Tightening liquidity, trade tensions and ongoing structural issues mean that Middle Eastern nations are facing a multitude of challenges, according to the International Monetary Fund’s (IMF) regional director, Jihad Azour.
The director of the Middle East and Central Asia Department at the IMF said that “The matrix of risks has local or regional components, as well as international components.”
“On the international side, the increased tension on trade could have an impact on the region, especially indirectly. The tightening of global financial conditions, if interest rates will continue to go up and liquidity will be less available, this will affect countries with a high level of debt — mainly oil importing countries where the average debt exceeds 80 percent (of gross domestic product),” Azour said, speaking to CNBC’s Hadley Gamble on Monday.
“Last but not least, some countries have succeeded in implementing reforms but what is important is to keep the momentum there and to address some of the structural issues,” he said. “This region needs to create at least 25 million jobs for the young generation in the next five years,” he said.
Azour’s comments come as the IMF released a report on the Middle East, North Africa, Afghanistan and Pakistan (MENAP) region on Wednesday. The IMF states in the research that oil price uncertainty, the tightening of financial conditions and regional conflicts were all tangible risks for the growth outlook.
It advocates a raft of changes, ranging from energy subsidy reforms and public wage bill reforms to implementing fairer taxation practices.
“With growth prospects low relative to historical standards, it is paramount to accelerate the structural reform agenda and move to a new growth model that promotes diversification and private sector development,” the IMF said in its report.
“Labor market and education reforms that boost productivity and create opportunities for everyone will be critical. Some important steps have been taken, but more needs to be done.”
It singled out country-wide reform programs for praise but believed these could go further. It highlighted investment in education and innovation by the United Arab Emirates and also Iran developing programs to foster job creation for young individuals and women.
“Bahrain has introduced a wage protection system and significant measures to increase job flexibility for expatriates. In Qatar, a visa-free entry program to stimulate tourism was recently announced, along with a new law that seeks to expand the protection of expatriate labour. But these reforms should also be underpinned by efforts to increase transparency and accountability, and by stronger institutions and governance,” the IMF said.