As the economies in the region face the global coronavirus outbreak and the collapse of oil prices, transparency will be key to their economic recovery. The cost to the region of both of these shocks is estimated at US$116 billion. While estimates of the costs of these current crises are fluid, the shocks have exacerbated already slow economic growth in the region, due, in part, to lack of data transparency. The report recommends that countries respond with policies in two parallel steps: address the health emergency and associated economic contraction, and invest in transparency to break the cycle of distrust and lack of government accountability.
The Middle East and North Africa (MENA) needs bolder and deeper economic reforms. GDP growth is projected to be 0.6% in the region in 2019, a fraction of what is needed to create enough jobs for the fast-growing working-age population. Even in those few countries that have had periods of higher growth, poverty failed to decline, suggesting a need for reforms to instill fair competition and promote inclusive growth.
World Bank expects economic growth in the Middle East and North Africa to continue at a modest pace of about 1.5 to 3.5 percent during 2019-2021, with some laggards and a few emerging growth stars. While some MENA economies have maintained what this Update calls “unexplained” current account balances for several years, fiscal policy has lost some of its historical role as a driver of the current account. In addition, the region’s capacity to recirculate savings from one country to another also seems to have weakened, most notably since 2014, when the global restructuring of the oil market became abundantly apparent.
Growth in the Middle East and North Africa (MENA) region is projected to rebound to an average of 2% in 2018, up from an average 1.4% in 2017. The modest rebound in growth is driven mostly by the recent rise in oil prices, which has benefitted the region’s oil exporters while putting pressure on the budgets of oil importers. The rebound also reflects the impact of modest reforms and stabilization efforts undertaken in some countries in the region. The report forecasts that regional growth will continue to improve modestly, to an average of 2.8% by the end of 2020 while there is the ongoing risk that instability in the region could worsen and dampen growth.
Economic growth in MENA is projected to rebound in 2018, thanks to the positive global outlook, oil prices stabilizing at relatively higher levels, stabilization policies and reforms, and recovery and reconstruction as conflicts recede. Growth in MENA is expected to rebound to 3.1% in 2018, following a sharp decline to 2% in 2017 from 4.3% in 2016.
Growth prospects for the MENA region is projected to improve in 2018 and 2019 with overall growth exceeding 3%. Nevertheless, MENA’s overall growth levels are half of what they were before the 2011 Arab Spring, making it difficult to address the youth unemployment problem and the needs of massive numbers of people who are displaced across the region as conflicts continue.
Plagued by war, violence, and low oil prices, economies in the Middle East and North Africa (MENA) region will see growth of 2.6% in 2017, down from 3.5% in 2016. But after 2017, driven by ongoing reforms, the situation is expected to improve slightly and growth could exceed 3% in 2018 and 2019.
Regional growth is expected to slow down to an average of 2.3% this year, half a percentage point lower than last year. Over the next two years, growth in MENA is expected to improve slightly to 3.1 and 3.5%, as governments across the region are taking the oil price decline as largely permanent and are undertaking reforms to diversify their economies away from oil. The disappointing performance of the MENA economies, and possibly the global economy, is partly due to the rise of terrorist attacks and spread of violent extremism.
This new issue of the report predicts that regional GDP growth will average 3% for 2016. Due to a combination of civil wars and refugee inflows, terrorist attacks, cheap oil, and a subdued global economic recovery, prospects for faster growth are slim.
Against this backdrop of a slowing global economy, the MENA region is stagnating. Continued low oil prices, the escalation of conflicts, and civil wars make the short-term prospects for a growth recovery slim. The World Bank estimates regional GDP growth to stay at around 2.8 percent in 2015, lower than predicted in April.
Despite a slight uptick in the global economy, the World Bank's MENA Economic Monitor expects GDP growth in the region to remain flat at between 3.1% and 3.3% for 2015 and 2016. For the first time in four years, the region faces a fiscal deficit due to the prolonged conflict and political instability in some countries, low oil prices, and the slow pace of reforms. These factors are also contributing to low investment and high unemployment.
The report projects regional growth to average 4.2 percent in 2015, slightly more favorable than the 2013-2014 figures. Economic growth could reach 5.2 percent depending on domestic consumption, easing political tensions crowding-in investments in Egypt and Tunisia, and full resumption of oil production in Libya.