Information about Middle East Oriente Medio
Front Matter

Front Matter

International Monetary Fund. Middle East and Central Asia Dept.
Published Date:
October 2009
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© 2009 International Monetary Fund

Cataloging-in-Publication Data

Regional economic outlook: Middle East and Central Asia. – [Washington, D.C.]:

International Monetary Fund, 2009.

p.; cm. – (World economic and financial surveys, 0258-7440)

“Oct. 09.”

Includes bibliographical references.

ISBN 9781589068582

1. Economic forecasting – Middle East. 2. Economic forecasting – Asia, Central.

3. Middle East – Economic conditions. 5. Asia, Central – Economic conditions.

5. Fiscal policy -- Middle East. 6. Fiscal policy -- Asia, Central. I. International Monetary Fund.

II. Series: World economic and financial surveys.

HC415.15. R445 2009

Please send orders to:

International Monetary Fund, Publication Services

700 19th St. N.W., Washington, D.C. 20431, U.S.A.

Tel.: (202) 623-7430 Fax: (202) 623-7201



The views expressed in this publication are those of the contributors, and not necessarily of the IMF. The coordinating team from the Middle East and Central Asia Department comprised Ratna Sahay, Ralph Chami, Axel Schimmelpfennig, Adolfo Barajas, Tobias Rasmussen, Yasser Abdih, Christine Ebrahimzadeh, Liliya Repa, Mandana Dehghanian, Muriel Vimond, and Sonia Lowman. Country desk economists, research assistants, and mission chiefs also provided important contributions.



The Middle East and Central Asia Regional Economic Outlook (REO) is prepared biannually by the IMF’s Middle East and Central Asia Department (MCD). The analysis and projections contained in the MCD REO are integral elements of the Department’s surveillance of economic developments and policies in its 30 member countries. It draws primarily on information gathered by MCD staff through their consultations with member countries.

The analysis in this report was coordinated under the general supervision of Masood Ahmed (Director of MCD). The project was directed by Ratna Sahay (Deputy Director of MCD) and Ralph Chami (Chief of MCD’s Regional Studies Division).

The primary contributors to this report are Yasser Abdih, Adolfo Barajas, Tobias Rasmussen, and Axel Schimmelpfennig. Other contributors include Ali Al-Eyd, Paul Cashin, Nigel Chalk, Mitra Farakbash, Harald Finger, Dominique Guillaume, Maher Hasan, May Khamis, Julie Kozack, Boileau Loko, Pablo Lopez-Murphy, Kenji Moriyama, Ananthakrishnan Prasad, Agustin Roitman, Tahsin Saadi Sedik, Carlo Sdralevich, Dominique Simard, Joël Toujas-Bernaté, Svetlana Vtyurina, Oral Williams, and Daria Zakharova. Mandana Dehghanian managed the database and the computer systems, and Jaime Espinosa and Liliya Repa provided research assistance. Christine Ebrahimzadeh provided editorial guidance. Muriel Vimond and Sonia Lowman were responsible for word processing and layout. Martha Bonilla of the External Relations Department edited the manuscript and coordinated the production of the publication.

Assumptions and Conventions

A number of assumptions have been adopted for the projections presented in the Regional Economic Outlook: Middle East and Central Asia. It has been assumed that established policies of national authorities will be maintained; that the price of oil will average US$61.5 a barrel in 2009 and US$76.5 in 2010; and that the six-month London interbank offered rate (LIBOR) on U.S.-dollar deposits will average 1.2 percent in 2009 and 1.4 percent in 2010. These are, of course, working hypotheses rather than forecasts, and the uncertainties surrounding them add to the margin of error that would in any event be involved in the projections. The 2008 data in the figures and tables are estimates. These estimates for 2008 and projections for 2009 and 2010 are based on statistical information available through September 21, 2009.

