Slow growth ahead: World Bank downgrades global forecast to 2.4 percent
Among MENA's greatest risks are a further slide in oil prices, escalation of conflict, and further negative effects of security challenges and social unrest in countries not entrenched in war. (File photo)
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The World Bank cut its 2016 growth forecast for the GCC nations on Wednesday to two per cent amid low oil prices and budgetary spending cutbacks, and said the UAE would grow at a slower pace than predicted earlier.
The dimmer outlook for the GCC was predicted as the bank downgraded its global growth forecast to 2.4 per cent from the 2.9 per cent projected in January on the back of "sluggish growth" in advanced economies.
"The global outlook faces pronounced risks of another stretch of muted growth," said World Bank chief economist Kaushik Basu.
"A wide range of risks threatens to derail the recovery."
The Washington-based bank, in its Global Economic Prospects report, warned that the global economy is increasingly vulnerable to a sharp slowdown as troubles in emerging markets mount and as advanced economies struggle to grow.
The forecast pegged the UAE growth at two per cent, which is 1.1 per cent down from its January estimate of 3.1 per cent. It predicted that growth in the second largest Arab economy would pick up next year to touch 2.4 per cent.
The bank said it expects the continued low oil prices, together with tightening fiscal and monetary policies, will drag on activity across the GCC this year. The regional growth forecast is down from last year's 2.9 per cent and is at the slowest pace since 2009.
For Saudi Arabia, the Arab world's largest economy, the growth was revised down to 1.9 per cent from 2.4 per cent.
The World Bank report assumes an average oil price of $41 per barrel for 2016, down from the $51 per barrel outlook in January. It projects that the price will rise to $50 in 2017 and $53 in 2018.
Growth in the wider Middle East region is forecast to pick up slightly to 2.9 per cent in 2016, 1.1 percentage points less than expected in the January outlook. The downward revision comes as oil prices are expected to track lower for the year, at an average of $41 per barrel.
The main reason for the slight improvement in regional growth in 2016 is an expected strong recovery in Iran following the lifting of sanctions in January. An envisaged upturn in average oil prices in 2017 is projected to support a recovery in regional growth to 3.5 per cent in 2017, the bank said.
However, the bank warned that risks in the Middle East were still high. "Risks to the growth outlook for the Middle East and North Africa are mainly to the downside," the bank said. "Three risks stand out: a further slide in oil prices, escalation of conflict, and further negative effects of security challenges and social unrest in countries not entrenched in war."
World Bank Group President Jim Yong Kim said the sluggish global growth underscored why it is critically important for countries to pursue policies that will boost economic growth and improve the lives of those living in extreme poverty.
Among major emerging market economies, China is forecast to grow at 6.7 per cent in 2016 after 6.9 per cent last year. India's robust economic expansion is expected to hold steady at 7.6 per cent, while Brazil and Russia are projected to remain in deeper recessions than forecast in January. South Africa is forecast to grow at a 0.6 per cent rate in 2016, 0.8 of a percentage point more slowly than the January forecast.
By Isaac John
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