The World Bank has said that the economic outlook for the Middle East and North Africa region is subject to substantial downside risks, revising down the growth forecast for 2019.
Economists expect real GDP growth for the Middle East and North Africa region to average 0.6 percent in 2019, lower than the 1.2 percent growth in 2018, said the World Bank’s economic update “Reaching New Heights: Promoting Fair Competition in the Middle East and North Africa.”
The report, a copy of which was obtained by Asharq Al-Awsat, discusses the current sluggish growth due to conservative oil production outputs, weak global demand for oil, and a larger-than-expected contraction in Iran.
“MENA’s economic outlook is subject to substantial downside risks—most notably, intensified global economic headwinds and rising geopolitical tensions,” it said.
On the other hand, a boost in non-oil activities in the Gulf Cooperation Council (GCC) countries (Saudi Arabia, the United Arab Emirates, Bahrain, Kuwait, Oman, Qatar), most prominently in construction, partially offset the dampening effect on the region’s average growth numbers as a result of Iran’s economic contraction.
Egypt’s Gross Domestic Product (GDP) continues to lead growth in the region as its overall macroeconomic environment has improved following the country’s exchange rate, fiscal, and energy reforms. As a result, Egypt’s economy grew to 5.4 percent in the first half of 2019, up from 5.2 percent in 2018, said the report.
"Countries in the region have implemented bold reforms to restore macroeconomic stability, but the projected growth rate is a fraction of what is needed to create enough jobs for the fast-growing, working-age population," said Ferid Belhaj, World Bank Vice President for the Middle East and North Africa region.
"It is time for courageous and far-sighted leadership to deepen the reforms, to bring down the barriers to competition and to unlock the enormous potential of the region’s 400 million people as a source of collective demand that could drive growth and jobs,” he added.
The region is expected to grow at a subdued rate of 0.6 percent in 2019, rising to 2.6 percent in 2020 and 2.9 percent in 2021, said the report.
The projected pickup in growth is largely driven by increasing infrastructure investment in GCC countries and the recovery in Iran’s economy as the effects of current sanctions wane.
However, the report warns that a further escalation in regional tensions could severely weaken Iran’s economy and spill over to other countries in the region. While rising oil prices would benefit many regional oil exporters in the short run, the overall impact would be to hurt regional trade, investment, and spending on infrastructure.
"The lack of fair competition is holding back the development of the region’s private sector, which history has shown to be the source of broad-based growth and jobs," said Rabah Arezki, World Bank MENA Chief Economist.
"Countries in the region have an opportunity to transform their economies by leveling the economic playing field, and creating business environments that encourage risk-taking and reward innovation and higher productivity."