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Oil funds see Mideast through downturn
Adam Schreck The Associated Press
The Middle East has weathered the global economic downturn better than other parts of the world because its energy exporters were able to tap billions of dollars in oil profits collected when prices were booming, the International Monetary Fund said Oct. 11.
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.
Doing so not only blunted the impact of the downturn on their own economies, but also helped shore up the economies of neighboring countries without large oil reserves, the IMF said.
“By and large, they all responded quickly and decisively. ... They continued spending,” the IMF’s Middle East and Central Asia Director Masood Ahmed said of the major oil exporters. “This acted, if you like, as a bit of a circuit breaker in terms of not having that shock transmit itself into the non-oil economy.”
$350 billion drawdown That spending came at a price.
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 Persian Gulf as well as far smaller exporters such as Sudan and Yemen.
“The interesting thing for me is not so much that it happened, but the magnitude,” Ahmed said at a presentation of the report in Dubai.
The plunge in oil prices from last year’s record high near $150 a barrel has left the Middle East’s oil exporters with less revenue to replenish its cash reserves this year.
The IMF expects the portion of the countries’ economies based on oil to fall by 3.5 percent this year. That drop is partially offset by slower but still positive growth of 3.2 percent in the rest of the economy.
Next year, the IMF expects the region’s oil exporters will see both the oil and non-oil parts of the economy rise by around 4 percent.
A rebound in demand for oil should also allow energy exporters to refill their coffers with more than $100 billion in oil revenue next year, the IMF predicts.
Money from workers Mideast countries without oil exports to fall back on have been only moderately hurt by the global recession, the IMF said.
That is because they are not so tightly linked to the global banking system, and because trade and labor ties allowed them to benefit from richer neighbors’ willingness to spend.
“The fact that (Gulf) countries have maintained spending had positive spillover effects ... to the oil importers, which are also labor exporters,” said Nasser Saidi, chief economist of the Dubai International Financial Center.
Much of that gain came from money sent home by Arab workers living in Dubai and other Gulf business hubs.
Those worker remittances officially account for 15 percent of Jordan’s economy, and more than 20 percent of the economies of Lebanon and Egypt, though unofficial remittance levels may be double that, Saidi said.
“So remittances played a very, very important role,” he said.
The IMF expects the economies of the region’s non-oil exporters to grow at 3.6 percent this year, down from 5 percent in 2008.
Just as their economies took a less severe hit during the downturn the IMF expects they “can only look forward to a very modest rebound” as the world economy improves.
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