By GORDON FELLER

The oil price boom is spurring economic growth in the Middle East

While armed conflicts escalate, the Middle East is in the midst of an oil boom reminiscent of the 1970s and 80s, but this time, instead of spending most of their profits, oil producing countries are managing the windfall with restraint, according to a new World Bank report on the Middle East and North Africa region. MENA Economic Developments and Prospects 2006: Financial Markets in a New Age of Oil finds that oil producers are increasingly turning finite oil wealth into longer-term revenue streams.

They’re also showing fiscal restraint by building up savings, paying down debt, and setting up oil stabilization funds, says the report, the second in a new series of annual reports on economic developments in the Middle East region. The oil producers’ behavior differs from that of previous oil booms, when they built up debt and banked on continued high oil prices to fuel their expansion. When the oil price declined, many were caught with large debts. This time, “there’s a realization that they can’t do things as before,” says Jennifer Keller, Senior Economist in the World Bank’s Office of the Chief Economist for the Middle East and North Africa Region and principal author of the report.