Better ME Prospects But Not In Iran.

Rising oil revenues have bolstered economic growth in the Middle East, and the outlook remains good because oil prices are expected to stay high, according to the IMF. Economic growth in the region is projected at 6% this year, and is likely to moderate to roughly 5.5% in 2007, the Washington-based group said in a report on global economies ahead of its annual meeting in Singapore this week. The report said growth in the non-oil sector was currently 8%, but most countries were able to contain rising inflation with pegged exchange rates and open product and labour markets alongside low global inflation.

Iran, however, is struggling with an inflation rate officially put at about 12%, with independent observers saying it is over 20% per annum. Iran is facing a US determined to prevent Tehran to expand its geo-political influences in the region and to have the atomic bomb (see news12-TerrorWar-Sep18-06).

The IMF report said another Middle Eastern country with a grim outlook was Lebanon, where growth was hampered by political uncertainty and was likely to fall significantly in 2006 because of the recent war between Israel and Hizbullah.

The IMF said: "The central policy challenge for the oil-exporting countries remains managing booming oil revenues". It said most countries had used higher revenues to increase spending on infrastructure and programmes to provide employment for burgeoning populations, adding: "At the current juncture, there seems ample scope for this buildup of spending, given high unemployment in many countries and still low inflation". It warned of the threat of overheating amid continued rapid credit growth.

The IMF urged countries to allow the "full pass-through" of higher global oil prices to end-users to ensure budget sustainability and changes in energy consumption. It praised recent fuel price increases in Jordan as the right move. The IMF also said Egypt had an opportunity to use a favourable economic outlook to reduce its large fiscal deficit, setting the stage for a trend of declining public debt. It said Saudi Arabia was correct to lift restrictions in equity markets for foreign investors. It said: "Reforms aimed at improving market liquidity and transparency will help to reduce asset price volatility that is not related to fundamentals".