Global economy to grow 4.2% this year JEDDAH/WAASHINGTON - The Mideast's economy is recovering from the global economic downturn at a healthy pace, helped along by higher oil prices and lavish spending by the region's richer governments, the International Monetary Fund said Wednesday. Those gains are expected despite lingering concerns about further fallout from Dubai's credit crisis, which has sent financial tremors across the region and raised questions about sovereign debt in much of the Arab world. The IMF's latest forecast calls for economic output in the Mideast and North Africa region (MENA), to grow as a whole by 4.5 percent this year and 4.8 percent in 2011. The estimates are largely in line with previous forecasts. “The MENA region is growing out of its downturn at a good speed,” the IMF said in its latest World Economic Outlook. It cited increased exports fueled by higher commodity prices and the “key role” played by government spending programs in OPEC member states such as Saudi Arabia and Qatar, which are pumping billions of dollars into infrastructure projects at home. The IMF flagged a number of causes for concern, however. It said financial sectors and property markets remain vulnerable in some rich Arab countries, including Kuwait and the United Arab Emirates, a seven-state federation of which Dubai is a part. Meanwhile, sluggish growth in Europe is hampering a recovery in exports, worker remittances and tourism in other countries without major oil reserves, such as Morocco and Tunisia, which rely heavily on neighbors across the Mediterranean. The IMF cautioned that “substantial uncertainty” to its forecast remains. One of its main concerns is an extended hangover from Dubai's debt problems. The Gulf emirate shocked global markets late last year by seeking new terms on repaying $26 billion in debt for its Dubai World conglomerate - only a fraction of what the city-state and its many government-run companies owe. The company is still in talks with creditors. The IMF said that while the economic aftermath of the Dubai World crisis has been relatively limited so far, the full effects on government debt in the region might not be felt for “some time.” That, in turn, “could have a lasting effect on financial systems, corporate sectors, and, more generally, economic activity in the area,” the IMF warned. The IMF also said the global economy, after enduring a crippling recession, should see better-than-expected growth this year, led by strength in China and other developing nations. It forecast that the world economy would expand 4.2 percent this year, faster than its previous projection and a sharp improvement from 2009 when global output fell by 0.6 percent, the worst performance since World War II. However, the international lending agency warned that the recovery still remained vulnerable with the biggest threat likely to come from a surge in government debt burdens. The IMF's estimate that the global economy would grow 4.2 percent this year, represented a 0.3 percentage point increase from the IMF's January forecast. For 2011, the IMF projected global growth of 4.3 percent, no change from its January outlook. The IMF expects wide disparities between regions with the US outperforming Europe and Japan but lagging behind China and other developing nations. For the US, the IMF expects growth of 3.1 percent this year.
