The Middle East and North Africa (MENA) region is expected to witness a 3.8 percent hike in GDP in 2016, amid more modest global economic growth prospects, according to a research report.
Global growth prospects are somewhat dim with the World Bank, International Monetary Fund (IMF) and the Organisation for Economic Cooperation and Development (OECD) lowering their forecasts to 2.4, 3.1, and 2.9 percent respectively.
The sharp decline in oil prices, various global factors and rising geopolitical tensions meant that the MENA region is estimated to have registered a lower GDP growth rate of 2.3 percent in 2015 as opposed to 2.6 percent a year earlier.
According to the Al Masah Capital Limited report titled 'MENA Yearbook 2016', despite these headwinds the MENA region has continued its growth trajectory with the same expected this year on account of the various government initiatives to introduce alternative measures to boost revenues and GDP contributions of the non-oil sector.
With oil prices dropping to record lows since mid-2014, government revenues are dwindling and state deficits are burgeoning. Oil price volatility is expected to continue in 2016 and hence increasing non-oil sector revenues will enable governments fund their ambitious spending programs which are key to sustaining regional economic growth.
The report highlights and analyses the economic performance and prospects of the key MENA economies namely the six GCC countries and Egypt, as well as the key developed economies of USA, Eurozone and Japan, and emerging economies of China and India. It highlights the various macroeconomic challenges that prevailed in 2015 which are expected to persist and most likely intensify further this year.
The events that unfolded in 2015, the success or failure of the divergent monetary policies of the central banks in developed economies and headwinds in key emerging markets especially China, are critical factors that will shape the global economy in 2016, cites the report.
Lower oil revenues in 2015 have weakened the fiscal position and impacted the capital spending program of the Saudi Arabian government aimed at boosting economic activity.
Amid tough economic conditions in 2016 and expectations of a sizeable reduction in project spending and gradual cut in subsidies, the IMF forecasts GDP growth to be curtailed at 1.2 percent down from 3.4 percent in 2015.
The report states that if Saudi Arabia is to reduce its fiscal deficit it will need to follow the regional trend and introduce tough reforms to boost non-oil revenues in addition to introducing measures to tackle youth unemployment, its biggest socio-economic challenge.
The UAE despite being the most diversified market in the region is expected to register a modest 3.1 percent GDP growth in 2016 as concerns over low oil prices continue to prevail resulting in a slowdown in economic activity.
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