The International Monetary Fund (IMF) said oil prices are expected to weaken gradually over the next three to four years and the Middle East needs to invent new economic model, given the changes in the region and rebalances, especially in the energy sector.
Finding that crude prices have shot up 20% (since its publication of World Economic Outlook in October 2017), fuelled by the Organisation of the Petroleum Exporting Countries' decision to extend production cut; IMF managing director Christine Lagarde said: "Nonetheless, I expect oil prices to gradually decline over the next three to four years."
Addressing a roundtable, organised by Qatar University in association with the Ministry of Finance, she said the economic recovery in the Middle East and North Africa is projected to be generally subdued at around 3.2% against an average 5.6%; and in the Gulf region, growth is expected to recover to 1.8% this year after declining slightly in 2017 due to oil production cuts.
About the Middle East, Lagarde pointed out several fundamental challenges facing the region such as persistent low growth, high unemployment, and weak governance and hence it is imperative to have more inclusive and sustainable growth.
"Given the changes taking place and given the rebalancing, particularly related to energy, a new economic model needs to be invented," she said, adding “achieving more robust and inclusive growth is a shared responsibility and vitally important not only for the region, but also for the rest of the world.
It is not only about economic diversification, which is absolutely critically needed, but it is also about changing the balance between the public and private sectors, the IMF chief said in the context of new economic model.
Highlighting that simply adjusting to lower oil prices would not be enough for the Gulf oil producers, an IMF research paper had said these countries are seeking to reduce their reliance on oil, strengthen their budgets, and encourage a more vibrant private sector than can create job opportunities for more people.
Observing that the Arab region has been purchasing peace during crisis and price for this peace is to be borne by public sector jobs, she said given the fiscal constraints, the IMF would recommend the region to move away from public sector rejuvenation of the economy to opening up the private sector.
She also said oil subsidies are not justifiable for plenty of reasons because of the fiscal drain on the economy, very limited targeting and more importantly lack of price signals which lead to excessive consumption of limited resources.
Lagarde said the global economy is in a "sweet spot" because from 3.2% growth in 2016, it has reached 3.7% in 2017 and is expected to be 3.9% in 2018. Moreover, 120 countries saw stronger growth last year, accounting for three-quarter of global gross domestic product.
Among the attendees were QU president Dr Hassan al-Derham; Dr Ibrahim al-Ibrahim, economic advisor at the Emiri Diwan; Qatar Development Bank chief executive Abdulaziz bin Nasser al-Khalifa; and officials from QU and the Ministry of Finance, as well as QU deans, faculty and staff.
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