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Mena to outpace global growth

Dubai - Diversification, non-oil sector's performance spur prospects in 2016

Spurred by new government initiatives to introduce alternative measures to boost revenues and contributions of the non-oil sector economy, the Middle East and North Africa region is expected to record a 3.8 per cent growth in 2016.
The growth, higher than the global average predicted for 2016, is regardless of a sharp decline in oil prices, various global factors and rising geopolitical tensions, a new forecast revealed on Sunday.

The Mena growth forecast, far optimsitic than the global economic outlook presented by the World Bank, International Monetary Fund and the Organisation for Economic Co-operation and Development, Al Masah Capital said in its MENA Yearbook - 2016.
"With oil prices dropping to record lows since mid-2014, government revenues are dwindling and state deficits are burgeoning. Oil price volatility is expected to continue in 2016 and hence increasing non-oil sector revenues will enable Mena governments fund their ambitious spending programmes which are key to sustaining regional economic growth," it said.
In contrast, the global economic growth prospects are somewhat modest with the World Bank, the IMF and the OECD lowering their forecasts to 2.4 per cent, 3.1 per cent and 2.9 per cent respectively,
The region was estimated to have registered a lower GDP growth rate of 2.3 per cent in 2015 as opposed to 2.6 per cent a year earlier.
According to the report, despite several headwinds, the Mena region has continued its growth trajectory in 2016 on account of the various government initiatives to introduce alternative measures to boost revenues and GDP contributions of the non-oil sector.
The UAE, the most diversified market in the Middle East region, is expected to register a modest 3.1 per cent economic growth in 2016 as concerns over low oil prices continue to prevail resulting in a slowdown in economic activity.
However, driven by its vision of increasing the non-hydrocarbon sector's contribution to the gross doemstic product, or GDP, to 81 per cent within the next five years, the UAE has made considerable progress through its economic and policy reforms, Al Masah Capital analysts said. These include enhancing business competitiveness, encouraging foreign investments and supporting a range of projects and initiatives based on the knowledge economy.
Lower oil revenues in 2015 had weakened the fiscal position and impacted the capital spending programme of the Saudi Arabian government aimed at boosting economic activity. Amidst tough economic conditions in 2016 and expectations of a sizeable reduction in project spending and gradual cut in subsidies, the IMF forecasts GDP growth to be curtailed at 1.2 per cent down from 3.4 per cent in 2015. The report states that if Saudi Arabia is to reduce its fiscal deficit, it will need to follow the regional trend and introduce tough reforms to boost non-oil revenues in addition to introducing measures to tackle youth unemployment, its biggest socio-economic challenge.
Qatar is likely to have registered a GDP growth of 4.7 per cent in 2015 which is expected to rise to 4.9 per cent in 2016. Its economy is expected to continue growing propelled by the government's commitment to continue investing in infrastructure projects.
According to IMF preliminary estimates, Kuwait's GDP is expected to have grown by 1.2 per cent in 2015 and increase to 2.5 per cent in 2016 driven by the non-hydrocarbon sector growth. The implementation of the $112.4 billion infrastructure development plan is expected to boost private sector participation in the economy.
The IMF expects Oman's economy to expand by 2.8 per cent in 2016 compared to 4.4 per cent in 2015 as its fiscal position continues to remain under pressure on account of its high breakeven price for oil.
"Despite several challenges, reforms and alternative methods to boost revenues can offset some of the headwinds facing the economy this year and beyond," it said.
Bahrain's economy is expected to expand at 2.1 per cent in 2016, however its fiscal position is deteriorating. With modest forex reserves and one of the highest debt-to-GDP ratios in the region, Bahrain will need to continue introducing reforms and boost non-oil sector revenues.
- issacjohn@khaleejtimes.com