By NNN-KUNA
Washington : Global growth is predicted to slow down and the Middle East is expected to face further inflation pressures in 2008, said the International Monetary Fund in its report.
“The global expansion is losing speed in the face of a major financial crisis,” said the world’s top financial institution in the report released here Wednesday.
The World Economic Outlook projected the global growth to slow by 3.7 per cent in 2008, recording a decrease of 0.5 per cent since last January and 1.25 per cent since last year.
The IMF said that global growth could drop below 3 per cent by the end of 2008, calling this trend “a global recession”. Growth in the Middle East continued to show positive indications, reaching 5.8 per cent in 2007, Egypt with the best performance of nearly 7 per cent.
The IMF said that the global financial crisis did not have any effect on the Middle East but identified inflation as “a growing concern” in the region. “Inflation pressures in the region have risen considerably in recent months, owing to strong domestic demand, rising food prices, and higher rents in the Gulf Cooperation Council (GCC), where a large influx of expatriate workers and the growing prosperity of local residents have caused a housing shortage,” commented the report on inflation pressures in the region.
“The recent monetary policy easing in the United States has not been helpful for the GCC countries, leading to increasingly negative real interest rates at a time when the regional economic cycle is moving ahead strongly,” said the report ruling out Kuwait, the only country in the GCC that does not peg its currency to the US dollar since May 2007.
Consumer price index reached almost 20 per cent in Iran, 14 per cent in Qatar and 9 per cent in the United Arab Emirates.
This report is released ahead of the World Bank-IMF spring meetings on April 12-13 in Washington, DC.
The IMF observed that this slowdown seemed to be more significant in advanced economies, mainly the United States and Western Europe. “The emerging and developing economies has so far been less affected by financial market developments and have continued to grow at a rapid pace,” said the report.
The IMF asserted that the strong demand in emerging economies is causing a boom in commodity markets.
It noted that the August 2007 mortgage crisis in the United States “has spread quickly and unpredictably to inflict extensive damage on markets and institutions at the core of the financial system”.
The US economy grew by 2.2 per cent in 2007, down from 3 per cent in 2006. “The US economy will trip into a mild recession in 2008 as the result of mutually reinforcing cycles in the housing and financial markets, before starting a modest recover in 2009,” added the report.
Global oil demand in 2007 was 85.8 millions barrels a day, up nearly 1 million from 2006, of which the Middle East consumes 7.1 million, Europe 15.4 million and North America 25.4 million.
Oil prices rose from USD 58 barrel per day in January 2007 to USD 100 a barrel per day in 2008, mainly because of political developments in the Middle East.
Global production remained steady with 85.6 million, of which 10 million barrels a day from Saudi Arabia and 14.3 million from North America.