IMF improves MENA outlook, warns of possible global recession

The International Monetary Fund (IMF) provided Saturday a darker outlook on the global economy compared to its April update. In return the IMF improved the outlook for the Middle-East and North Africa region. The QNB Group released a statement today showing that the IMF has now upped its expectation for the growth rate of the MENA region to a rate of 5.5% in 2012, from 4.3% in its April forecast. The figure would be en-par with the average for emerging economies. QNB Group stated that the increase was "by far the largest positive revision for any region or country." The IMF said that the boost was provided due , however, note that the boost was due in part to the recovery of some of the economic activity in Libya and to the increase in oil production across the region. The IMF back in April expected Libya to achieve a whooping growth rate of 76% as a result of Libyan oil production returning to pre-revolution levels. The Fund also saw Iraq achieving a relatively high growth rate of 11%, due to foreign investment in oil. The IMF, also in its April forecast, saw most MENA countries achieve a growth rate between 2-3%, with the GCC achieving a slightly higher growth rate average of 6%. The IMF did not provide a separate forecast for both countries for July forecast however. QNB Group said in its statement that the IMF's stronger regional outlook in its July update was "particularly striking given further deterioration in Syria since April, which is also having a negative economic impact on its neighbors." On the flip side expansionary spending plans in some countries’ budgets, including Qatar’s, have probably contributed to the IMF’s forecast of higher domestic demand, the Group said. The IMF's outlook for the global GDP however was not optimistic as it was for MENA. The fund revised the global GDP downwards by 0.1% to 3.5% in 2012, and by 0.2% to 3.9% in 2013. India was the biggest loser as its GDP growth was revised down by 0.7%, while both Brazil and the UK were also revised down by 0.6%. On the other side, Germany and Japan were the most notable performers, as the two countries' GDP was revised upwards by 0.4%. The IMF saw that there were a number of immediate risks threatening the global GDP. The most prominent of which was the failure of policy makers to protect banks in the Eurozone, especially in Spain and Greece. The IMF also saw that a failure by US politicians in negotiating a revision for automatic tax rises and spending cuts would complicate the global economic situation even further. The tax and spending cuts, which would take effect in 2013, could cut the GDP of the US by 4% according to the IMF. Which would mean that the US economy could fall into recession, threatening the entire global economy to follow as a result.