The following conventions are used in this publication:

  • In tables, ellipsis points (…) indicate “not available,” and 0 or 0.0 indicates “zero” or “negligible.” Minor discrepancies between sums of constituent figures and totals are due to rounding.
  • An en dash (–) between years or months (for example, 2007–08 or January–June) indicates the years or months covered, including the beginning and ending years or months; a slash or virgule (/) between years or months (for example, 2007/08) indicates a fiscal or financial year, as does the abbreviation FY (for example, FY2008).
  • “Billion” means a thousand million; “trillion” means a thousand billion.
  • “Basis points (bps)” refer to hundredths of 1 percentage point (for example, 25 basis points are equivalent to ¼ of 1 percentage point).

As used in this publication, the term “country” does not in all cases refer to a territorial entity that is a state as understood by international law and practice. As used here, the term also covers some territorial entities that are not states but for which statistical data are maintained on a separate and independent basis.

This report on the Regional Economic Outlook: Middle East and Central Asia is available in full on the IMF’s Internet site,

Inquiries about the content of the Regional Economic Outlook: Middle East and Central Asia should be sent by mail or e-mail (telephone inquiries cannot be accepted) to:

Regional Economic Outlook

Middle East and Central Asia Department

International Monetary Fund

700 19th St., N.W.

Washington, D.C. 20431, U.S.A.


Country and Regional Groupings

The October 2009 Regional Economic Outlook: Middle East and Central Asia (REO), covering countries in the Middle East and Central Asia Department (MCD) of the International Monetary Fund (IMF), provides a broad overview of recent economic developments in 2008 and prospects and policy issues for the remainder of 2009 and 2010. To facilitate the analysis, the 30 MCD countries covered in this report are divided into three groups: (1) oil exporters of the Middle East, North Africa, Afghanistan, and Pakistan (MENAP); (2) MENAP oil importers; and (3) Caucasus and Central Asia (CCA). The country acronyms used in some figures are included in parentheses.

MENAP oil exporters comprise Algeria (DZA), Bahrain (BHR), Iran (IRN), Iraq (IRQ), Kuwait (KWT), Libya (LBY), Oman (OMN), Qatar (QAT), Saudi Arabia (SAU), Sudan (SDN), the United Arab Emirates (U.A.E.), and Yemen (YMN).

MENAP oil importers comprise Afghanistan (AFG), Djibouti (DJI), Egypt (EGY), Jordan (JOR), Lebanon (LBN), Mauritania (MRT), Morocco (MAR), Pakistan (PAK), Syria (SYR), and Tunisia (TUN).

CCA countries comprise Armenia (ARM), Azerbaijan (AZE), Georgia (GEO), Kazakhstan (KAZ), the Kyrgyz Republic (KGZ), Tajikistan (TJK), Turkmenistan (TKM), and Uzbekistan (UZB).

In addition, the following geographical groupings are used:

The GCC (Gulf Cooperation Council) comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.

The Maghreb comprises Algeria, Libya, Mauritania, Morocco, and Tunisia.

The Mashreq comprises Egypt, Jordan, Lebanon, and Syria.


As elsewhere in the world, the global financial and economic crisis has taken a toll on the Middle East and Central Asia region. Given the region’s diversity, the Regional Economic Outlook divides the countries of the Middle East and Central Asia into three subregions: (1) oil exporters of the Middle East, North Africa, Afghanistan, and Pakistan (MENAP); (2) MENAP oil importers; and (3) Caucasus and Central Asia (CCA).

MENAP oil exporters have been directly hit by the global financial crisis through a sharp decline in oil prices and a sudden drying up of capital inflows, but the impact has been greatly mitigated by countercyclical government spending.

