Economic growth in the Middle East, despite a relatively slow start in the first quarter and a heightened geopolitical environment, is expected to reach 2.4% this year, according to the ‘Economic Insight: Middle East’, a quarterly economic forecast for the region by ICAEW and Oxford Economics.
Recovering oil prices, the easing of fiscal consolidation measures, relative improvements in the security conditions and steady progress of reform will push growth to 2.4% in 2018, said the report. In comparison, in 2017, growth in Middle Eastern economies remained flat at 1.0%, the slowest in eight years.
The report said economic growth in the GCC and Iraq is expected to recover by 2.3% and 2.5% respectively in 2018. Growth in the GCC last year is estimated to have slowed to 0.1%, the weakest since 2009, while Iraq’s economy contracted by 0.3%.
Geopolitical issues
The forecast for Iran is lowered from 4.1% previously to 2.3% due to the nuclear deal fallout, which will weigh negatively on overall output and the country’s oil exports as the US re-imposes economic sanctions.
Oil prices hit their highest level since November 2014 at $80 p/b following the US President’s decision to pull out of the nuclear deal. The fate of the deal is still uncertain as European countries work alongside China and Russia to salvage it.
A complete collapse of the deal would exacerbate the already heightened geopolitical tension in the region, weighing negatively on growth, business confidence and investment sentiment.
In the GCC, the Qatar blockade looks to be the new normal, with no signs of reversal so far, and though the short-term economic impacts have been limited, the continuation of blockade could undermine long-term investment in the region, the report said. M