Wednesday, June 06, 2012

Oil-Importing Countries in the Middle East and North Africa Face Continued Financial Challenges

Sources:
Arab News: IMF's economic outlook for MENAP shows growth despite historic transitions
The Daily Star (Lebanon): Experts call for joint action to assist Arab states in need
IMF: Arab Oil Importers Under Strain
IMF: Anchoring Stability to Sustain Higher and Better Growth
IMF: Middle East and North Africa: Historic Transitions under Strain
The Nation (Pakistan): IMF expects high oil prices in 2012

In the Middle East and North Africa (MENA), countries which import oil faced reduced growth last year and projected financial challenges in the future. According to the International Monetary Fund (IMF), growth in the oil-importing MENA countries fell from 4.3% of gross domestic product (GDP) in 2010 to 2.2% in 2011. GDP is the total value of goods and services produced in a country during a year.

The slowed growth came in the form of a reduction in tourism and private investment in local businesses, both of which are sources of employment and revenue. The main cause of reduced tourism was the political unrest in the region as many nations faced either regime changes or significant political changes. Political unrest creates safety concerns, which in turn reduces tourism. It also reduces private foreign investment because the political instability creates a situation in which it is uncertain whether investors will see a return, or profit, from their investment.

Another cause of the reduction of tourism and private investment is the European financial crisis. Europe is a major source of tourism and investment for many MENA countries because of its close proximity to the region. However, Europeans have less money to spend elsewhere on tourism and investments because of domestic financial problems resulting from the European sovereign debt crisis.

While many MENA countries are seeing a return to political stability, the IMF points to continued challenges to economic growth for these oil-importing countries. First, the IMF expects oil prices to continue to rise in 2012, which would increase the amount of money flowing out of the country, making it more expensive to cover the costs of continued oil consumption. Second, Syria is still facing significant political turmoil, affecting the regional economy through continued decreased in tourism and private investment mentioned previously.

To aid in recovery, the IMF asserts that ensuring adequate financing is key. The IMF estimates that oil-importing MENA countries will need $50 billion in 2012 to keep their economies functional during times of political unrest. While the IMF is providing some assistance, the IMF and other experts call for international and regional donors to participate as well. The IMF says that infusions of investment funds will aid in meeting short-term needs and establishing greater long-term stability in the form of job growth and modernizing infrastructure.

Thus, though oil-importing MENA countries are currently facing financial challenges resulting from political unrest in the region and financial instability in Europe, the IMF expects that increased investment assistance will encourage future economic growth.

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