  • Drawing on substantial reserves built up prior to the crisis, governments responded with strong countercyclical policies, which have helped contain the impact on the non-oil sectors of their economies: non-oil GDP has slowed, but still is projected to grow at 3.2 percent in 2009. The corollary is that MENAP oil exporters’ current account surpluses are falling from US$380 billion in 2008 to about US$50 billion in 2009.
  • With higher oil prices and the anticipated reemergence of global demand, oil revenues will increase, allowing oil exporters to rebuild their international reserve positions—by more than US$100 billion in 2010. This, in turn, provides the basis for maintaining spending. With the Gulf Cooperation Council’s share of world imports expected to increase from 2.7 percent in 2008 to 3.2 percent in 2010, the region’s contribution to global demand will remain high.
  • The crisis has revealed some vulnerabilities in the region’s financial sector: weak risk management systems and overleveraged institutions. Measures to strengthen financial regulation and supervision—already being instituted in some countries—will remain crucial for safeguarding the financial system against future shocks.
  • In 2010, for the group as a whole, oil and non-oil growth are projected at 4.4 percent and 3.9 percent, respectively. To help realize these economies’ potential, public spending on infrastructure and social development will remain a key feature of economic policy. Looking ahead, governments will need to begin designing strategies to unwind the exceptional liquidity support provided to mitigate the impact of the crisis.
  • In the medium term, financial market development—including diversification beyond a bank-based system—will remain a priority, as will efforts to improve the business climate to support economic diversification and generate employment.

MENAP oil importers have been moderately hit by the worldwide recession, with growth projected to fall from 5.0 percent in 2008 to 3.6 percent in 2009. A low degree of integration with global capital markets, limited exposure of the banking system to structured products, and a small manufacturing base have helped these countries avoid a substantial fallout from the crisis. Fiscal and monetary stimulus, as well as spillovers from increased public spending in neighboring oil exporters, are also helping sustain demand. For much the same reason that these countries have experienced a comparatively muted slowdown, they can only look forward to a very modest rebound. Higher oil prices are also of concern, especially for the poorer countries of the group.

  • The global slowdown’s main transmission channel has been a reduction in receipts from abroad. Merchandise exports and foreign direct investment have been hardest hit, and are projected to decline by 16 percent and 32 percent, respectively, in 2009. Tourism receipts and remittances are also lower, but not by as much.
  • Oil importers in the Maghreb (Mauritania, Morocco, and Tunisia) have been highly exposed to the slowdown in the European Union—their main partner for trade and remittances. In Morocco, however, an exceptional agricultural harvest has mitigated the impact of the global economic slowdown on overall output.
  • For 2010, a slow recovery in partner country economies, combined with limited scope for further countercyclical policy action, imply that growth—projected at 3.8 percent—will remain relatively flat.
  • High debt levels in most MENAP oil importers limit the space for fiscal stimulus, and the scope for monetary easing will be constrained by an anticipated increase in global interest rates from current historical lows. With narrowing room for continued stimulus, policymakers need to focus more on supply side reforms that will help boost private sector activity and employment and enhance competitiveness. In countries without fixed exchange rate regimes, greater flexibility in exchange rates will facilitate these goals.

The global crisis has severely impacted the CCA, with growth for the region projected to drop from 6.6 percent in 2008 to 1.5 percent in 2009. But this average masks important differences across countries. Most CCA energy exporters are projected to record solid growth in 2009, given limited linkages to international markets, long-term energy export contracts, and supportive policies. The energy importers, however, are facing a marked slowdown in growth and deteriorating living standards as a result of a sharp drop in remittances from Russia. A modest recovery for the CCA as a whole is expected in 2010.

  • Three of the four energy exporters—Azerbaijan, Turkmenistan, and Uzbekistan—are projected to register robust growth in 2009, supported mainly by public spending made possible by ample public savings accumulated during previous boom years. Kazakhstan, however, is in the midst of a banking crisis and is likely to see negative growth of about 2 percent in 2009. With global energy demand increasing again, the energy exporters should continue to see solid growth rates in 2010.
  • CCA energy importers are being hit to varying degrees. Armenia, which is more integrated into global markets, is likely to suffer a contraction of more than 15 percent in 2009, while Georgia, the Kyrgyz Republic, and Tajikistan are faring better. The recovery in 2010 is projected to be slow and gradual.
  • Policymakers have responded to the downturn by easing fiscal and monetary policies and strengthening social safety nets. In the energy importers, where governments have little space to implement such measures, donors, including the neighboring states of Russia and China, and the IMF have provided support.
  • In 2010, where possible, fiscal policy should continue to be supportive of growth and prioritize social protection. Additional donor support on concessional terms will be needed for the energy importers to prevent a buildup of unsustainable debt levels. The energy exporters should use part of their anticipated increase in revenue from rising energy prices to push ahead with structural reforms.
  • Financial sectors across the region are under stress, most notably in Kazakhstan, where restoring financial health remains a priority. Countries should continue to preserve exchange rate flexibility or move toward flexible exchange rate regimes over time to protect or develop export-oriented sectors.

