Mena to grow at 2.3% in '16
By 2020, FocusEconomics believes oil prices will hover around $70 per barrel.
Dubai - FocusEconomics forecast predicts this current account deficit to continue through 2019
Economic growth of the oil-exporting countries in the Middle East North Africa region is projected to be at 2.3 per cent in 2016, lower than the 2.4 per cent increase in 2015, mirroring the subdued oil price growth, FocusEconomics, a leading provider of economic analysis and forecasts, said.
While the growth in 2016 represents the weakest growth since the height of the global financial crisis in 2009, next year, dynamics in Mena should improve on the back of slightly higher oil prices and more stable global economic dynamics, the forecast said. "Going forward, growth will likely pick up, but it will always stay below the four per cent threshold," FocusEconomics said in its regional outlook report.
Ricard Torné, head of Economic Research at FocusEconomics FocusEconomics, said for 2017, Mena growth would be slightly stronger at 2.8 per cent.
According to the report, since February 2015, more than one full percentage point has been shaved off from the 2016 economic outlook for oil-producing countries
"The glaring consequence of the decline in oil prices has been a sharp deterioration in the aggregate fiscal and current account balances of the Mena economies. While the region as a whole has enjoyed an enviable current account surplus due to massive capital inflows stemming from oil revenues in the past decade, this situation started to change in 2014 and, last year, the region had the first aggregate current account deficit in nearly two decades," the report said.
FocusEconomics forecast predicts this current account deficit to continue through 2019. "Saudi Arabia, the largest economy in the region and a perfect example of an oil-export-driven economy, experienced astonishingly high current account surpluses in the 2010-2013 period, which averaged nearly 20 per cent of GDP. However, when oil prices started to plummet in the summer of 2014, the balance began to narrow."
In 2014 it fell to 9.8 per cent of GDP, before collapsing to a deficit of 8.3 per cent in 2015. For this year, the deficit will likely widen to 8.6 per cent before recovering slightly year on year until reaching a surplus in 2020, said the report.
According to FocusEconomics' latest Commodities Consensus Forecast report, Brent crude oil prices to average $51.2 per barrel in fourth quarter 2016, before rising further to $ 60.9 per barrel in fourth quarter 2017. WTI crude prices are expected to follow suit and will rise to $50.3 per barrel in fourth quarter 2016 and to $59.6 in fourth quarter 2017.
"While oil prices will trend upward going forward, they will likely remain low to the end of our forecast horizon due to a series of factors," it said.
The report noted that the divergence between supply and demand will likely persist in the coming years, which means that oil prices will remain at relatively low levels. "Oil prices will most likely not return to the $100 per barrel prices of just a few years ago in the coming years largely due to the combination of factors we just outlined. In fact, by 2020, FocusEconomics believes oil prices will hover around $70 per barrel."
According to the report, the global oil glut is simply a result of supply and demand influencing prices, as increased oil output and weaker global growth has caused a severe mismatch between supply and demand to widen. Opec estimates that in 2015, the negative balance reached 2.1 million barrels per day and caused oil prices to hit rock-bottom in early 2016.