Mideast oil powers weather economic woes: IMF


Middle East oil powers are using their increased wealth to weather the global economic strife but cannot escape the inflation that has been fueled by their main export, the IMF warned on Wednesday.


Inflation in Iran is predicted to peak at 20.7 per cent this year, the International Monetary Fund's World Economic Outlook report said, leading a surge in prices across the Middle East.


The region's economies "are becoming more diversified and benefiting from improved policies and structural reforms that are under way in many countries. This should strengthen the resilience of the region to a slowdown in the advanced economies.


"Nonetheless, the region remains sensitive to developments in advanced economy trading partners, especially western Europe."


Growth across the Middle East remains strong at 5.8 per cent across the region in 2007 and hitting 6.1 per cent in 2008 and 2009, the IMF said.


All the major oil exporters would see stable growth this year. Iran's economy was predicted to expand 5.8 per cent this year, unchanged from 2007, before falling next year to 4.7 per cent.


Saudi Arabia was predicted to see 4.8 per cent growth this year, up from 4.1 per cent in 2007 and rising to 5.6 per cent in 2009. Egypt's economy was predicted to advance 7 per cent this year and 7.1 per cent next year.


Lebanon's growth fell this year however to 3 per cent from 4 percent in 2007 and was only predicted to start recovering in 2009 at 4.5 per cent.


Tighter global financial markets could "slow the pace of capital inflows and investment" it warned. "In a number of countries, political and security risks remain important."


The IMF said Middle East nations must "maintain progress toward increasing integration with the global economy and to reduce poverty in the context of a less-friendly global environment."


Inflation pressures "have risen considerably in recent months, owing to strong domestic demand, rising food prices, and higher rents" in the Gulf states where there are housing shortages.


In Iran, consumer price index is at 20 per cent and is near 14 per cent in Qatar and above 9 per cent in the UAE – a 19-year high.


The UAE and Oman have capped rents and Saudi Arabia has put subsidies on some food items because of higher prices. But the IMF said the inflation outlook was "broadly balanced."


The IMF said oil production levels have barely changed "but high oil prices are supporting increased government spending, including on infrastructure and social projects, and strong expansion of credit to the private sector."


Growth in countries like Egypt has been "spurred by trade and financial spillovers from oil-exporting countries as well as domestic reforms." (AFP)