In sum, where feasible, countries should continue to support domestic demand to mitigate the impact of the crisis on their citizens while keeping debt sustainability in view. For the region’s low-income countries, higher donor support will be necessary to maintain needed economic development and prevent poverty rates from rising further. Across the region, governments should further strengthen financial systems and take care not to lose momentum on structural reforms aimed at diversifying their economies, creating employment opportunities, and allowing them to take advantage of the global economic recovery.

World Economic Outlook1

After a deep global recession, world economic growth in 2010 is expected to turn positive, as wide-ranging public intervention has supported demand and lowered uncertainty and systemic risk in financial markets. The recovery is expected to be slow, as financial systems remain impaired, support from public policies will gradually have to be withdrawn, and households in economies that suffered asset price busts will continue to rebuild savings while struggling with high unemployment. Global activity is forecast to contract by about 1 percent in 2009 and, in 2010, to expand by about 3 percent, which is well below the rate achieved before the crisis (see table).

Overview of the World Economic Outlook Projections(Percent change, unless otherwise noted)
Year over Year
World output5.23.0−1.13.1
Advanced economies2.70.6−3.41.3
Of which: United States2.10.4−2.71.5
European Union3.11.0−4.20.5
Emerging and developing economies8.
Of which: MENAP6.
Commonwealth of Independent States8.65.5−6.72.1
Of which: Russia8.15.6−7.51.5
World trade volume (goods and services)7.33.0−11.92.5
Commodity prices (U.S. dollars)
Nonfuel (average based on world commodity export weights)14.17.5−20.32.4
Source: IMF, World Economic Outlook (October 2009).

Simple average of prices of U.K. Brent, Dubai, and West Texas Intermediate crude oil. The average price of oil in U.S. dollars a barrel was $97.03 in 2008; the assumed price based on future markets is $61.53 in 2009 and $76.50 in 2010.

Source: IMF, World Economic Outlook (October 2009).

Simple average of prices of U.K. Brent, Dubai, and West Texas Intermediate crude oil. The average price of oil in U.S. dollars a barrel was $97.03 in 2008; the assumed price based on future markets is $61.53 in 2009 and $76.50 in 2010.

Advanced economies are projected to expand sluggishly through much of 2010, with unemployment continuing to rise until later in the year. Annual growth in 2010 is projected to be about 1¼ percent, following a contraction of 3½ percent in 2009. In emerging economies, real GDP growth is forecast to reach almost 5 percent in 2010, up from 1¾ percent in 2009. The rebound is driven by China, India, and a number of other emerging Asian economies. Other emerging economies are staging modest recoveries, supported by policy stimulus and improving global trade and financial conditions.

Downside risks to growth are receding gradually, but remain a concern. The main short-run risk is that the recovery stalls. Premature exit from accommodative monetary and fiscal policies seems a significant risk because the policy-induced rebound might be mistaken for the beginning of a strong recovery in private demand. In general, the fragile global economy still seems vulnerable to a range of shocks, including rising oil prices, a virulent return of swine flu, geopolitical events, or resurgent protectionism.

Short-run risks are not only on the downside, as evidenced by the recent, more rapid-than-expected improvement in financial conditions. In particular, the policy-induced reduction in fears about a 1930s-style crash in activity and the accompanying strong rebound in financial market sentiment might induce a larger-than-expected surge in consumption and investment across a number of advanced and emerging economies.

The key policy priorities remain to restore the health of the financial sector and to maintain supportive macroeconomic policies until the recovery is on a firm footing, even though policymakers must also begin preparing for an eventual unwinding of extraordinary levels of public intervention. The challenge is to map a middle course between unwinding public interventions too early, which would jeopardize progress made in securing financial stability and recovery, and leaving these measures in place too long, which carries the risk of distorting incentives and damaging public balance sheets.

1 See IMF, World Economic Outlook (October 2009) for more information.

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