Growth in MENA region estimated to have slowed to 2.7% in 2016 — WB

AMMAN — The World Bank (WB) on Tuesday said  growth in the Middle East and North Africa (MENA) region is estimated to have slowed to 2.7 per cent in 2016, reflecting fiscal consolidation in some countries and oil production constraints in others.

In its Global Economic Prospects  report for 2017, the WB said the failed ceasefire in Syria, the ongoing war in Yemen, the fight in Iraq against the Daesh terror group, and the political crisis in Libya were part of a continued cycle of conflict in the region that has led to mass displacement, loss of life and destruction of infrastructure.

 The multilateral lender said cross-border spillovers in the form of disrupted trade, fiscal pressures from spending demands related to refugees and security, and loss of revenues from tourism have caused damage to the region and had international ripple effects.

Growth slowed sharply in the Gulf Cooperation Council (GCC) countries to 1.6 per cent as oil sector weakness spread to non-oil sectors, according to the WB group.

At the same time, output is estimated to have accelerated in Iran to a 4.6 per cent pace and in Iraq to a 10.2 per cent rate, thanks to large gains in oil production and, in the Republic of Iran, to a recovery in agriculture, automotive production, trade and transport.

Among oil-importing economies, growth in Egypt dipped slightly to a 4.3 per cent pace in fiscal year 2016, as foreign currency shortages held back manufacturing and the tourism industry slowed.

Morocco eased to an estimated 1.5 per cent in 2016 on a drought-related contraction in the agricultural sector, the WB indicated.

Outlook

Growth in the region is forecast to recover to a 3.1 per cent pace this year, with oil importers registering the strongest gains, according to the WB.

Among oil exporters, Saudi Arabia is forecast to accelerate to a 1.6 per cent growth rate in 2017, still modest by historical standards.

Iran is anticipated to pick up to a 5.2 per cent rate on the expectation oil production will continue to expand and that deals to obtain foreign investment are completed.

Algeria should slow to a 2.9 per cent pace on a decline in spending on public works and delays in tax and subsidy reforms.

Among oil importers, growth in Egypt is forecast to slow to a 4 per cent rate in FY2017, as fiscal consolidation begins and as private consumption slows with rising inflation, before picking up in 2018.

Morocco is anticipated to jump to a 4 per cent pace in 2017, thanks to a recovery in agricultural output. Jordan should see a recovery in investment and exports that will push growth up to 2.6 per cent, the WB said.

Risks

Failure of oil prices to follow their expected upward trajectory and an escalation of conflict pose substantial downside risks to growth in the region. Elevated oil price volatility could undermine government spending and fiscal paths. 

Spillovers from existing conflicts in several countries, as well as a heightened incidence of terrorism, are risks to regional economic activity, the WB reported. Rising conflict-related risks would likely increase economic uncertainty and slow investment, the WB noted. 

Fiscal and structural reforms could trigger public discontent, with negative effects on confidence, foreign investment and growth.

For GCC countries, the anticipated tightening of monetary policy in the United States could pose an indirect risk to growth, the WB added.