The euro zone narrowly avoided recession in the first quarter as growth remained flat, showed data released yesterday by Eurostat, the area's statistics agency. But the euro zone  is likely to contract by 0.8 percent for the year as a whole, Sarah Hewin, the regional head of research for the United Kingdom and Europe at Standard Chartered, said yesterday. Such a scenario carries risks for the Mena region.
"The main transition is through the risk of a deep recession and an escalation of the crisis, this would take euro area GDP lower," she said at a press briefing in Dubai. "Global trade links suggest a weak Europe would be bad news for this region and Asia."
Exports from the GCC to the 27-member EU were valued at €21.7 billion (Dh102.38bn) before the current crisis began in 2009. As well as oil, other goods include aluminium, petrochemicals and food. The European market is even more important for North African economies, accounting for more than half of exports from Morocco and Tunisia. A stagnation in euro-zone economies is likely to sap demand for exports as well as flows of European tourists, another important money earner for regional economies.
Standard Chartered expects a split in the growth prospects of oil importers and exporters this year. While countries such as Egypt, Tunisia and Jordan battle with strong oil prices and fiscal deficits, the oil exporters would benefit from higher crude revenues, said Philippe Dauba-Pantanacce, a senior economist for Turkey, the Middle East  and North Africa at Standard Chartered. The UAE would grow by 3.4 per cent this year, up from the bank's previous forecast of below 3 per cent.
Europe's debt crisis has also triggered concerns about the ability of GCC companies and banks to refinance debt this year. The impact of the euro crisis, together with requirements for European lenders to raise capital buffers, would lead to a cut in lending to the region, Moody's Investors Service warned in March. But the impact of any pullback will be limited, said Mr Dauba-Pantanacce.
"Sometimes the role of European banks in the GCC is exaggerated a little bit," he said. "Except for Bahrain, which has the highest percentage of European bank assets to GDP, the other countries' exposure to European banks is not enough to cause a systemic risk." Another risk for the GCC is from lower oil prices, he said.
"Oil prices are starting to soften recently," he said. "The main drivers for global GDP right now, Asia and China, have seen their GDP indicators softening a little bit and Asia, especially since 2008, has become an increasingly important market for the GCC."