1. QNB Economics
economics@qnb.com.qa
October 27, 2013
Weekly Commentary
GCC Countries Continue to Lead MENA Growth, According to
QNB Group
The latest International Monetary Fund (IMF)
World Economic Outlook (WEO) projections
suggest that economic performance in the
Middle East and North Africa (MENA) region
remains mixed. On the one hand, growth in the
oil importing countries of the MENA region
remains subdued as political uncertainty and
lack of investment is holding back growth. On
the other hand, oil exporting countries,
including the Gulf Cooperation Council (GCC),
continue to grow rapidly, boosted by large
infrastructure projects. According to QNB
Group, this dual speed development will
continue over the next two years, with the GCC
countries as the locomotive for growth in the
MENA region and the main source of
investment and financing.
According to the latest QNB Group forecasts,
the overall MENA economy will grow 2.1% in
2013 and 3.8% in 2014 (see chart). The overall
figure masks a significant difference in
performance between oil exporters, including
the GCC countries, and oil importers. Last year’s
subdued 2.7% growth in MENA oil importers is
expected to fall to 1.6% in 2013 and recover to
3.2% in 2014. However, this will not be
sufficient to begin making sizable progress into
creating sufficient jobs to reduce these
countries’
large
unemployment
rates.
Meanwhile, oil exporters’ healthy growth rates
are projected to moderate this year to 3.0% as
they scale back increases in oil production
amidst modest global energy demand.
Continued large infrastructure investment is
expected to lead to a rise in economic growth to
4.5% in 2014.
Real GDP Growth Rates
(% change)
6
5
Oil Importing
5. 3
5. 0
Oil Exporting
4. 7
MENA
3. 8
4
3. 9
3
2. 9
2
2. 1
1
0
2008
2009
2010
2011
2012
2013f
2014f
Sources: IMF data and QNB Group forecasts
Economic conditions remain impaired across
most MENA oil importers, with continued social
unrest in Arab Spring countries, and an
economic environment characterized by modest
global growth, persistently high food and fuel
prices, and weak domestic confidence. Eroded
international reserves are unlikely to improve in
the short-term, absent a boost in exports,
foreign direct investment (FDI), or remittances.
Moreover, with low fiscal buffers and depleted
reserves, considerable fiscal consolidation will
be needed in some cases, in order to maintain
macroeconomic stability, instill confidence,
preserve competitiveness, and mobilize external
financing. Specifically, countries will need to
implement more cutbacks in subsidies, coupled
with the need to design policies that help
contain the wage bill.
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2. Weekly Commentary
In addition, the MENA countries in transition
continue to face political uncertainty with the
challenge of delivering on the expectations for
jobs and fostering economic cohesion, which is
also holding back growth. In particular, the
Syrian crisis has had a strong negative impact
on growth in the Mashreq region, with a large
size of refugees straining the fiscal resources of
countries like Iraq, Jordan, Lebanon, and Turkey
to a lesser extent. For instance, the 750,000
Syrian refugees that have already entered
Lebanon (nearly 19% of the population) have
had a substantial impact on the already weak
fiscal position of the Lebanese budget. Equally
damaging have been the setbacks to the
political transitions as well as escalation of
violence in Libya, Egypt and Tunisia, which
have further deterred much needed economic
reforms and deterred FDI.
On the other hand, MENA oil exporters continue
to experience robust growth on account of the
almost near restoration of Libya’s oil production
along with strong expansions in the Gulf
Cooperation Council (GCC) countries. According
to QNB Group, GCC economic growth is
expected to rise to 4.7% in 2014 from 3.7% this
QNB Economics
economics@qnb.com.qa
October 27, 2013
year on the back of the non-oil sector
benefitting from large infrastructure projects.
In addition, GCC countries also continue to
provide external financing for the rest of the
MENA region in the form of official grants, soft
loans, and large FDI. This is critical for a smooth
economic recovery in the MENA region,
according to QNB Group. Indeed, this will
provide enhanced access to export markets for
the region’s products and services which will
also be critical for cultivating competitiveness
and jobs.
Looking ahead, MENA countries will continue
on their path of economic transition owing
primarily to the benign GCC outlook which will
continue to act as the locomotive for regional
growth. That said, caution must be given to the
external environment in oil importing countries
which remains volatile, with spillovers from the
Syria conflict. Finally, important as it is now to
focus on maintaining economic stability, it is
critical for MENA governments not to lose sight
of the fundamental medium-term challenge of
modernizing and diversifying the region’s
economies, creating more jobs, and providing
fair and equitable opportunities for all.