Political climate in Middle East casts shadow on short-term growth prospects
A sluggish global economic outlook, with slower growth in the next 12 to 18 months than previously anticipated, will impede poverty reduction in the Middle East, according to a new World Bank report. Action to remove barriers to trade and investment that hurt poor people in developing countries is becoming increasingly urgent.
Despite a continuation of high oil prices, growth in the Midde East and North Africa declined to 2.5 percent, down from 3.2 percent in 2001, as the events of September 11, 2001 continue to reverberate throughout the region, state the World Bank’s Global Economic Prospects and the Developing Countries 2003.
For oil exporting countries, growth remained just above two percent. The larger increase in growth anticipated from both high oil prices and increased public expenditures were offset by a slowdown in production and exports, a result of tightened OPEC quotas introduced in 2001 to support higher oil prices.
Diversified exporters in the region faced worsening conditions in 2002, with GDP growth falling to 2.2 percent, a decline of two percent from 2001. External factors leading to this decline include the deterioration in export market growth for Egypt, Morocco and Tunisia, as well as sharp declines in the tourism sector in North Africa and several countries in the Levant following the events of September 11.
Internal factors such as unfavorable weather conditions, tightened fiscal and monetary policies and an unstable exchange rate regime in some Middle East countries also served to exacerbate the impact of the economic slowdown stemming from external shocks.
According to the report, growth prospects in the region are clearly contingent upon whether military conflict occurs in the region. If a conflict is averted over the next year and confidence in the region is gradually restored, the region's growth is forecast to increase to 3.7 percent by 2004. A recovery would be expected for both oil-exporting countries and diversified exporters.
Growth is expected to average 3.6 percent for the oil-exporting countries, while growth in diversified exports would be expected to increase to 2.7 percent in 2003 and 3.6 percent in 2004.
In the face of uncertainties in the global environment, Global Economic Prospects 2003 outlines steps that can be adopted by rich and poor countries to increase growth rates and accelerate poverty reduction. Though global GDP is expected to rise by 2.5 percent in 2003 as a result of improved business health and policy stimulus in the US and Europe, the chances of the world economy sliding toward recession are real. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
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