Rainy Day Oil Funds See Middle East Through Downturn

Source:

"Middle East oil exporters together drew down their rainy-day reserves by nearly $350 billion over the past year"

The Middle East has weathered the global economic downturn better than other parts of the world because the region's energy exporters tapped billions of dollars in oil profits from when prices were booming, the International Monetary Fund said.

By reaching into those reserves, major oil producers like Saudi Arabia shielded their economies from the worst of the slump by maintaining government spending and injecting liquidity into domestic banking systems rattled by the credit crisis.

Doing so not only blunted the impact of the downturn on their own economies, but also "generated positive spillovers for their neighbors," said the IMF.

That spending came at a price.

The IMF estimates Middle East oil exporters together drew down their rainy-day reserves by nearly $350 billion over the past year. That figure includes the major exporters in the Persian Gulf, as well as far smaller exporters such as Sudan and Yemen.

The IMF expects the portion of the countries' economies based on oil to fall by 3.5% this year. That drop is partially offset by slower but still positive growth of 3.2% in the rest of the economy.

Next year, the IMF expects the region's oil exporters will see both the oil and non-oil parts of the economy rise by around 4%. A rebound in demand for oil should also allow energy exporters to refill their coffers with more than $100 billion in oil revenue next year.

Countries without oil exports to fall back on have been only moderately hurt by the global recession, the IMF said. That is because they are not so tightly linked to the global banking system, and because trade and labor ties allowed them to benefit from richer neighbors' willingness to spend.

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