Amid major global changes, the International Monetary Fund (IMF), in its latest reports, reduced growth expectations for the current year in a number of countries in the world, including China and the Eurozone. The new forecasts also extended to a number of countries in the Middle East, as a result of recent developments.
The IMF expected Saudi Arabia to achieve growth of 4 percent in 2024, compared to 2.8 percent in the previous estimate, adding that growth in the Middle East and Central Asia region would reach 3.4 percent next year, recovering from an expected growth of 2 percent this year.
In an interview with Asharq Al-Awsat, Dr. Jihad Azour, Director of the Middle East and Central Asia Department at the IMF, talk broadly about his vision of the situation in the region, and the reasons for lowering Saudi Arabia’s expectations for this year and raising them by a large percentage for 2024.
Azour noted that reducing growth expectations was based primarily on the decision taken in OPEC Plus to curb production, in addition to Saudi Arabia’s voluntary decision to commit to more reductions.
However, this decline was compensated for by the development of the non-oil sector, which is expected to grow by 5.8 percent, according to the IMF official.
Compared with the G20 countries, the Kingdom’s non-oil sector growth is high and is likely to maintain this level next year.
Azour explained that while the oil sector contributed to the decline of growth levels, the dynamism of the non-oil sector still exists, in parallel with an improvement in the volume of job opportunities, an increase of public investment and a continued economic diversification.
Regarding the Middle East region in general, Azour said that the policy of global monetary tightening and interest rates remaining high for a longer period than expected, would lead to a slowdown in economic activity.
Hence, it is important for the region to undertake structural reforms, which would improve the economic prospects without the need to resort to financial adjustment, Azour emphasized.
The IMF calls on the countries of the Middle East and North Africa region to implement structural reforms that will be a building block for achieving growth and creating job opportunities for thousands of young people. Asharq Al-Awsat asked Azour whether these countries would be able to achieve this breakthrough in light of the continued monetary tightening and amid growing crises and rising debt levels.
In this regard, the IMF official pointed to the difference between structural reform and structural correction. He noted that structural reform helps improve the business environment and prepares the ground for the private sector to play a greater role in the economy. It also strengthens labor markets, which would contribute to creating job opportunities, promoting governance and reforming the state institutions.
Azour explained that the Arab region suffers from a chronic unemployment problem, especially among youth and women. This imposes the necessity of accelerating structural reforms that will ultimately grant a greater role to the private sector, create a healthy business environment, and enhance the ability of entrepreneurs to launch projects and new businesses, he underlined.
In this context, he highlighted Saudi Arabia’s efforts to empower women and increase their participation in the labor market, by enacting laws that strengthen their contribution to the economy.
Situation in Egypt
According to Azour, the Egyptian economy is exposed, like all other countries, to external shocks. Therefore, it is essential to protect the economy by adopting a flexible and mobile exchange rate system, which gives the central bank the ability to maintain economic stability.
“But this is not only what is required. The program that was developed with Egypt has several pillars, including a flexible exchange rate, and granting the private sector a greater role in the economy,” he told Asharq Al-Awsat.
Last December, the IMF approved a loan worth $3 billion within the framework of the Extended Fund Facility for Egypt. The provision of payments under the 46-month program is subject to eight reviews. The first review was scheduled for March.
Egypt pledged to adopt a flexible exchange rate when it reached the loan agreement with the IMF late last year, but the official rate has remained almost unchanged for about six months, at about 30.93 pounds to the dollar.
