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IMF chief says oil cuts weigh on Mena GDP growth  

Stunted GDP growth 'is largely due to short-term cuts in oil production' said IMF chief Kristalina Georgieva Reuters/Denis Balibouse
Stunted GDP growth 'is largely due to short-term cuts in oil production' said IMF chief Kristalina Georgieva

Gross domestic product (GDP) growth for the Middle East and North Africa (Mena) is expected to reach 2.9 percent in 2024, which is higher than last year, but still below October 2023 projections, International Monetary Fund (IMF) managing director Kristalina Georgieva said.

“This is largely due to short-term cuts in oil production, the Gaza-Israel conflict, and tight monetary policies, which are still needed,” she said in her keynote speech at the eighth annual Arab Fiscal Forum in Dubai.

Among exporters, slow growth outside the hydrocarbon sector is another factor, Georgieva said, adding that the declining oil demand will become an increasing headwind over the medium term. 

The IMF had projected a growth of 3.4 percent for the year.

Economically, the impact of the conflict has been devastating in Gaza, where activity dropped 80 percent from October through December compared with a year earlier—and in the West Bank, where the drop was 22 percent. 

The Palestinian economy’s dire outlook is worsening as the conflict persists – only a durable peace and political solution will fundamentally change it, Georgieva said. 

The IMF will continue to provide policy advice and technical assistance to the Palestinian Authority and the Palestinian Monetary Authority, she added.

Looking at neighbouring economies, the conflict is weighing on tourism, a lifeline for many. “We are closely watching the fiscal impacts, which could be seen in areas such as higher spending on social safety nets and defense.”

Across the region and beyond, the impact is felt through rising freight costs and reduced Red Sea transit volumes, down by nearly 50 percent this year, according to IMF’s PortWatch data.

“This exceptionally uncertain moment compounds the challenges of economies that are still recovering from previous shocks. And further widening of the conflict would aggravate the economic harm,” Georgieva said.

However, the IMF official said they are a bit more confident about the economic outlook because the global economy has been surprisingly resilient. 

Growth exceeded expectations in 2023, and global headline inflation is expected to fall in 2024, but Georgieva said it was too premature to declare victory.

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