IMF trims Mena growth forecast

The IMF dimmed its growth outlook for the Middle East and North Africa this year, one of several regions where it lowered its forecast in the face of tail risks to the global economy.

Output in the Mena region would reach 3.4 per cent, down 0.2 per cent from its previous forecast in October, the fund said in an update yesterday to its World Economic Outlook report. This follows growth of 5.2 per cent last year.

"In the Middle East and North Africa region, many countries will need to maintain macroeconomic stability under difficult internal and external conditions," said the IMF.

Globally, it said growth was expected to strengthen this year, led by surging emerging markets and more robust activity in the United States.

But it said the upturn was projected to be more gradual than it had outlined in its prior report. Global output would climb from 3.2 per cent last year to 3.5 per cent, 0.1 per cent down from its earlier outlook.

"Policy actions have lowered acute crisis risks in the euro area and the United States," it said. "But in the euro area, the return to recovery after a protracted contraction is delayed.

"While Japan has slid into recession, stimulus is expected to boost growth in the near term."

The IMF did not give a reason for its downgrade to the Mena outlook. Masood Ahmed, the director of the IMF's Middle East and Central Asia department, said in November that regional instability was taking longer to resolve than previously forecast.

The economies of Egypt, Tunisia, Libya and Yemen are recovering after leadership changes, while Syria remains locked in civil war. Oil output in the GCC is also expected to moderate this year, removing a leading driver of GDP last year. Growth in Mena would pick up by 3.8 per cent next year.

But it was the euro zone that was hit by the IMF's most severe downgrade. It said the single currency area would remain mired in recession for a second consecutive year, dipping by 0.2 per cent instead of expanding by the same amount. The economy would return to positive territory next year, with expansion of 1 per cent.

"The near-term outlook for the euro area has been revised downwards, even though progress in national adjustment and a strengthened EU-wide policy response to the euro area crisis reduced tail risks and improved financial conditions for sovereigns in the periphery."

After the US avoided plunging off the so-called fiscal cliff, its economy was forecast to grow 2 per cent this year, down from 2.3 per cent last year and 0.1 per cent lower from its previous projection. Growth would climb to 3 per cent next year, it said.

A supportive financial market and a turnaround in the housing market had helped to bolster household balance sheets, said the IMF.

Despite Japan plunging into recession, the IMF did not downgrade the near-term outlook for the country. Its economy was expected to expand by 1.2 per cent this year, broadly unchanged from the October forecast.

Growth in emerging markets and developing economies would hit 5.5 per cent this year. Weakness in advanced economies and softer commodity prices would weigh on external demand, stopping growth from rebounding to the high rates of 2010 to 2011.

tarnold@thenational.ae