WORLD BANK LOW­ERS GROWTH FORE­CAST FOR ARA­BIAN GULF ON OIL CUT

Mena re­gion economies will slow this year be­fore re­cov­er­ing in 2018 as UAE non-oil GDP is boosted dur­ing the run-up to Expo 2020

The National - News - - BUSINESS - DANIA SAADI Wash­ing­ton

The World Bank low­ered its growth fore­cast for the Ara­bian Gulf re­gion this year and in 2018 as the ad­her­ence of the area’s Opec mem­bers to a global oil out­put cut takes its toll on the economies.

Growth this year will slow to 0.7 per cent, com­pared with a 1.3 per cent fore­cast in June, the World Bank said in a re­port. Next year, growth will pick up and reach 1.9 per cent, but will still be lower than the bank’s June fore­cast of 2.3 per cent.

“The pick-up in eco­nomic ac­tiv­ity in the Mid­dle East and North Africa [Mena] re­gion that started in mid-2016 is ex­pected to mod­er­ate in 2017 due to slower growth in Mena’s oil ex­porters,” said the bank. “Oil pro­duc­tion cuts will weigh down growth in al­most all coun­tries in the sub­group.”

Gulf Opec mem­bers – Kuwait, Qatar, the UAE and Saudi Ara­bia – are com­ply­ing with a global oil out­put deal that trimmed 1.8 mil­lion bar­rels per day (bpd) from the mar­ket to prop up prices. The six­month deal, which in­cluded a group of non-Opec coun­tries led by Rus­sia, ended in June and was extended un­til the end of next March.

“The over­all growth in GCC coun­tries for 2019 is pro­jected at 2.7 per cent, be­low the lev­els seen prior to the 2014 oil price shock,” the bank said. “The av­er­age growth rate prior to 2011 for the GCC coun­tries was around 4.5 per cent.”

The UAE’s econ­omy will ex­pand 1.4 per cent this year, down from 2 per cent in the June fore­cast. Oil GDP will con­tract by 2.9 per cent this year, while non-oil GDP will grow by 3.3 per cent thanks to higher public in­vest­ment and a pick-up in global trade.

But in the medium term, the out­look is brighter, with pro­jected growth fore­cast of more than 3 per cent.

“Non-oil growth is pro­jected to re­bound as the ex­pected im­prove­ment in oil prices and its pos­i­tive ef­fects on con­fi­dence and fi­nan­cial con­di­tions dampen the ef­fects of fis­cal con­sol­i­da­tion and as megapro­ject im­ple­men­ta­tion ramps up ahead of Dubai’s host­ing of Expo 2020 [which is], ex­pected to draw in many vis­i­tors, boost­ing pri­vate con­sump­tion and ser­vices exports.”

The coun­try that will be hit most by the Opec cuts is Kuwait, which re­lies on oil for nearly half of its GDP. It is the only Gulf coun­try fore­cast to con­tract this year by 1 per cent. Nearly 90 per cent of the coun­try’s gov­ern­ment in­come comes from oil rev­enues.

Saudi Ara­bia, Opec’s big­gest oil pro­ducer, which fell into re­ces­sion in the first half of this year, will grow 0.3 per cent, down from 0.6 per cent from the June fore­cast, the bank said.

For Qatar, which has faced an eco­nomic boy­cott since June 5 led by Saudi Ara­bia, the UAE, Bahrain and Egypt be­cause of its back­ing of ex­trem­ist groups, growth will slow to 2 per cent this year from 3.2 per cent in the June fore­cast. The coun­try has had to pump US$40 bil­lion into its econ­omy in the wake of the po­lit­i­cal fall­out to prop it up.

Over­all in the Mena re­gion, growth this year will slow to 2.1 per cent from 4.9 per cent last year. But it will re­cover, with pro­jec­tions it will reach 3 per cent next year and 3.4 per cent in 2019, the bank said.

“Both Mena’s oil ex­porters and oil im­porters will ben­e­fit from a steady im­prove­ment in the global growth, in­creased trade with Europe and Asia, more sta­bilised com­mod­ity mar­kets, es­pe­cially oil; and re­forms un­der­taken in some of the coun­tries in the re­gion,” the bank said.

Bloomberg

The IMF and World Bank Group an­nual meet­ings are tak­ing place in Wash­ing­ton this week. The world econ­omy is gain­ing strength and ex­tend­ing the broad­est re­cov­ery since the start of the decade

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