publication April 16, 2018

MENA Economic Monitor, April 2018: Economic Transformation

Image

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. The increase in growth is broad-based, and almost all countries will experience an uptick this year. On the back of a good performance by Gulf Cooperation Council countries, oil exporters could see growth reach 3% in 2018, double their rate in 2017. Improvement in oil importers is also expected to be driven by a sharp rebound in Egypt. Stabilization policies, reforms, and a surge in foreign receipts are expected to lower fiscal and external imbalances in 2018 and beyond. In the short term, the outlook for MENA remains positive, and the growth rebound is expected to hold firm over the next two years, reaching 3.3% in 2019 and 3.2% in 2020. However, geopolitical tensions, the challenges posed by the forcible displacement of people, including refugees, and the rising level of debt in the region could cloud the positive outlook.

While stabilization policies have helped economies adjust in recent years, a second phase of reforms is needed that should be transformative if the region is to reach its potential. Indeed, the current growth trajectory is markedly below that potential and insufficient to absorb the hundred million young people who will enter the labor market in coming decades. In this report, we explore the role that public-private partnerships can play, not only in providing an alternative source of financing but in helping change the role of the state from the main provider of employment to an enabler of private sector activity.

Studies have shown that the gap between MENA economies and fast-growing ones is the performance of the services sector. Rapid technological change offers new opportunities for boosting private-sector-led growth through enhancement of high-tech jobs in the services sector. For each job created in the high-tech sector, approximately 4.3 jobs are created across all occupation and income groups. The MENA region has a fast-growing pool of university graduates and a heavy penetration of social media and smartphones. Combining them could serve as the foundation of a digital sector that could create much-needed private sector jobs for the youth over the next decade. Several MENA countries have developed strategies to transform their economies and take advantage of disruptive technology, but more is needed to capture the opportunity.

The report also shows how external forces are disrupting various markets, including those for energy, which exposes MENA countries to new risks, including of stranded assets.

 

Economic prospects for:

Algeria | Djibouti | Egypt | | Iraq | Iran | Jordan | Lebanon | Libya | Morocco | Palestine | Tunisia | Yemen |

GCC: United Arab Emirates | Bahrain | Saudi Arabia | Oman | Qatar | Kuwait