IMF warns of volatile oil prices, ‘double-digit’ inflation in Middle East
'We see vulnerabilities going up again, and this is why countries are encouraged to do more structural reforms, to inch up their growth'
Despite being shielded from last month’s banking turmoil in the United States and Europe, banks in the Middle East and central Asia are facing financial pressure from high-interest rates, volatile oil prices, and years of double-digit inflation, a top IMF official warned Saturday.
Jihad Azour, director of the International Monetary Fund’s (IMF) Middle East and Central Asia department, said the banking sector strains have coincided with tighter monetary policies that raised rates and reduced access to finance.
"We are worried because the matrix of risks keeps growing: high-interest rates, volatility in oil prices, geopolitical tensions, and it's the third year in a row where you have double-digit inflation," Azour said.
He noted that there was an increasing gap between countries that had good credit and were able to access the markets – including Morocco, Jordan, and oil exporters – and others who were struggling.
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The IMF on Thursday forecast that GDP growth in the Middle East and north Africa will slow to 3.1 percent in 2023, down over two percent from a year ago. However, stability in the financial sector was not the primary concern in the region, Azour continued, taking a back seat to worries of high debt levels and the risk of social unrest.
"We see vulnerabilities going up again, and this is why countries are encouraged to do more structural reforms, to inch up their growth by at least one or two percent," he said.
"And they have a window of opportunity with governments now willing to do more, and not to put money in the central bank coffers."