The economic experts who are out to lunch

When the legendary economist Milton Friedman wrote There’s No Such Thing As A Free Lunch, maybe he hadn’t yet visited the International Monetary Fund in Washington. There, an excellent meal can be had each mid-day on starched tablecloth – if not quite free then, at most, for some loose change. The buffet is good, the desserts impressive. After suitable nourishment, staff head back upstairs to think big thoughts about the world. Should a little drowsiness threaten productivity in the late afternoon, there’s a coffee barista to jump-start the brain cells. It’s this kind of sustenance that allows the institution’s staff to come up with serious, considered reports such as the one they released on Sunday that included the Gulf states.

In its outlook for the economies of the Middle East and Central Asia, the Fund projects that growth this year will be 2.6 per cent. It had previously thought these economies would grow 6 per cent. Think of the difference as an “update”. The IMF does a lot of that. In February, it predicted that Gulf economies would grow 3.6 per cent this year; now, it says 2.3 per cent. The Fund also believes the UAE economy this year will dip 0.6 per cent. Hold your breath for an adjustment. Of course, re-evaluations are nothing new and have been a longstanding practice of the Fund. For example, during the Asian crisis a decade ago, the IMF was strongly critical of Malaysia for imposing currency controls to ease interest rates. The Fund changed its mind after Malaysia quickly emerged from recession.

It also has a propensity for stating the obvious. The IMF thinks regional states must maintain spending to offset the impact of the world economic crisis. Yet a taxi cab driver attempting to negotiate the massive construction site that is Salaam Street in the capital will know this is already happening. The crisis is also hurting the region as a result of lower oil prices, lower tourism demand, tight credit conditions and falling international investment, says the Fund. If this had been a prediction last autumn, it would have been remarkably prescient. As a statement issued this week, it inspires a reaction commonly expressed in the grade-school monosyllable “duh”.