The tide is shifting: North Africa may overtake economic growth in the Gulf
Challenges such as large current account and fiscal deficits remain, but three years after the Arab Spring uprisings, the tide is turning in favor of the economies of North Africa, London-based Capital Economics said.
A gradual return to political stability in Egypt and Tunisia should support activity there, while exports are likely to pick up on the back of the modest recovery in the global economy, its analysts noted, while expecting overall growth to gradually strengthen over the next couple of years.
Growth in the Gulf region, meanwhile, is likely to slow as the past decade’s boom in hydrocarbon production fades and fiscal policy becomes less supportive, the analysts said.
“The big picture is that growth in North Africa could surpass that in the Gulf come next year,” Capital Economics forecast.
Capital Economics said in its latest outlook report on the Middle East that:
Saudi economy is set to slow over the next few years as government spending rises at a weaker pace and growth in the oil sector eases.
- UAE’s non-oil sector should benefit from the pick-up in the global economy, but rising fears in Dubai of a fresh property bubble, as well as the emirate’s large corporate debts will continue to cast a shadow over the outlook.
- Qatar’s ambitious investment program means it is likely to remain the region’s best performing economy over the next few years.
- Egypt’s economy is gradually recovering following last summer’s “second revolution”, though a fresh outbreak of political unrest remains a risk. However, with the new government undertaking reforms, the outlook is brightening.
- In Tunisia, a return to political stability, coupled with faster growth in key euro-zone trading partners, should support a gradual recovery.
However, The Economist Intelligence Unit said in “GCC 20202” report that GCC will grow in importance as an economic and trading hub. In 2020, the GCC is projected to be a $2 trillion economy, providing nearly one-quarter of the world’s oil supplies as well as increasing quantities of petrochemicals, metals and plastics. As economic weight gradually shifts southwards and eastwards, emerging markets will become increasingly important trading partners and investment destinations. Gulf investors and sovereign wealth funds are likely to diversify their assets into Asia and Africa, and the region is likely to export more of its oil to industrializing countries.
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