MENA region forecast to see 'lowest growth in 30 years' in 2016
The Middle East and North Africa (MENA) region will see its lowest growth since the 1980s, as countries tighten fiscal policy in response to low oil prices, according to a new study.
While the UAE has the best long-term economic prospects, with anticipated GDP growth of up to 3 percent in the coming years, Bahrain and Oman are likely to be poor performers with GDP growth of maximum 1 percent in 2016-2017, according to Capital Economics’ Q2 2016 Middle East Outlook.
Fitch this week downgraded Bahrain’s long-term foreign currency credit rating from BBB- to BB+, making it the first of the six GCC countries to receive “junk” status since oil prices started to fall in mid-2014.
Meanwhile, Saudi Arabia’s economy is also set to slow sharply to 0.3 percent this year and remain weak “for the foreseeable future”, with anticipated growth of 0.8 percent in 2017, said Capital Economics
It noted that low oil prices have resulted in large twin budget and current account deficits, and although the country’s strong balance sheet provides some buffer, the shortfalls will need to be addressed within the next two years and the kingdom’s Vision 2030 economic diversification strategy is a longer-term solution.
Qatar’s economy grew by 3.7 percent in 2015, but this is also likely to soften to 2-3 percent in 2016-2018. “We are concerned about the rapid expansion of private sector credit. At the very least, credit conditions will tighten and a period of deleveraging is likely,” the report said.
Kuwait’s economy, meanwhile, is expected to remain “sluggish”, with forecast growth of just 1-1.5 percent in 2016-2018
The outlook is poor in the rest of the region too, Capital Economics said. In Egypt, depressed tourism revenues along with tighter fiscal and monetary policy will result in very slow growth this year.
Morocco has the brightest medium-term prospects in the region but it, too, will weaker growth in the coming year due to a drought.
“Overall, we forecast the MENA region as a whole to expand by just 1.3 percent this year which would mark the weakest growth since the late-1980s,” the report said.