Regional Economic Outlook May 2018

Risks to the global outlook are broadly balanced in the near term, but are skewed to the downside over the medium term. In addition to the risk of tighter financial conditions, escalating import tariffs or a shift toward inward-looking policies could harm international trade, reduce global growth, and dampen commodity prices. And the region continues to be exposed to the risk of worsening geopolitical tensions and conflicts. 

The outlook for oil prices remains highly uncertain, largely reflecting supply-side uncertainty. Oil prices grew strongly in the second half of 2017, rising above $65 a barrel in January, supported by the improved global growth outlook, extension of the OPEC+ agreement (limiting oil production through the end of 2018), unplanned outages, and geopolitical tensions. More recently, with rapidly rising US shale production, the price of oil has edged down. In this context, while the oil price assumptions for 2018 and 2019 have been revised upward relative to the October 2017 Regional Economic Outlook: Middle East and Central Asia (see figure), the medium term outlook for oil prices remains subdued. 

See the April 2018 World Economic Outlook, Global Financial Stability Report, and Fiscal Monitor for a more comprehensive discussion of the global outlook.

Risks to the global outlook are broadly balanced in the near term, but are skewed to the downside over the medium term. Specific risks include a rapid tightening of global financial conditions, while escalating import tariffs or a shift toward inward-looking policies could harm international trade, reduce global growth, and dampen commodity prices. 

The outlook for oil prices remains highly uncertain, largely reflecting supply-side uncertainty. Oil prices grew strongly in the second half of 2017, rising above $65 a barrel in January, supported by the improved global growth outlook, extension of the OPEC+ agreement limiting oil production through the end of 2018, unplanned outages, and geopolitical tensions. More recently, with rapidly rising US shale production, the price of oil has edged down. In this context, while the oil price assumptions for 2018 and 2019 have been revised upward relative to the October 2017 Regional Economic Outlook: Middle East and Central Asia (see figure), the medium-term outlook for oil prices remains subdued.

See the April 2018 World Economic Outlook, Global Financial Stability Report, and Fiscal Monitor for a more comprehensive discussion of the global outlook.

A number of assumptions have been adopted for the projections presented in the Regional Economic Outlook: Middle East and Central Asia. It has been assumed that established policies of national authorities will be maintained, that the price of oil¹ will average US$62.3 a barrel in 2018 and US$58.2 a barrel in 2019, and that the six-month London interbank offered rate (LIBOR) on U.S.-dollar deposits will average 2.4 percent in 2018 and 3.4 percent in 2019. These are, of course, working hypotheses rather than forecasts, and the uncertainties surrounding them add to the margin of error that would in any event be involved in the projections. The 2018 and 2019 data in the figures and tables are projections. These projections are based on statistical information available through early April 2018.

What’s new: Arithmetically weighted averages are used for all data aggregates except consumer price index, for which geometric averages are used. Aggregates for fiscal data (tables 10–17) are sums of individual country data after conversion to US dollars at the average market exchange rates in the years indicated, in percent of aggregate GDP, also in US dollars ². The impact of these changes has been relatively insignificant on inflation, and more significant on fiscal balances, but does not change the overall assessment of the outlook.

2011 data for Sudan exclude South Sudan after July 9; data for 2012 onward pertain to the current Sudan.

All data for Syria are excluded for 2011 onward due to the uncertain political situation.

All data refer to the calendar years, except for the following countries, which refer to the fiscal years: Afghanistan

(March 21 to March 20 until 2011, and December 21 to December 20 thereafter), Iran (March 21 to March 20), Qatar (April to March), and Egypt and Pakistan (July to June) except inflation.

Data in Tables 7 and 8 correspond to the calendar year for all aggregates and countries, except for Iran, for which the Iranian calendar year (beginning on March 21) is used.

Data for West Bank and Gaza are included in all tables except in 3–6, 8, 10, 13, and 14.

In Tables 3, 6, 13, and 14, “oil” includes gas, which is also an important resource in several countries.

REO aggregates are constructed using a variety of weights as appropriate to the series:

• Composites for data relating to the domestic economy (Tables 1, 3, 7–8), whether growth rates or ratios, are weighted by GDP valued at purchasing power parities (PPPs) as a share of total MCD or group GDP. Country group composites for the growth rates of broad money (Table 9) are weighted by GDP converted to U.S. dollars at market exchange rates (both GDP and exchange rates are averaged over the preceding three years) as a share of MCD or group GDP.
• Composites relating to the external economy in nominal terms (Tables 18–20 and 22) are sums of individual country data. Composites relating to external economy in percent of GDP (Tables 21 and 23) are weighted by GDP in U.S. dollars as a share of MCD or group GDP in U.S. dollars.
• Composites in Tables 2, 4, and 5 are sums of the individual country data.

The following conventions are used in this publication:

• In tables, ellipsis points (. . .) indicate “not available,” and 0 or 0.0 indicates “zero” or “negligible.” Minor discrepancies between sums of constituent figures and totals are due to rounding.

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1. Simple average prices of U.K Brent, Dubai, and West Texas Intermediate crude oil.

2. These changes are introduced to bring MCDREO aggregation methodology in line with the WEO. Please refer to http://www.imf.org/external/pubs/ft/weo/data/changes.htm for more information.