Conflict and low oil prices are weighing heavily on the economic prospects of the Middle East and North Africa, according to a new set of forecasts from the IMF, with every part of the region affected. Overall growth in the MENA region is expected to be 3.2% this year and next year – that is higher than the previous three years, but still well below what is needed to create enough jobs for the region’s young and fast-growing population.
The picture around the region varies considerably. The sharpest distinction is between the countries at war and those living in peace, but other aspects are also important. Oil exporting countries are suffering from low oil prices and a need to rapidly curtail government spending to try and bring their huge budget deficits under control. Oil importing countries, on the other hand, are being hurt by a slow-down in remittances from their overseas citizens.
Overall, the IMF is predicting growth of 3.3% among the region’s oil exporting nations, falling to 2.9% next year. This group includes Algeria, Iran, Iraq, Libya, Yemen and the six GCC countries of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.
Oil importers – a group that includes Egypt, Jordan, Lebanon, Mauritania, Morocco, Sudan, Syria and Tunisia – are expected to grow slightly more slowly this year, at 3.1%, but then accelerate to 3.8% next year.
Among oil exporters, the toughest situation looks to be in the Gulf, where government spending cuts mean the economies are slowing. The IMF predicts that the GCC countries will grow by just 1.7% this year. As the impact of government cutbacks eases next year the growth rate could bounce back to 2.3%, but this is still well below the 7% average seen from 2000 to 2014.
Worryingly, the IMF is forecasting a sharp slow-down in growth for the non-oil sector in the GCC, predicting that it will drop from 3.75% in 2015 to just 1.75% this year. The main culprits are government austerity drives and declining liquidity in the banking sector.
The worst performer is Saudi Arabia, where overall growth is expected to be just 1.2% this year, rising to 2% next year. The best of the GCC looks to be Qatar, with forecast growth of 2.6% in 2016 and 3.4% in 2017.