Regional growth in the MENA region is projected to pick up to around 3% per annum in 2020-21, supported by capital investment and policy reforms, said the World Bank in its report ‘Global Economic Prospects: Heightened Tensions, Subdued Investment’.
In 2019, growth in the region is projected to remain subdued at 1.3%, the report said. Among oil exporters, oil production cuts and a contraction in economic activity in Iran due to US sanctions have weighed on activity. Growth is improving modestly in oil importers as policy reforms progress, despite long-term structural challenges. While easing external financing conditions have supported regional growth, weakening external demand has softened export prospects.
Regional outlook
The projected pickup over the next two years is largely driven by an assumed rebound in activity in Iran as the impact of recent US sanctions wanes, and by an expected ramping up of infrastructure investment in the GCC economies, the report said. Growth in the rest of the region is projected to remain stable, with broadly resilient domestic demand in key economies partly offset by slowing external demand growth. Medium-term growth prospects are contingent on geopolitical tensions remaining contained and regional spillovers from conflict-ridden economies remaining limited.
For oil exporters, growth in 2019 is expected to decrease slightly to 0.7%, with strengthening non-oil activity only partly offsetting constraints on oil sector activity. Growth is projected to pick up to 2.9% in 2020 before tapering slightly in 2021. The rebound in 2020 is partly driven by rising growth in Iraq as oil production increases. Stronger infrastructure investment (including an expansion of natural gas capacity in some economies), higher oil production, and eased financing conditions associated with slowed rate hikes are expected to support higher growth in the GCC economies.
Growth in oil importers is expected to rise steadily from 3.9% in 2018 to 4.7% in 2021, led by expansions in the larger economies. These projections are predicated on business climate reforms to support investment, healthy tourism activity, and a slight easing in political risks.
Global economic growth
Globally, economic growth is forecast to ease to a weaker-than-expected 2.6% in 2019 before inching up to 2.7% in 2020. Growth in emerging market and developing economies is expected to stabilise next year as some countries move past periods of financial strain, but economic momentum remains weak.
Emerging and developing economy growth is constrained by sluggish investment, and risks are tilted to the downside. These risks include rising trade barriers, renewed financial stress, and sharper-than-expected slowdowns in several major economies, the report said. Structural problems that misallocate or discourage investment also weigh on the outlook. M