- Mohamed El-Erian, and Susan Fennell
- Published Date:
- November 1997
© International Monetary Fund
Cover Design: IMF Graphics Section
El-Erian, Mohamed A., 1958–
The Economy of the Middle East and North Africa in 1997 / Mohamed A. El-Erian and Susan Fennell. –[Washington. D.C.] : Middle Eastern Dept., International Monetary Fund, 1997.
1. Middle East—Economic conditions–1979. 2. Middle East—Economic policy, 3. Africa, North—Economic conditions. 4. Africa North—Economic policy. I. Fennell, Susan. II, International Monetary Fund. Middle Eastern Dept.
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The authors are grateful for valuable comments from colleagues in the Middle Eastern and European I Departments. They are grateful for the contributions on country examples provided by Patricia Alonso-Gamo, Amer Bisat, Eric Clifton, Annalisa Fedelino, Thomas Helbling, Alexei Kireyev, Shahpassand Sheybani, and Sherwyn Williams. Special thanks are due to Rahul Dhumale for his contributions on investment and growth issues and to Peter Kunzel for his exceptional research assistance. Thomas Enger prepared the Annex on oil and natural gas in the GCC. Martha Bonilla, of the External Relations Department, edited the publication. Joan Wise and Anne Yee were very helpful in the final preparation of the manuscript. The views expressed in this study are the sole responsibility of the authors and do not necessarily reflect the views of the Executive Directors of the IMF or other members of the IMF staff.
After a decade of stagnating economic performance, the economic picture in the Middle East and North Africa (MENA) region improved considerably in 1996 and has remained favorable in 1997. Economic growth is estimated to be about 4 percent, and per capita income to have increased for the second consecutive year in 1997. Financial balances have also improved for the region as a whole, with a further reduction in the fiscal deficit and continued improvement in the external position.
This performance reflects, in part, favorable external factors (the sharp increase in international oil prices in 1996 and favorable weather conditions for the Maghreb economies), but most important, particularly in 1997, the effect of appropriate domestic economic policies—including government efforts to tighten fiscal and monetary policies.
Progress is also being made in overcoming the structural impediments in many countries. Steps have been taken to redefine the role of government; enhance financial intermediation; address inefficiencies in the labor market and introduce training schemes; deregulate domestic markets and production structures; liberalize highly protective external trade regimes; and strengthen institutions. However, MENA’s implementation of structural reforms, while accelerating, continues to lag that in many emerging markets. Further efforts are needed to increase investment and saving rates so as to place the economies on a higher growth path, address the difficult employment challenge and, for some countries, deal with disappointing social indicators.
In moving forward, MENA countries face a number of challenges. Most of all, they must move rapidly to restructure their economies in order to participate in the evolving globalization and reap the rewards, while minimizing the risks. With a less favorable outlook in this external environment, the onus of adjustment falls squarely on the MENA countries themselves.
Those MENA countries that are more advanced in macroeconomic stabilization and structural reform will need to widen and deepen those reforms, and embark upon a second generation of reforms aimed at advancing the transformation of the role of the state in the economy and increasing economic transparency. They face the additional challenge of “managing their growing success” in the increasingly complex global economy. For those countries that have not yet begun to reap the rewards of reform, determined action is needed in the short term to set a sound foundation for growth and avoid being marginalized in the rapidly globalizing world economy.