WASHINGTON, April 19: Lost tourism and trade from the Iraq war have hurt Middle East economies, but windfalls from soaring oil prices have helped, and many will have fast growth this year, regional officials told Reuters this week.
The end of the war will most likely improve the economic climate but the outlook depends on political stability across the Middle East, they said.
“Isn’t it clear that if you have disturbance at your next door neighbour, just domestic disturbance, you will be disturbed also, let alone war,” said Ghassan al-Rifai, minister of economy and foreign trade for Syria.
Rifai is hoping Syria, which shares a border with Iraq, will nevertheless grow a respectable 3.5 per cent to 4 per cent this year.
That is slightly under the International Monetary Fund’s latest forecast of 5.1 per cent for the region in 2003.
The United Arab Emirates Central Bank governor, Sultan bin Nasser al-Suwaidi, said there is evidence of a slump in investment and tourism. But he played down the impact on the regional economy over the longer term.
“It will not be a long lasting impact,” he said.
The World Bank said last week, oil exporters like Iran and the UAE will benefit overall from the war. But a top Iranian official said Iran’s economy also has suffered.
The Iraq war hurt the world economy “and as a member of the world economy it hurts us as well. We are trying to minimize the impact,” said Iran’s Finance Minister Tahmasb Mazaheri.
Despite the complaints, he expects Iran’s economy to expand at least 6.5 per cent this year, and he said there is a chance it could even be as high as 8 per cent.
The officials are split on what the end of the war will mean for the regional economy.
Some suggest a newly opened economy on the doorstep and removal of Saddam Hussein may boost investors’ confidence.
“The end of the war will remove the uncertainty from the horizon,” said Anwar Ahady, central bank governor from Afghanistan, who is expecting growth in his country to rocket ahead by at least 10 per cent this year.
Saddam Hussein’s departure and the threat his government posed in the region may also encourage Arab governments to channel more money into economic development rather than arms.
“I think the impact will be felt in Arab countries because less money will be spent on armaments,” said Suwaidi.
“This would lead to further stability and create jobs. We are optimistic. There is a lot of tourism in the region which will be encouraged by stability.”
The United States has accused Syria of providing a haven for members of Saddam Hussein’s government and family, and of developing chemical weapons.
The rhetoric has raised fears in Europe and across the Muslim world that Syria could be the target of a future military strike. Official denials by Washington that there are plans to target Syria have done little to ease anxieties.
“If all this military action stops, then you can expect normal growth rates in the economies of all the Arab world,” said Rifai.
“But otherwise I am not optimistic.”
For Iran and other oil producers, the key question is what happens to the oil market.
“It depends on oil prices,” he said. “We should wait and see before making predictions about the economy.”
The officials said they believed the United Nations and other international organizations should be leading the effort to rebuild Iraq.
“It needs international maintenance to expedite reconstruction,” said Iranian minister Mazaheri.
For Afghanistan the fear is that attention and much-needed funds will be redirected away from Afghanistan to Iraq.
“The consequences will be very negative if aid to Afghanistan does not continue,” said Ahady. “I’m rather confident the international community realizes this but perhaps it’s best to remind them.”—Reuters
