World Economy

If the price of oil goes up, the appetite for social and economic reform will go down: IMF

Key Points
  • Social and economic reform in the Middle East, North Africa, Afghanistan and Pakistan (MENAP) is broadly accepted as a "positive move" toward growth, Jihad Azour, the IMF's director for the region told CNBC
  • But this needs to pick up in order to create enough jobs for a young region, he added
  • The IMF's latest report cites global growth for the fiscal year of 2017 to be 3.6 percent, with this falling at 2.6 percent for the MENAP region
IMF MENA director: If oil price rises, appetite for reform will weaken

Changes abound in the Middle East and North Africa, but the pace of economic and social reforms needs to increase, according to one senior voice at the International Monetary Fund (IMF).

Global growth will be 3.6 percent for the fiscal year of 2017, with this falling to 2.6 percent for the Middle East, North Africa, Afghanistan and Pakistan (MENAP) region, according to the IMF's 2017 Regional Economic Outlook for the Middle East and Central Asia report out Tuesday.

Jihad Azour, the IMF's director for its Middle East and Central Asia department, told CNBC: "Reforms are now accepted by all as a positive move toward creating additional growth." But he added, "If we don't grow at 6 and 7 percent it's going to be very difficult to find enough jobs for the 25 million young men and women that will enter the labor market in the region in the next five years."

Azour discussed Saudi Arabia's impetus to "genuinely move into a private sector-led economy." For him, the Kingdom needs to improve "access to finance, by reforming the financial sector; access to talent, by reforming education; (and) access to market by opening up the economy and improving the business environment."

"Sequencing and keeping the momentum is important" in achieving this, he added.

Saudi Arabia's consumer industries make it an investment destination: Expert

"The region is recognizing the importance of the new cycle," Azour said, referring to a broader global economic recovery. "Yet they need to do more reforms in order to fully benefit from it."

A key challenge facing the MENAP region was complacency resulting from higher oil prices. "If the oil price will go up, then the appetite for reform will go down," Azour warned. Also pressing on decision-makers was conflict and geopolitical issues arising in the region, as well as global risks such as tightening monetary policy and "inward looking policies in the West."

Azour cited Egypt as an example of a country that had begun to turn its economy around, with capital flows, exports and tourism — among other things — on the up.

But, he described the need to "consolidate" progress in the country. This included addressing structural issues in its business environment. The Egyptian state needs to become an "enabler, rather than an operator," he said. Azour also cited social issues to be tackled, including education and allowing women to participate more in the economy.

According to the IMF's report, growth for Egypt, which has seen major political upheaval in recent years, remains unchanged at 4.3 percent for the fiscal year 2017.

IMF MENA director: Impact of Qatar diplomatic crisis mostly muted

Impact of Qatar sanctions has 'been absorbed'

Azour described the impact of sanctions imposed by several Arab countries on regional neighbor Qatar as "mostly muted," due to the Qatari authorities responding quickly to cushion any blows to the state's trade and capital flows.

"The non-oil sector will grow at 4.7 percent, a little less than what we had expected six months ago," he said. But overall, "the impact has been absorbed."

Azour disagreed that the crisis had been overblown, but said that its impact on the oil price was "minimum or even non-existent."

Egypt must address structural issues, IMF MENA director says