World Economic and Financial Surveys
Regional Economic Outlook Update:
Middle East and Central Asia
©2012 International Monetary Fund
Middle East and North Africa: Historic Transitions under Strain
The Middle East and North Africa (MENA) region is going through a period of unprecedented change. In the 'Arab Spring' countries, political transition, pressing social demands, and an adverse external environment have combined to increase the near-term risks to macroeconomic stability. These risks were contained during 2011 but, with growth faltering, unemployment rising, and continued fiscal and external pressures, 2012 will be an equally challenging year. Moreover, many countries are faced with diminished policy space, having eaten into their foreign exchange and fiscal buffers during 2011. There is a risk that these developments could derail the historic transition that is under way in these countries, and managing this risk is a shared international responsibility. Arab Spring countries need to set out on their own paths toward economic modernization and transformation. At the same time, the international community is called upon to provide financial support and technical and policy advice, as well as enhanced market access, to support homegrown reform agendas. On the other hand, Middle East oil exporters are benefiting from high oil prices. Growth in 2011 was concentrated in Gulf Cooperation Council countries, but is expected to pick up further and be more broad-based across the region in 2012.
Caucasus and Central Asia Set for Solid Growth, But Global Risks Loom Large
The Caucasus and Central Asia (CCA) region recorded fairly strong economic performance in 2011, underpinned by robust commodity exports and remittance inflows. Although growth of such flows is expected to moderate in the near term—reflecting a weaker external environment—CCA economies are still expected to hold up well. This broadly positive outlook presents an opportunity for CCA policymakers to rebuild policy buffers, prepare for downside risks that might materialize, and foster an inclusive growth agenda.