Oil exporters in the Middle East and North Africa region are expected to increase their international reserve positions by over $100 billion in 2010 as oil prices rebound, the IMF said Sunday. The rebuilding of their international reserve positions would help governments of the region maintain public spending, which has helped mitigate the impact of the global financial turmoil on their economies, the International Monetary Fund said in report released in Dubai. “With higher oil prices and the anticipated re-emergence of global demand, oil revenues are expected to increase, allowing oil exporters to rebuild their international reserve positions by over 100 billion dollars in 2010,” the Middle East and Central Asia Regional Economic Outlook said. Oil exporters — Algeria, Bahrain, Iran, Iraq, Kuwait, Libya, Oman, Qatar, Saudi Arabia, Sudan, United Arab Emirates and Yemen — have suffered as oil prices dropped to near $30 per barrel around the turn of the year from a life-time high of $147 per barrel in July 2008. As a result, the current account surplus of these countries dropped by nearly $350 billion. Since then, the price of oil has rebounded to around 70 dollars per barrel. “The use of reserve buffers for countercyclical spending by oil exporters mitigated the impact on their own economies and generated positive spillovers for their neighbors,” IMF Middle East and Central Asia Department Director Masood Ahmed said in a press release. The IMF projected that the economies of all countries of the Middle East and North Africa in addition to Afghanistan and Pakistan are expected to grow 4.0 percent in 2010. The Fund also said that strengthening financial regulation and supervision is crucial to cushioning the financial system against future shocks. Gulf Arab economic growth is expected to slow to 0.7 percent in 2009 from 6.4 percent in 2008 but rising to 5.2 percent next year, the IMF said. The IMF report said that the impact of the crisis in the region is most visible in the oil sector, where output is projected to contract by 3.5 percent in 2009. “The MENAP (Middle East, North Africa, Afghanistan and Pakistan) oil exporters were directly affected by the global financial crisis through a sharp drop in oil prices, a contraction in the global economy, and a sudden drying up of capital inflows,” the report said. Oil importers' economic growth will slow to 3.6 percent this year from 5 percent in the previous year but the report said that they will be straddled by high debt levels that would limit the space for fiscal stimulus. Ahmed also said that the Middle East has weathered the global economic downturn better than other parts of the world because the region's energy exporters were able to tap billions of dollars in oil profits from when prices were booming. By reaching into those reserves, major oil producers like Saudi Arabia shielded their economies from the worst of the slump by maintaining government spending and injecting liquidity into domestic banking systems rattled by the credit crisis. The IMF estimates Mideast oil exporters together drew down their rainy-day reserves by nearly $350 billion over the past year. That figure includes the major exporters in the Arabian Gulf as well as far smaller exporters such as Sudan and Yemen.
