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October 12, 2009

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Middle East handled economic crisis better than most - IMF

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 yesterday.
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.
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... as a bit of a circuit breaker in terms of not having that shock transmit itself into the non-oil economy."
That spending came at a price.
The IMF estimates Middle East oil exporters together drew down their rainy-day reserves by nearly US$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.
The plunge in oil prices from last year's record high near US$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 US$100 billion in oil revenue next year, according to IMF's prediction.


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