The IMF Director stated that economic growth in the Middle East is expected to decrease in 2024 due to reduced oil production and the ongoing conflict in Gaza.
According to the International Monetary Fund, the economies of the Middle East are falling behind growth expectations due to reductions in oil production and the ongoing conflict between Israel and Gaza. However, the overall global economic forecast remains strong.
IMF managing director Kristalina Georgieva addressed the Arab Fiscal Forum in Dubai, acknowledging uncertainties but praising the resilience of the global economy. However, she also cautioned about the potential for ongoing conflict in Gaza to have a wider impact on regional economies.
Last month, the IMF released a regional economic report where it lowered its prediction for GDP growth in the Middle East and North Africa to 2.9% for this year. This is lower than the previous forecast made in October, which can be attributed to temporary reductions in oil production and the ongoing conflict in Gaza.
Last month, the IMF raised its prediction for worldwide economic growth, improving the prospects for both the United States and China. The organization cited quicker-than-anticipated inflation relief as the reason for the upgrade.
According to Georgieva, countries near Israel and the Palestinian territories experienced a decline in tourism profits due to the ongoing conflict. Additionally, global shipping costs were affected by incidents in the Red Sea.
She explained that these factors added to the difficulties faced by economies that are still in the process of recovering from past shocks. This was said during the forum held alongside the World Governments Summit in Dubai.
Since mid-November, the Houthis in Yemen, who are aligned with Iran, have been using drones and missiles to target commercial ships in the Red Sea. They claim that these attacks are in support of Palestinians as Israel carries out strikes against Hamas militants in Gaza. However, the U.S. and its allies view these actions as reckless and a threat to international trade.
Many international shipping companies are redirecting their shipments to the Cape of Good Hope instead of using the shorter route through the Suez Canal in Egypt.
According to Reuters, Mohamed Maait, Egypt’s Finance Minister, stated during the summit that the impact of the Suez Canal diversion on revenues could potentially be mitigated by strong growth experienced prior to the event.
Georgieva stated that the IMF will release a report on Monday revealing that eliminating energy subsidies in the Middle East could result in savings of $336 billion, which is equal to the economies of Iraq and Libya combined.
Georgieva commented that getting rid of energy subsidies that disproportionately impact lower-income individuals also discourages environmental harm and supports increased investment in social programs.
According to the IMF, in 2022, approximately 19% of the gross domestic product (GDP) in the Middle East and North Africa (MENA) region was comprised of subsidies for fossil fuels.
The suggestion is to slowly decrease energy subsidies for economies in the region, including those that export oil, and instead provide targeted support.
The World Governments Summit is placing a strong emphasis on advanced technology, particularly Artificial Intelligence. Many high-ranking executives from prominent global tech companies, such as Sam Altman who is the CEO of OpenAI, are scheduled to give talks at the event.
According to Georgieva, approximately 40% of jobs worldwide are at risk due to AI, and nations without the necessary resources and trained workers to adapt may face setbacks.
Countries in the Middle East, such as the UAE and Saudi Arabia, have substantially boosted their funding for AI in order to diversify their sources of revenue.