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Contribution to Book
Middle East and North Africa Oil Exporters: Increase Resilience and Create Private-Sector Jobs
Middle East and Central Asia Regional Economic Outlook (2012)
  • Alberto Behar, International Monetary Fund
Abstract
The region's oil-exporting countries have been able to use the proceeds from booming oil prices to sustain growth in a weak global environment. For the group as a whole, growth is expected to rise to about 6½ percent in 2012 on the back of a strong, better-than-expected recovery in Libya, and is forecast to return to a rate of almost 4 percent in 2013. GCC growth continues to be robust, supported by accommodative monetary and fiscal conditions, but is expected to slow from 7½ percent in 2011 to 3¾ percent in 2013 as oil production reaches a plateau. The price of oil is expected to remain above US$100 per barrel in 2012–13. As a result, the oil exporters’ combined current account surplus is anticipated to remain near its historic high of about US$400 billion in 2012. However, these surpluses are sensitive to a change in the oil price: a 10 percent drop in oil prices would bring down that surplus by about US$150 billion. In the context of booming oil prices and growing social demands, government expenditure on wages and salaries has been rising dramatically in most oil exporters in recent years. This stepped-up spending means that fiscal breakeven prices have risen faster than the actual oil price and are expected to continue to rise, increasing the vulnerability to a negative oil price shock. Although many countries have the buffers to withstand short-run oil price volatility, a sustained drop in oil prices resulting from a further slowdown in global economic activity remains a key risk. To boost resilience to oil price declines and achieve greater intergenerational equity, fiscal policy can gradually shift to bolstering national savings. Some low-income oil exporters face constrained budgets and immediate difficult trade-offs. The GCC countries, where the expansionary fiscal stance has been appropriate in the absence of overheating ressures, could ease the pace of government spending, especially on hard-to-reverse expenditures like public-sector hiring, which tends to crowd out private-sector employment. Broader structural reforms, including reduced restrictions on international trade in services and measures to reduce skills mismatches, would also help generate private-sector jobs and inclusive growth.
Disciplines
Publication Date
Fall 2012
Editor
Paul Cashin
Publisher
International Monetary Fund
Citation Information
Alberto Behar. "Middle East and North Africa Oil Exporters: Increase Resilience and Create Private-Sector Jobs" Middle East and Central Asia Regional Economic Outlook (2012)
Available at: http://works.bepress.com/alberto_behar/32/