DUBAI, United Arab Emirates – Nations across the Middle East and North Africa are grappling with notable obstacles to their economic development due to an uncertain economic landscape. Factors contributing to this uncertainty include recent tariff measures, fluctuating oil prices, and diminished financial aid, as noted in a report released by the International Monetary Fund (IMF). The regional outlook for the MENA region highlights the financial vulnerabilities due to the projected oil prices; Brent crude oil, which soared past $120 a barrel in 2022, is predicted to settle between $65 and $69 per barrel in 2025 and 2026. Such fluctuations place energy-exporting countries at risk from market instabilities.
Additionally, the introduction of tariffs by the U.S. and other nations, coupled with geopolitical tensions, has intensified global economic uncertainties, which, in turn, could stifle regional economic growth significantly. This growth could be hindered by rates ranging from 2% to 4.5%, remarked the IMF’s regional director for the Middle East and Central Asia.
In response to these challenges, it’s imperative for nations to innovate and develop policies that safeguard their economies against these external pressures, as suggested in recent discussions in Dubai. Another layer of complexity is added by the decrease in foreign aid. With recent decisions seeing a reduction in assistance, especially from the U.S., nations dealing with fragility are at increased risk. The withdrawal of this aid, particularly under the current U.S. administration, has introduced new risks that countries in the region must navigate.
There is a glimmer of hope, though, as the growth rate in the MENA region is projected to reach 2.6% this year, an improvement from last year’s 1.8%. However, ongoing global uncertainties might alter these projections. On a positive note, the economies within the Persian Gulf region are witnessing a notable increase in foreign direct investment, having risen by about 2% of GDP since the pandemic, in stark contrast to other MENA regions experiencing more sluggish investment inflows.
The IMF has expressed its commitment to collaborating with these struggling economies, including engaging in discussions with Lebanese officials and the government’s new structure in Syria. Acknowledging that Syria’s recovery roadmap will be complex, requiring both regional and international support, this effort will necessitate comprehensive strategies focusing on institution-building, economic reforms, infrastructure development, refugee management, and the establishment of a social contract.
Despite these challenges and global economic uncertainties, the IMF report underscores that countries within the MENA region have potential pathways to growth. Embracing structural reforms and broadening economic ties could serve as pivotal strategies for enhancing development and economic fortitude.