Growth in the MENA region is forecast to pick up slightly to 2.9% in 2016, 1.1 percentage points less than expected in the January outlook and even further below the average pace during 2000-2013, said the World Bank.
In its latest “Global Economic Prospects” report, the World Bank said growth in most other oil-exporting countries, including most GCC countries, will weaken in 2016, while performance in oil-importing countries will be mixed because of varied macroeconomic and geopolitical challenges.
The downward revision comes as oil prices are expected to track lower for the year, at an average of US$41 per barrel. The outlook also assumes no worsening of negative spillover effects from the war in Syria, continued gradual improvement in the security situation in Iraq, and that a new government takes office in Libya, as established in a political agreement outstanding since the start of the year.
The marginal acceleration in regional economic activity expected in 2016 largely reflects stronger growth in the second-largest economy, Iran, after the lifting of economic sanctions in January.
Iran’s economy is expected to advance at a 4.4% pace in 2016 after expanding by 1.6% last year. The country’s crude oil production has increased sharply in recent months, and by April was 25% higher than average monthly production in 2015. Iraq, as well, is expected to see growth surge to 7.2% in 2016, reflecting rapidly rising oil production and continued success in regaining territory from ISIS.
For GCC countries, low oil prices and tightening fiscal policy are expected to slow growth to 2% in 2016, from 2.9% in 2015. Growth is forecast to ease in Egypt, to 3.3% in fiscal year 2015/16 (ending 30 June 2016), 0.5 percentage point below the pace expected in January. Moderating growth comes as tourism is contracting, business sentiment is soft, and businesses faced a foreign currency shortage for much of the year.
Risks to the growth outlook for the MENA are mainly to the downside, the Bank cautioned. “The three risks stand out: a further slide in oil prices, escalation of conflict, and further negative effects of security challenges and social unrest in countries not entrenched in war.”