The Middle East and North Africa (MENA) region is in turmoil. Syria, Iraq, Libya and Yemen are in civil war, 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 fourth quarter of 2015 and the possibility that the January 2016 forecast of 2.9 percent growth for the year may have to be revised downwards, economic prospects in the Middle East and North Africa (MENA) region remains grim. A combination of civil wars and refugee inflows, terrorist attacks, cheap oil, and subdued global economic recovery is expected to keep average growth in the MENA region around 3 percent in 2016. Since 2013, MENA has not been able to escape the spiral of “slow growth” for a variety of reasons including the incidence of war and conflict. These factors are expected to dampen the short-term economic prospects in the region, unless there is some progress in the peace talks. If the recent truce in Syria and the ongoing peace talks in Yemen and Libya materialize - which could in turn reduce the spread of insecurity and conflict elsewhere in the region – economic growth in MENA could improve over the forecast period (2017 and 2018). Real GDP in the MENA region is forecast to grow close to 4 percent in 2017 and 2018, still low by historical standards. The continuation of sluggish growth will hurt the overall unemployment rate, now standing at 12 percent, and household earnings in the region.
Despite low oil prices, growth in the group of oil importers will slow down from its 2015 level by 0.8 percentage point at 2.6 percent in 2016. It will increase to 3.4 percent in 2017 and 3.8 percent in 2018. Persistent security concerns and slow activity in tourism and remittance inflows are just a few factors explaining slow growth in this group of countries. Fiscal deficits and debt in these countries remain high. Lebanon’s public debt, already high at 138 percent of GDP, is expected to increase by 7 percent of GDP in 2016.
Growth in oil exporters including the six GCC countries will be affected by persistently low oil prices. Growth in the GCC countries is expected to fall to 2.2 percent in 2016 from 3.1 percent in 2015. It is expected that growth will pick up slightly over the forecast period. However, growth in this group of countries has been halved since 2014, suggesting that GCC rich countries have been “growing by oil and slowing by oil”. Among other oil exporters, Libya and Iraq are expected to witness large deficits, of respectively 59.9 percent of GDP and 20 percent of GDP in 2016, which could barely be sustained without spending reform schemes in place. Iran on the other hand is expected to benefit from the lifting of sanctions in 2016 and beyond. The country is managing to increase oil exports to pre-sanctions levels, approximately 2.4 million barrels per day. This is projected to increase growth to above 4 percent in 2016 and 2017, although this growth remains oil driven. The World Bank estimates growth for the group of oil exporters to pick up slightly in 2016 and 2017 due to a rebound in oil production in Iran, Iraq and Libya.
Last Updated: Mar 30, 2016