Kristina Georgieva, the International Monetary Fund (IMF) managing director, spoke at the World Governments Summit in Dubai on 11 February, where she discussed the resilience of the global economy despite a number of challenges. Georgieva highlighted the impact of short-term oil production cuts, the Israel-Gaza conflict, and tight monetary policies in the Middle East.
Despite these challenges, Georgieva noted that surprisingly, the global economy has been resilient and growth exceeded expectations in 2023. However, she also pointed out that any further widening of the Israel-Gaza conflict could worsen the economic situation for countries still recovering from previous shocks.
Georgieva added that declining oil demand will become an increasingly challenging issue over the medium term for net energy importers. These countries are already limited by historically high debt and borrowing needs and have limited access to external financing. This could make it more difficult for them to maintain their current levels of economic growth.
The IMF expects 2024 GDP growth for the Middle East and North Africa (MENA) region to reach 2.9%, down from 3.4% previously. Despite this slight decline, Georgieva believes that growth in 2024 will still be robust and surpass previous year’s growth rate. However, she also emphasized that while there is reason to be optimistic about future economic prospects in this region, there is still much work to be done to address long-term structural issues such as debt sustainability and low productivity levels.
On February 12th, the IMF is publishing a paper recommending gradual energy subsidy reforms for the Middle East region which could save $336bn equivalent to economies of Iraq and Libya combined. Georgieva suggested that eliminating regressive energy subsidies would discourage pollution and help improve social spending by freeing up resources for other priorities such as education and healthcare.