IIF forecasts strong growth for oil exporting Arab countries
Warns of dangers and uncertainties for key non-oil exporting countries. Greater uncertainties surrounding the transition process in several countries suggest weaker macroeconomic performance in 2012 than earlier forecasts. Downside risks include more difficult and costly transitions, shortfalls in external financing and the impact of weaker global growth.
Oil exporting countries’ external and budget surpluses in 2012 will be somewhat lower than earlier forecasts, but foreign asset accumulation will continue.
The divide in economic prospects between oil exporting and non-oil exporting Arab countries continues to increase. While the oil-exporters are likely to see average growth of 6.5 per cent this year, the Arab oil importing countries will see their economies contract on average by 0.4 per cent, according to new projections from the Institute of International Finance (IIF).
The transitions from authoritarian regimes as a result of the ‘Arab Spring’ are proving to be most difficult for some countries. Dr. George Abed, IIF Senior Counselor and Director for the Middle East and Africa, stated, “It is critical that the transition authorities place a high priority on deepening and accelerating structural economic reforms. Among the populations of countries such as Egypt, Tunisia, Jordan and Morocco, expectations are that change will bring about a revival of growth that will be more widely shared, improved job opportunities and, in general, a better standard of living.”
The IIF is an association of financial services firms with more than 450 member institutions headquartered in over 70 countries. The IIF’s new report updates an earlier assessment published in May and sets out forecasts for 2011 and 2012 for two groups: (i) the Arab oil exporters (Saudi Arabia, the UAE, Kuwait, Qatar, Oman, Bahrain, Algeria, Iraq, and Libya); and (ii) oil importers (Egypt, Jordan, Lebanon, Morocco, Tunisia, and Syria).
The IIF said that average overall growth of Arab oil exporters is projected to rise from 4.8 per cent in 2010 to 6.5 per cent in 2011, and then moderate to four per cent next year (aggregate projections exclude Libya). The 2011 advance is due to higher oil and gas production and large increases in government spending. Higher oil prices and production levels should help lift the budget revenues from hydrocarbon exports from $554 billion in 2010 to $793 billion in 2011 and then decline to $725 billion in 2012. The combined external current account surplus is projected to rise from $170 billion in 2010 to $322 billion in 2011, but then decline to $225 billion in 2012. Gross foreign assets of the GCC are projected to rise to about $1.9 trillion (against foreign liabilities of $0.4 trillion).
By contrast, the new report stated that the Arab Spring, which flowered at the start of 2011 into popular uprisings to take down authoritarian regimes across several countries in the Arab region, has run into serious difficulties. While transitions in Tunisia and Egypt remain peaceful, earlier hopes for a quick passage to a more democratic future have dimmed as the process of political transformation was found to be more complex and uncertain. In Egypt, the military leadership has continued to send mixed and confusing signals on the immediate steps to complete the transition.