Regional Economic Outlook, Middle East and Central Asia, April 2011

The April 2011 Regional Economic Outlook: Middle East and Central Asia takes stock of recent developments and discusses key policy issues facing the region. Changes taking place in the Middle East and North Africa provide an opportunity for the region to lay the foundation for a socially inclusive growth agenda. In the near term, however, social unrest and surging commodity prices will weigh on growth in a number of countries. Governments are, understandably, stepping up spending to offset the impact of surging global food and fuel prices. While most oil exporters can accommodate this additional expenditure-given their projected increase in oil revenues-for many oil-importers, it is straining fiscal balances. Going forward, priorities include job creation to address chronic unemployment and, over the medium-term, more cost-effective social safety nets to replace subsidies. In the Caucasus and Central Asia, strong growth continues on the back of higher oil and gas exports and government spending. To sustain this recovery, policymakers need to address rising inflation, respond to social pressures arising from high food prices without threatening fiscal stability, and restore the health of banking systems. Looking ahead, these countries will need to diversify their sources of growth beyond mining, oil, and gas to help step up job creation and reduce poverty.