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NEWS

Transcript of the Press Conference on Middle East and Central Asia

www.imf.org
14 October 2017

Abstract: Full text is here.

 

SPEAKERS: 
Jihad Azour, Director, Middle East and Central AsiaDepartment
Wafa Amr, Senior Communications Officer, Communications Department

MS. AMR: Good morning everyone. And good afternoon to those joining us from the rest of the world. This is Wafa Amr, Senior Communications Officer.

I'd like to introduce today, Jihad Azour, Director of the Middle East and Central Asia Department. He will be giving brief opening remarks on the economic outlook for the Middle East and Central Asia. And then we'll take questions from you and online. Thank you.

MR. AZOUR: Good morning, I would like to welcome you all to the 2017 Annual Meetings. As you know, macroeconomic forecasts for our region have been released as part of the World Economic Outlook. We will have a more detailed discussion of those forecasts when we launch our Regional Economic Outlook in Dubai on October 31st and in Almaty on November 1st. I would like to now make a few remarks about the prospects for our countries, before taking your questions.

Let me first begin with the outlook for the Middle, East, North Africa, Afghanistan, and Pakistan region.

Although the global economy is strengthening, the growth outlook for MENAP countries remains subdued owing to the continuing adjustment to low oil prices in oil exporting countries and regional conflicts. However, this overall assessment masks important differences across oil exporting and importing countries.

Growth in MENAP oil exporters is expected to bottom out at 1.7 percent in 2017, held back by the agreed cut in oil production under the OPEC-led agreement. On the positive side, non-oil growth is expected to increase to about 2.6 percent in 2017 from 1.1 percent in 2016 as fiscal consolidation generally slows.

In contrast, growth in oil importers is expected to accelerate to 4.3 percent this year, well above 3.6 percent outturn in 2016, supported by stronger domestic demand, structural reforms, and the current upswing in the global economy.

The outlook for countries in conflict (Iraq, Libya, Syria, Yemen) remains predicated on security conditions.

Over the medium term, growth is anticipated to accelerate gradually in most MENAP economies, but it will generally remain below what is needed to effectively tackle the high level of unemployment in the region and raise standards of living.

Against this back drop the policy priorities for MENAP countries are as follows:

Growth needs to be made stronger, more inclusive, and job-rich to improve living standards and ease social tensions.

  • A critical mass of structural reforms, including improving the investment climate, is needed to take advantage of the current window of opportunity provided by the stronger global economy.
  • MENAP oil exporters need to accelerate efforts to diversify their economies away from oil and translate their ambitious visions into specific well-sequenced measures that can be implemented.

High fiscal deficits and/or public debt require a continued focus on consolidation. The projected fiscal deficit is 5.2 percent of GDP in MENAP oil exporters and 6.6 percent of GDP in MENAP oil importers, and average public debt remains above 80 percent of GDP in oil importers. The pace and composition of adjustment should be tailored to country circumstances, but needs to protect priority social and growth-enhancing spending. Energy price reforms should be completed to free up for resources for productive spending.

Improved monetary frameworks are needed in many countries, including clear monetary objectives supported by greater central bank independence. 

Let me now turn to the Caucasus and Central Asia.

Growth in the CCA started to pick up during the second half of 2016 and is projected to reach 3.6 percent in 2017, up from 2.5 percent last year. Improving economic conditions in the region's main trading partners, firming of some commodity prices, and the continued implementation of structural reforms, should support the recovery. 

However, medium-term growth is forecast to remain well below historical norms so there is no room for complacency. 

Against this back drop the policy priorities for CCA countries are as follows:

Reforms to diversify economies away from remittances and commodities and to foster private sector development need to be accelerated to secure strong, sustainable, and inclusive growth. This would also help harness the benefits of the Belt and Road Initiative, including from greater trade and financial integration with the global economy.

With an average fiscal deficit at 3.4 percent of GDP in 2017, fiscal consolidation should continue, including to rebuild buffers. Countries need to channel public expenditure efficiently and improve tax collection, while protecting social safety nets. 

Monetary policy frameworks should be strengthened further. Ensuring financial sector resilience is a continuing priority and deep-rooted weaknesses in highly dollarized banking sectors should be addressed promptly.

 

Important downside risks remain for both the MENAP and CCAregions, especially over the medium term.

Geopolitical risks and spillovers from conflicts remain a deep concern in MENAP. While the diplomatic rift between Qatar and several other countries has so far had a limited impact on growth in the region, a protracted rift could weaken medium-term growth prospects. Social pressures and reform fatigue also weigh on prospects. 

Downside global risks include lower-than-expected oil prices, tightening global liquidity, and inward-looking policies by advanced economies. 

On the upside, all countries, especially oil importers, should benefit if global growth strengthens further. The impact of various integration initiatives-Compact with Africa, Belt and Road Initiative, and reforms in Uzbekistan-could be stronger than expected.

Before I take your questions, I'd like to highlight some of the support and advice we've been providing to the MENAP andCCA region.

The IMF continues to be deeply engaged and has set the goal of strong, sustainable, and inclusive growth as its top priority for policy advice and technical assistance for the region. 

In January, we will be heading to Marrakech for the "Opportunity for All" Conference that we are co-hosting with the Government of Morocco, the Arab Monetary Fund and the Arab Fund for Economic and Social Development. Participants from across the region's public and private sectors will exchange their experiences, lessons, and ideas on how to create more jobs by developing new sources of growth.

We continue to broaden our analytical work so that it remains relevant for countries and their policy challenges. Our forthcoming Regional Outlook will include thematic chapters on the opportunities and challenges from international trade and financial technology, while papers on wage bill management and financial sector resilience in CCA are also forthcoming. 

And of course, we continue to underpin our engagement with extensive financial support-now covering 9 countries across the MENAP and CCA regions, for a total amount of about USD 25 billion.

I again thank you for your time and for joining us for the IMF's Annual Meetings. Let me now turn to your questions. 

And please identify yourself and the organization you work for, please. 

QUESTIONER: You mentioned Caucasus and Central Asiathere. Based on the reforms you're seeing in countries; Kazakhstan, Uzbekistan, for example, but elsewhere, which countries beyond the dates were you most excited about and most concerned about going forward in a more sort of reform-based way? That's it. Thanks. 

MR. AZOUR: Thank you. Central Asian countries have been adjusting to the shock of the climb in oil price and price of commodities over the last few years. They have introduced certain number of reforms to ease the tension on the financial sector, as well as to strengthen their fiscal positions. 

Uzbekistan which has been for a certain of number of years managing its economy and running, in fact, its economy with certain differences, has started recently strong reform that was initiated by opening up their economy to further trade integration and trade cooperation, has moved into more open-exchange rate regime, and has announced a certain number of reforms that, if well implemented will allow them to regain additional growth as well as also, to provide to the region additional integration and growth potential. [Full text is here.]