Growth strengthens in MENA, but vulnerabilities persist

The new Regional Economic Update presents the outlook for MENA in the context of rapidly-evolving global and domestic environments, recognizing the linkages that matter for shaping country-specific outlooks and the multiple risks that could alter them. The following are some main observations and findings:

1. The region as a whole is expected to grow at 4.8 percent in 2012, surpassing the 3 percent growth achieved in 2011.

2. Growth of MENA’s oil exporting countries will be strong and rise from the average of 3.4 percent in 2011 to 5.4 percent in 2012.

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3. Oil importers are in fragile positions and will grow at half the pace observed in oil exporters.

• Oil importers, especially those recovering from political turbulence, are in vulnerable positions as suggested by widening risk premia, diminished foreign reserves and increasing difficulty financing fiscal and current account gaps.
• Net oil importers will be affected negatively by high oil prices, and those with strong EU links will be impacted by the weak growth expected in the Eurozone. Still, oil importers with GCC links will benefit from strong growth in the GCC oil exporters through trade, investment and remittances.

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In summary:

Outlook is uncertain and contingent on developments in the region and beyond. While political transitions and economic challenges remain and continue to cloud the short-term growth prospects in parts of the region, external downside risks could also alter the forecast. These include volatility in oil markets, a deeper than expected slowdown in Europe, and potentially weaker growth in the US and developing economies.