World Bank re­vises up Mena growth fore­cast on oil prices

The National - News - - BUSINESS - DANIA SAADI

Growth in the Mid­dle East and North Africa re­gion will re­bound to 3.1 per cent in 2018 af­ter more than halv­ing in 2017, thanks to higher oil prices, re­forms and global eco­nomic ex­pan­sion, the World Bank said yes­ter­day.

Mena growth, which fell to 2 per cent in 2017 from 4.3 per cent in 2016, is ex­pected to be broad-based, in­clud­ing 3 per cent fore­cast ex­pan­sion in oil ex­port­ing coun­tries, dou­ble the rate of 2017, and 4 per cent in oil im­port­ing coun­tries.

The Mena growth pro­jec­tion for 2018 is 0.1 per­cent­age points higher than its Oc­to­ber fore­casts.

But the Wash­ing­ton-based lender warned a sec­ond wave of re­forms are needed in the re­gion to ab­sorb the mil­lions of un­em­ployed youth.

“There are grounds for op­ti­mism,” said Hafez Ghanem, World Bank vice pres­i­dent for Mena. “Now is the time to fo­cus on cre­at­ing more jobs and eco­nomic op­por­tu­ni­ties for youth. The pos­i­tive out­look is an op­por­tu­nity to speed up re­forms for a re­newed pri­vate sec­tor as an en­gine of growth and job cre­ation.”

Mena is ben­e­fit­ing from a re­cov­ery in global growth and oil prices, which have topped this month $70 per bar­rel for the first time since 2014 on global pro­duc­tion cuts and geopo­lit­i­cal ten­sions. In Jan­uary, the IMF re­vised up its pro­jec­tions for global eco­nomic growth for 2018 and 2019 on the back of an un­ex­pected uptick in Asia and Europe as well as US tax cuts that are set to pro­pel growth in the coun­try along with its trad­ing part­ners.

The fund now fore­casts the global econ­omy grow­ing at 3.9 per cent in 2018 and 2019, up 0.2 per­cent­age points from its Oc­to­ber pro­jec­tions.

In the Ara­bian Gulf, growth that lan­guished since the three-year oil slump is ex­pected to re­cover, but a slower pace, ac­cord­ing to the World Bank. Gulf growth will ex­pand more than five-fold in 20182020 to 2.7 per cent, com­pared to 0.4 per cent in 2017, but the rate is still lower than the av­er­age of 4.6 per cent achieved be­tween 2010 and 2014, the bank said.

Growth in the GCC will pick up in all coun­tries ex­cept Bahrain be­cause of lower oil prices and eco­nomic un­cer­tain­ties. In the UAE, growth pro­jec­tions were low­ered to 2.5 per cent for 2018, from the Oc­to­ber pro­jec­tion of 3.1 per cent. Growth in 2017 was es­ti­mated at 2 per cent, down from 3 per cent in 2019.

The World’s Bank’s 2018 growth pro­jec­tion for the UAE is lower than the gov­ern­ment’s es­ti­mate of 3.6 to 3.9 per cent.

“In the UAE, growth will reach 3.3 per cent [up from 2 per cent in 2017] by the end of the decade,” the World Bank said.

“The pos­si­ble re­ver­sal of Opec-man­dated pro­duc­tion cuts af­ter 2018, a mod­er­ate in­crease in pro­jected oil prices, im­proved oil pro­duc­tion ca­pac­ity and re­cent sta­bil­i­sa­tion poli­cies and re­forms are ex­pected to con­trib­ute pos­i­tively to the eco­nomic re­cov­ery.”

Mena coun­tries, how­ever, have failed in their di­ver­si­fi­ca­tion ef­forts de­spite un­der­tak­ing re­forms to lower de­pen­dence on oil in­come, the bank said. The re­gion’s to­tal non-oil ex­ports are lower than Fin­land’s, al­though it has a pop­u­la­tion ex­ceed­ing 300 mil­lion and Fin­land has only 5 mil­lion peo­ple.

In the Gulf, the share of oil in fed­eral gov­ern­ment rev­enue is 22.5 per cent of GDP and 63.6 per cent of ex­ports.

“Decades of ef­forts to di­ver­sify their economies [in Mena] away from oil have not worked,” the bank said. “At about 14 per cent, Mena has the world’s low­est share of non-noil man­u­fac­tured ex­ports and the high­est share of fuel ex­ports – be­tween 60 per cent and 80 per cent.

“Mena coun­tries are the least in­te­grated into the world econ­omy. The re­gion’s 6 per cent ra­tio of for­eign di­rect in­vest­ment to GDP is con­sid­ered the world’s low­est.”

Mena coun­tries have also failed to cre­ate enough jobs and tackle un­em­ploy­ment, which ex­ceeds 11 per cent and is above 30 per cent among the youth. The re­gion needs high­tech jobs in or­der to lower un­em­ploy­ment, the bank said.

AP

The Mena growth pro­jec­tion for 2018 is 0.1 per­cent­age points higher than Oc­to­ber fore­casts

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