MENA REGION ECONOMIC OUTLOOK

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ECONOMIC OUTLOOK

The MENA region is in turmoil.  Syria, Iraq, Libya and Yemen are in civil war.  Fifteen million people have fled their homes, many to fragile or economically strapped countries such as Jordan, Lebanon, Djibouti and Tunisia, giving rise to the biggest refugee crisis since World War II.  The current turmoil in Yemen has set that country’s development back several years.  Blockades and repeated cycles of violence have made Gaza’s unemployment rate the highest in the world and with Gross Domestic Product at only 40%. 

Countries undergoing political transitions, such as Egypt, Tunisia, Morocco and Jordan, are having to address security concerns over growth-promoting policies.  The relatively peaceful oil exporters, such as Algeria, Iran and the GCC, are grappling with low oil prices alongside chronic youth unemployment and undiversified economies. 

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PROSPECTS

Alongside disappointing global growth in 2015, economic prospects in the MENA region remain grim.  A combination of civil wars and refugee inflows, terrorist attacks, cheap oil, and subdued global economic recovery is expected to keep average growth in the region around 3% in 2016.  Since 2013, MENA has not been able to escape the spiral of “slow growth” for a variety of reasons, including the incidence of war and conflict.  These factors are expected to dampen the short-term economic prospects in the region, unless there is some progress in the peace talks.  Real GDP is forecast to grow close to 4% in 2017 and 2018, still low by historical standards.  The continuation of sluggish growth will hurt the overall unemployment rate, now standing at 12 percent, and household earnings in the region.

OIL PRICES

Despite low oil prices, growth in the group of oil importers will slow down from its 2015 level by 0.8 percentage point at 2.6% in 2016, due in part to persistent security concerns and slow activity in tourism and remittance inflows.  Fiscal deficits and debt in these countries remain high.  Lebanon’s public debt, already high at 138 percent of GDP, is expected to increase by 7 percent of GDP in 2016.

Growth in the six GCC countries will be affected by persistently low oil prices and is expected to fall to 2.2 percent in 2016 from 3.1 percent in 2015.   Libya and Iraq are expected to witness large deficits, of respectively 59.9 percent of GDP and 20 percent of GDP in 2016.  Iran on the other hand is expected to benefit from the lifting of sanctions in 2016 and beyond.