Fund calls for budget consolidation across region
- Middle East, North Africa, Afghanistan and Pakistan combined fiscal deficit will be $1 trillion in 2015
- GCC fiscal deficit forecast to reach $700bn, or 13.2 per cent of GDP
- Falling oil prices and regional conflicts are main factor in slowing growth and deficits
The Washington-based IMF estimates that the Middle East, North Africa, Afghanistan and Pakistan (MENAP) will have a combined fiscal deficit of 11 per cent of their GDP in 2015, or $1 trillion between 2015 and 2020.
The GCC countries alone are expected to run a $700bn deficit over the next five years, or 13.2 per cent of GDP in 2015. Middle East and North Africa (Mena) oil exporters are expected to lose $360bn in oil revenue in 2015.
Saudi Arabias fiscal deficit is expected to reach 21.6 per cent of GDP in 2015, and the country has not yet released its plans on how it will consolidate its budget.
The IMF identified two major factors affecting Mena economic growth this year: falling oil prices and conflicts in Syria, Iraq, Yemen and Libya. GDP in these countries has plummeted, while the refugee crises and overspill are dragging on neighbouring economies such as Lebanon, Jordan and Tunisia.
The institution recommended fiscal consolidation in both oil-exporting and oil-importing countries in the region.
Many countries have built buffers up, and have started to consolidate their fiscal position, says Masood Ahmed, director of the Middle East and Central Asia department at the IMF. But fiscal deficits, averaging almost 13 per cent for Mena oil exporters, are likely to persist for years. Sizeable, sustainable fiscal consolidation is needed.
However, GDP growth is projected to slow to 2.3 per cent across the Mena region, and 3.3 per cent in the GCC for 2015. This has worrying implications for the 10 million new jobseekers expected to enter labour markets in oil-exporting countries in the next 10 years.
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