Despite facing challenges of a weak global economy and volatile domestic politics, the MENA region is showing robust economic performance.
According to the QNB Group, the region’s economy will grow by 3.5 to 4 percent this year. Further improvements are expected in 2014 along with growth rates of 4.5 to 5 percent. The MENA region will continue to have an impact on the global economy, which is expected to grow by 2.5 to 3 percent this year. Oil importing countries are likely to show continued recovery.
Most importantly, the MENA economy will benefit from continued heavy investment in major infrastructure projects and diversification. These projects contribute to the non-oil GDP growth. The IMF estimates that MENA region experienced a real GDP growth of 6 percent in 2012. Qatar and Saudi Arabia led the regional growth, boosted by higher global oil and gas prices. Compared to the Middle East and North Africa region, the Gulf Cooperation Council countries also enjoyed lower inflation (2.4%) and large surpluses in fiscal and current account balances.
Within the remaining decade, lower oil and gas prices and flat production levels are expected to reduce the reliance of GCC countries on income from hydrocarbon exports. Economic activity in these countries will be driven by strong private sector demand and higher public investment in various sectors of the economy. Other countries in the MENA region are expected to bounce back as a result of higher investments and continue as the global economic recovery gains traction.
However, the report points towards significant downside risks as the fragile global economic recovery could be impacted by volatile oil prices and turbulent political situations. These risks are most apparent for oil importing countries and, therefore, a cautious approach needs to be adopted by governments in framing economic policy.