Oil exporters offset core inflation in Middle East; Growth to slow
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KUWAIT CITY, May 3, (Agencies): The International Monetary Fund (IMF) revealed in its recent Regional Economic Outlook (May 2023) that inflation is lower in a number of oilexporting countries, including Kuwait. The report cited factors leading to lower inflation in these countries compared to other parts of the world; such as “subsidies and caps on certain products, strengthening of the US dollar (to which many of the countries peg their currencies), and limited share of food in the consumer price index basket. It also disclosed that in the Gulf Cooperation Council (GCC) member- states, “non-oil primary balances (as a percentage of non-oil GDP) remained broadly unchanged in 2022 relative to 2021. Despite a substantial increase in oil revenues — about four percentage points of GDP on average, primary current expenditures remained broadly stable.
Most countries avoided procyclical spending, except for Kuwait and Saudi Arabia, entirely reflecting higher capital expenditures. Overall, oil exporters have increased their buffers, as evidenced by improved fiscal balances in 2022 and some countries repaid public debt like Kuwait and Oman.” Also, “real GDP growth for MENA oil exporters is expected to slow from 5.7 percent in 2022 to 3.1 percent in 2023 (and to broadly maintain that pace in 2024) as the main driver of growth in most oil exporters shifts to nonhydrocarbon activities, reflecting agreed oil production cuts. Non-oil GDP is forecast to expand at a healthy clip in 2023 (about 3.7 percent), broadly unchanged from 2022, as the positive momentum in the retail and service sectors; particularly in Kuwait, Saudi Arabia and United Arab Emirates, is sustained thanks to abundant liquidity and continued reform momentum.”
Economies across the Middle East and Central Asia will likely slow this year as persistently high inflation and rising interest rates bite into their post-pandemic gains, the International Monetary Fund said Wednesday. The IMF’s Regional Economic Outlook blamed in part rising energy costs, as well as elevated food prices, for the estimated slower growth. The report said that while oil-dependent economies of the Gulf Arab states and others in the region have reaped the benefits of elevated crude prices, other countries – such as Pakistan – have seen growth collapse after an unprecedented flooding last summer or as economic woes worsened. The regional slowdown also comes as an explosion of fighting in Sudan between two top rival generals – who only a year ago as allies orchestrated a military coup that upended the African country’s transition to democracy – threatens a nation where IMF and World Bank debt relief remains on hold. Rising interest rates, used by central banks worldwide to try to stem inflation’s rise, increase the costs of borrowing money. That will affect nations carrying heavier debts, the IMF warned.
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