January 2010 - A new World Bank report, “Global Economic Prospects 2010: Crisis, Finance, and Growth,” notes that the crisis is having serious cumulative impacts on poverty, with 64 million more people expected to be living in extreme poverty by the end of 2010 than would have been the case without the crisis, according to updated analysis.
Following the tortuous conditions of 2009, prospects for the Middle East and North Africa (MENA) should improve through 2011. Growth is projected to increase to 4.4 percent by that year, the same pace registered on average between 1995 and 2005.
Though domestic absorption will be a continuing source of strength, the forecast for regional recovery is premised on a revival in global oil demand, firming oil prices, and a rebound in key export markets.
Oil prices are expected to remain broadly stable over the projection period, at around $75 a barrel. A rekindling of interest in regional FDI may emerge as financial and economic conditions begin to normalize. Economic recovery in Europe and among the GCC countries will be supportive of a revival for the diversified economies.
The impact of the global financial crisis for the developing economies of MENA region varied across oil exporters and importers of the region
GDP Growth Rates for the Region
The MENA region was less sharply impacted by the crisis than other regions, with overall GDP growth slowing to 2.9 percent in 2009. GDP is projected to grow 3.7 percent in 2010 and 4.4 percent by 2011
GDP growth in 2009 for the developing countries of the region is estimated to have eased to 2.9 percent, from 4.3 percent in 2008.
As investment and trade plummeted in key Euro Area economies, GDP for the diversified economies declined to 0.5 percent growth in 2008, and it is anticipated to contract by a sharp 3.9 percent in 2009, the deepest recession since WWII.
GDP growth for developing oil exporters should reach 3.1 and 3.7 percent, respectively, in 2010 and 2011.
GDP gains for the oil importers (diversified economies) faltered by almost 2 percentage points in the year, from a strong 6.6 percent outturn in 2008 (powered by growth of more than 7 percent in Egypt) to 4.7 percent in 2009.
GDP for the high-income GCC economies is anticipated to increase by 3.2 percent in 2010 and 4.1 percent in 2011, as oil production firms and a higher average oil price help to restore revenues, albeit in more moderate increments.
The “food-fuel” crisis of 2007-08 was a challenge for the region, the largest net exporter of oil and the largest net importer of food.
Oil exporters were less adversely affected, but food import bills widened sharply.
Hardest hit were countries in the Maghreb, as well as Jordan and Lebanon, which are large importers of both food and fuel; and the Arab Republic of Egypt (high food-import dependence).
Over the course of 2009, net terms-of-trade movements for the developing oil exporters (Algeria, Islamic Republic of Iran, Syrian Arab Republic, and Republic of Yemen) and the Gulf Cooperation Council (GCC) were favorable, as oil prices increased and food prices declined. But high oil prices have been maintained at the expense of much reduced output.
For the more diversified economies (Egypt, Jordan, Lebanon, Morocco, and Tunisia) steep declines in external demand (notably from the dominant Euro Area) had a negative effect on merchandise exports, compounded by falling tourism volumes, lower worker remittances, and declining FDI inflows, notably those from the GCC economies.
Developments among the regional oil exporters
The global economic crisis ended the oil boom that saw oil prices peak at more than $150 a barrel in mid-2008, and prices have settled into a range of $65–$80 a barrel. As part of this effort, regional oil exporters scaled back production by nearly 10 percent (11 percent among high-income producers and 7.3 percent among the developing exporters of the region). The combination of much lower prices and reduced output caused oil and gas revenues for all exporters to drop from $755 billion in 2008 to $485 billion in 2009.
Developments among the diversified economies
The Euro Area is the destination for more than 70 percent of goods exports from the diversified economies of MENA region. Moreover, the Euro Area is also the host for overseas workers from the Maghreb and Mashreq and an important source of remittance flows and tourism arrivals to the developing region.
Slackening of economic activity and worsening labor conditions in Europe, as well as across the GCC economies over the course of 2009 caused the flow of worker remittances into the developing region to decline by 6.3 percent for the year—in contrast to the strong gains of 23.0 and 11.3 percent in 2007 and 2008, respectively. Among the larger recipient countries, Egypt appears to have been most adversely affected, with flows declining 9 percent, while Morocco experienced an 8 percent drop in receipts. Jordan, Lebanon, and Tunisia experienced lesser declines, within a range of 1 to 3 percent.
Tourism receipts are a key source of foreign currency equivalent to 14 percent of GDP for the diversified economies of the region. With Europe suffering increasing unemployment rates, faltering wage growth, and efforts by households to repair balance sheets badly damaged by the financial market meltdown of 2008, tourism receipts are estimated to have declined by 5 percent during 2009.