The Middle East and North Africa (MENA) region is in turmoil. Syria, Iraq, Libya and Yemen are in conflict, causing untold damage to human lives and physical infrastructure. Fifteen million people have fled their homes, many to fragile or economically strapped countries such as Jordan, Lebanon, Djibouti and Tunisia, giving rise to the biggest refugee crisis since World War II. The current turmoil in Yemen has set that country’s development back several years. Blockades and repeated cycles of violence have made Gaza’s unemployment rate the highest in the world and with Gross Domestic Product at only 40 percent of its potential. Countries undergoing political transitions, such as Egypt, Tunisia, Morocco and Jordan, are having to address security concerns over growth-promoting policies. The relatively peaceful oil exporters, such as Algeria, Iran and the GCC, are grappling with low oil prices alongside chronic youth unemployment and undiversified economies. On a positive note, the political consensus around the constitution in Tunisia, and constitutions and legislation in Morocco, Jordan and Egypt that give greater rights to women and protect freedom of expression and information, indicate that citizens are increasingly engaging in policymaking.
Alongside disappointing global growth in the first two quarters of 2015 and the possibility that the June forecast of 2.8 percent growth for the year may have to be revised downwards, economic prospects in the Middle East and North Africa (MENA) region remain mixed. Growth in MENA is expected to be about 2.9 percent in 2015, slightly higher than last year’s 2.6 percent, but considerably below the 4-5 percent growth the region enjoyed from 2000-2010. The main reasons for the continued, sluggish growth are: prolonged conflict and political instability in Syria, Iraq, Libya and Yemen; terrorist incidents in places like Tunisia that hurt tourism; low oil prices that are dragging down growth in oil exporters; and the slow pace of reforms that is standing in the way of a resumption of investment. The continuation of sluggish growth will hurt the overall unemployment rate, now standing at 12 percent, and household earnings in the region. The group of oil exporters are estimated to grow by around 2.7 percent in 2015 with growth stagnating in developing oil exporters, at 1.4 percent. The Gulf countries could lose about US$215 billion in oil revenues, equivalent to 14% of their combined GDP, in 2015. Growth for this sub-group is estimated at 3.2 in 2015, about half a percentage point lower than last year. Fiscal deficits continue to mount, leaving the region with a deficit of 8.8 percent of GDP in 2015, higher than last year, and following three years of surpluses.
The group of oil exporters are estimated to grow by around 2.7 percent in 2015 with growth stagnating in developing oil exporters, at 1.4 percent. The Gulf countries could lose about US$215 billion in oil revenues, equivalent to 14% of their combined GDP, in 2015. Growth for this sub-group is estimated at 3.2 in 2015, about half a percentage point lower than last year. Fiscal deficits continue to mount, leaving the region with a deficit of 8.8 percent of GDP in 2015, higher than last year, and following three years of surpluses.
Growth in developing MENA countries will be about 2.3 percent in 2015. While low, this figure is a full percentage point higher than the previous year, owing to better-than-expected growth in oil importers-- estimated at 3.7 in 2015 and 2016.
Among developing oil exporters, Iran’s economic prospects could improve following the nuclear deal signed on July 14, 2015 and the potential lifting of sanctions. The eventual increase in Iran’s oil exports could boost economic activity and accelerate growth to an estimated 5.8% in 2016.
For those countries already in conflict, Iraq, Libya, Yemen, and Syria, economic prospects are grim. The ISIS insurgency and large military expenditures, not to mention low oil prices, have hit the Iraqi economy hard. Growth is expected to be about 0.5 percent in 2015, following a contraction of 2.4 percent in 2014 due mainly to the decline in economic activity in the areas occupied by ISIS. Libya may see a slight rebound of 2.9 percent growth in 2015, following a major contraction of the economy over the last two years, as severe disruptions in the oil sector have interrupted oil exports, a major source of government and external revenues, in addition to the impact of cheap oil.
Last Updated: Sep 30, 2015