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Is debt answer to Middle East economic troubles?

The forecast for growth across the Middle East and North Africa is bleak. Unfortunately for the regions, heavy debt appears to be one way out.
A man walks past a currency exchange bureau advertisement showing images of the U.S. dollar and other currencies in Cairo, Egypt, April 2, 2019. REUTERS/Mohamed Abd El Ghany - RC1BF9442E80

The International Monetary Fund (IMF) and World Bank Group spring meetings begin this week in Washington. As finance ministers and economic policy teams enjoy the cherry blossoms, the forecast for growth in the Middle East and North Africa looks more like winter. Real gross domestic product (GDP) growth across the Middle East and North Africa regions is expected to average 1.5% in 2019. Growth prospects are low, tied to low growth in the United States and Europe. There are pockets of higher growth inside the region, notably in places where reforms are underway — or the bounce back from war or bleaker times has begun. Where there are bright spots says a lot about the outlook for the region as a whole. For example, "notable expansions" are expected in Yemen and Iraq in 2019, according to the World Bank.

In Egypt, for example, the return of its tourism sector has been as important as new taxes and reduced subsidies as a boost to government revenue. Egypt has made some difficult reforms — with a very heavy hand and a cost to human capital — setting an example to the region wary of public reaction to structural reform. As conditions of Egypt’s IMF program, local fuel prices will be indexed to global ones and most energy subsidies will be eliminated by mid-2019. But Egypt has been rewarded already with praise from the World Bank and with its new status as the only country in the Middle East with higher expected growth in 2019 (at 5.5%) than its respective trend from 2011-2016, according to research by Standard Chartered.

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