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Blanchard

Soaring prices great news for oil-producing nations

Special to World Tribune.com
MIDDLE EAST NEWSLINE
Wednesday, September 20, 2000

LONDON — Soaring oil prices have led to a strong comeback for oil-producing countries in the Middle East.

But the International Monetary Fund said that non-oil producing countries in the Middle East could see a reduction in their growth as their fuel bill grows higher. The organization predicts higher oil prices in the coming months.

"In the Middle East, economic growth among the Gulf oil exporters is projected to turn positive in 2000 and remain so in 2001," the IMF said in its semi-annual World Economic Outlook report. "Despite the improvement in growth prospects as well as external and fiscal balances many of these countries are pressing ahead, albeit sometimes slowly, with structural reforms to boost the non-oil private sector that was initiated when much lower oil prices threatened macroeconomic stability."

The IMF report cited Saudi Arabia, which is restructuring its telecommunications and utility sectors; Kuwait, which has encouraged the growth of its private sector; Algeria, which has expanded private industry and instituted reforms. In contrast, Iran's reform plans have been implemented too slowly to fully benefit from higher oil prices.

The fund predicted a 47.5 percent increase in oil prices by the end of 2000 as compared to the previous year. In 2001, prices would decrease by 13.3 percent.

"There may still be upside risks to prices in coming months," IMF research director Michael Mussa said.

Non-oil countries have a less bright future. The IMF said an increase of $5 a barrel will result in a .2 percent drop in the gross domestic product of consumer nations. The increase in oil prices would also cause higher inflation and interest rates.

The IMF said Egypt's annual output growth is expected to slow down this year while inflation will remain at about three percent. The regime of President Hosni Mubarak must continue what the IMI termed its tight monetary and fiscal policies.

The IMF forecasts modest economic recovery in Israel. The organization said private domestic demand is expected to grow because of improved confidence and lower interest rates.

Wednesday, September 20, 2000


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