Tightening liquidity, trade tensions and ongoing structural issues mean that Middle Eastern nations are facing a multitude of challenges, according to the International Monetary Fund's (IMF) regional director.
"The matrix of risks has local or regional components as well as international components," Jihad Azour, director of the Middle East and Central Asia Department at the International Monetary Fund (IMF), told CNBC.
"On the international side, the increased tension on trade could have an impact on the region, especially indirectly. The tightening of global financial conditions, if interest rates will continue to go up and liquidity will be less available, this will affect countries with a high level of debt — mainly oil importing countries where the average debt exceeds 80 percent (of gross domestic product)," Azour said, speaking to CNBC's Hadley Gamble on Monday.
"Last but not least, some countries have succeeded in implementing reforms but what is important is to keep the momentum there and to address some of the structural issues," he said. "This region needs to create at least 25 million jobs for the young generation in the next five years," he said.
Azour's comments come as the IMF released a report on the Middle East, North Africa, Afghanistan and Pakistan (MENAP) region on Wednesday. The IMF states in the research that oil price uncertainty, the tightening of financial conditions and regional conflicts were all tangible risks for the growth outlook.
It advocates a raft of changes, ranging from energy subsidy reforms and public wage bill reforms, to implementing fairer taxation practices.
"With growth prospects low relative to historical standards, it is paramount to accelerate the structural reform agenda and move to a new growth model that promotes diversification and private sector development," the IMF said in its report.
"Labor market and education reforms that boost productivity and create opportunities for everyone will be critical. Some important steps have been taken, but more needs to be done."
It singled out country-wide reform programs for praise but believed these could go further. It highlighted investment in education and innovation by the United Arab Emirates and also Iran developing programs to foster job creation for young individuals and women.
"Bahrain has introduced a wage protection system and significant measures to increase job flexibility for expatriates. In Qatar, a visa-free entry program to stimulate tourism was recently announced, along with a new law that seeks to expand the protection of expatriate labor. But these reforms should also be underpinned by efforts to increase transparency and accountability, and by stronger institutions and governance," the IMF said.
Saudi Arabia, United Arab Emirates and the rest of the Gulf Cooperation Council (GCC) need to pursue their reform agenda in order to prepare for a post-oil order, the IMF's director of the Middle East and Central Asia Department added.
"(Reforms) will help them diversify the economy and to prepare for the post-oil era, as well as addressing some of the major challenges and I would cite two— one is how to create jobs, especially for the youth given the level of unemployment that is faced in the region."
"Secondly, uncertainties are still there where the potential increase in interest rates and global liquidity becoming maybe less available for emerging markets," he said.
Looking at Lebanon and the outlook for political and economic stability in the country, Azour said the country had to work on several issues. In April, the international community promised Lebanon some $11 billion of assistance for an investment program to boost its economy.
"Lebanon has to do a three-pronged approach (to improve its economy)," Azour said. "One is maintaining the macro-economic adjustments in order to reduce the level of deficit and address the balance of payment issue if their investment program that is being supported by the international community is to reignite growth. The third one is to address some of the structural problems in some key sectors like energy and telecoms to make the economy more competitive," he added.
Azour offered similar advice to Egypt, saying the country also needed to make its economy more productive and competitive.