continue to lead the recovery, as growth in others is held back by lasting damage to financial sectors and household balance sheets. Risks are generally to the downside, with those related to public debt growth in advanced economies having become sharply more evident. The main concern is that room for policy maneuvers in many advanced economies has either been largely exhausted or is much more limited, leaving the fragile recoveries exposed to new shocks. In addition, bank exposures to real estate continue to pose downside risks, mainly in the United States and parts of Europe.

The recoveries in real and financial activity are mutually supportive, but access to credit remains difficult for some sectors. In advanced economies, the tightening of bank lending standards is ending, and the credit crisis appears to be bottoming out. In many emerging and developing economies, credit growth is reaccelerating. Nevertheless, financial conditions remain more difficult than before the crisis.

Together with real and financial activity, cross-border financial flows from advanced to many emerging economies have also rebounded strongly. Key drivers include rapid growth in emerging economies, large yield differentials in their favor, and a returning appetite for risk. The recovery of cross-border flows has come with some real effective exchange-rate changes—depreciation of the U.S. dollar and appreciation of some other floating currencies of advanced and emerging economies. But relative to precrisis levels, changes have been generally limited and global current account imbalances are forecast to widen again over the medium term.

Given the large amount of public debt that has been accumulated during this recession, in many advanced economies exit policies need to emphasize fiscal consolidation and financial sector repair. This will allow monetary policy to remain accommodative without leading to inflation pressure or financial market instabilities. In emerging and developing economies, priorities depend on room available for fiscal policy maneuvers and on current account positions. Spillovers related to fiscal policies are particularly relevant for the major advanced economies, as large deficits and the lack of well-specified medium-term fiscal consolidation strategies in these economies could adversely affect funding costs of other advanced or emerging economies.

1 See IMF, World Economic Outlook (April 2010) for more information.

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