MENA region faces an old-new crisis: Barclays

Economic and political developments in the US and the euro zone are weighing on investor appetite and jeopardising global growth which could have a long-term effect on the Middle East and North Africa region, claims research from an international bank.

Barclays Capital's emerging markets report, released this week, compares the 2008 and 2011 prospects for the region's net oil importers and exporters. The former group of countries -- which includes Egypt -- is facing the most sustained challenge from the building economic crisis, the report says.

The downgrade of the US sovereign credit rating by Standard & Poor's in August was not a surprise to investors, says Barclays, but suggests that fiscal policy in the US and in many major economies has little alternative but to retrench for some years to come.

MENA economies, already facing their own headwinds from political upheaval which has hit growth, will likely feel the impact of western troubles too. The deciding factors, says Barclays, will be the macroeconomic standing of invididual countries. Those with healthy supplies of domestic oil seem far likelier to weather the storm.

The outlook for net oil importer Egypt -- with a larger fiscal deficit than 2008, poor fiscal dynamics and reliance on overseas trade - looks especially challenging.

"In oil importers, the macro outlook is much more challenging than three years ago," says the report.

"Heightened political volatility since January has undermined growth and investment in several countries, and it has rendered external and fiscal positions weaker than in 2008.

"The possible prolongation of transition periods may also delay further much-needed fiscal and economic reforms and exacerbate financing needs."

The proximity of Tunisia and Morocco to Europe mean they are most vulnerable to weakening trade, tourism and investment flows. But Egypt is also likely to be affected, claims Barclays, "though foreign positioning in the bond and equity markets is lower than at the onset of the Lehman bankruptcy."