Uncertainty, volatility, and political change continue to characterise conditions in the Middle East and North Africa (MENA) region, said the World Bank. Aggregate GDP grew by one percent in 2011, down from 3.8 percent in 2010. Regional growth is projected to remain weak at 0.6 percent for 2012, mainly reflecting the influence of sanctions on growth in Iran, and continued GDP declines in Syria and Yemen .
As these elements fade in importance, growth for the region should step up to 2.2 percent in 2013 and 3.4 percent in 2014. Egypt’s economy  is projected to move out of negative territory to 1.4 percent growth in 2012, rising to 4.6 percent in 2014. Growth is also expected to pick up strongly in Jordan and Lebanon , while oil prices, which are projected to average near $107/bbl in 2012, will benefit the region’s oil exporters.
The World Bank’s Global Economic Prospects report says developing countries should prepare for a long period of volatility in the global economy  by re-emphasizing medium-term development strategies, while preparing for tougher times.
A resurgence of tensions in high-income Europe has eroded the gains made during the first four months of this year, which saw a rebound in economic activity in both developing and advanced countries and an easing of risk aversion among investors. Since 1 May, increased market jitters have spread. Developing and high-income country stock markets have lost some seven percent, giving up two-thirds of the gains generated over the preceding four months. Most industrial commodity prices are down, with crude and copper prices down by 19 and 14 percent, respectively, while developing country currencies have lost value against the US dollar, as international capital fled to safe-haven assets, such as German and US government bonds.
“Global capital market and investor sentiment are likely to remain volatile over the medium term – making economic policy setting difficult. In this environment, developing countries should focus on productivity-enhancing reforms and infrastructure investment instead of reacting to day-to-day changes in the international environment,” said Hans Timmer, Director of Development Prospects at the World Bank.
Increased uncertainty will add to pre-existing headwinds from budget cutting, banking-sector deleveraging and developing country capacity constraints. As a result, the World Bank projects that developing country growth will slow to a relatively weak 5.3 percent in 2012, before strengthening somewhat to 5.9 percent in 2013 and 6.0 percent in 2014. Growth in high-income countries will also be weak, 1.4, 1.9 and 2.3 percent for 2012, 2013 and 2014 respectively – with GDP in the Euro Area declining 0.3 percent in 2012. Overall, global GDP is projected to rise 2.5, 3.0 and 3.3 percent for the same period.
This baseline scenario remains the most likely outcome. However, should the situation in Europe deteriorate sharply no developing region would be spared. Developing Europe and Central Asia is especially vulnerable because of its close trade and financial ties with high-income Europe, but the world's poorest countries  will also feel the fall out – especially countries that are heavily reliant on remittances, tourism or commodity exports or that have high-levels of short-term debt.
“Where possible, developing countries need to move to reduce vulnerabilities by lowering short-term debt levels, cutting budget deficits and returning to a more neutral monetary policy stance. Doing so will provide them with more leeway to loosen policy, should global conditions take a sharp turn for the worse,” said Andrew Burns, Manager of Global Macroeconomics and lead author of the report.
The full report and accompanying datasets are available at www.worldbank.org/globaloutlook .