IMF sounds alarm: Economic pressures mount on Iraq, non-Gulf oil producers

Shafaq News

01-05-2025

Shafaq News/ Iraq and other non-Gulf oil-exporting countries are set to face mounting economic pressure due to declining oil production and shrinking public spending, the International Monetary Fund (IMF) warned on Thursday.
According to the IMF's May 2025 Regional Economic Outlook, growth prospects in the Middle East and Central Asia have been revised sharply downward, reflecting diverging performance across countries amid a weakening global outlook.
The report cited heightened global trade tensions, tariff levels not seen in a century, and escalating regional conflicts as major drags on growth across the region.
Real GDP growth in the Middle East and Central Asia is projected to slow to 2.6% in 2025, down from 2.9% in 2024, amid oil production slowdowns and heightened global uncertainty.
For oil-exporting countries overall, growth is expected to decline to 2.4%, driven by a slower recovery in output despite the gradual easing of OPEC+ cuts, and a drop in oil prices to around $66 per barrel.
While non-oil sectors remain strong in Gulf Cooperation Council (GCC) countries—supported by public investment and ongoing reforms—non-GCC exporters like Iraq, Algeria, and Iran are under twin pressures: constrained oil output due to sanctions or logistical challenges, and reduced fiscal spending. This has led to sharp downward revisions in their growth forecasts.
Oil-importing countries such as Egypt, Jordan, and Tunisia are expected to see only marginal improvements, hampered by weak external demand, declining aid flows, and higher borrowing costs. In Central Asia, growth is being restrained by slowing investment and lower demand from key trade partners.
Despite headwinds, the IMF noted that Saudi Arabia and Qatar are continuing to benefit from economic diversification efforts and increased foreign direct investment.
Strong non-oil activity in the GCC helped offset the impact of voluntary OPEC+ production cuts, maintaining moderate growth of 2.2% in 2024. Sovereign wealth fund investments and business climate reforms also boosted consumption and private investment.
However, the report warned that growth could soften in the near term due to lower oil prices and persistent global uncertainty.
On the other hand, conflict-hit oil importers such as Sudan, Gaza, and Lebanon face deep economic contractions and humanitarian crises. Egypt's economy, the report noted, has been negatively affected by declining revenues from the Suez Canal and mounting debt burdens, complicating fiscal consolidation efforts.
The IMF concluded that the region's economic challenges are likely to persist amid growing financial pressures and stalled structural reforms. It called for cautious but comprehensive policy responses to ensure long-term stability and sustainable growth.