Raising the forecast for the Middle East for 2011 is up by half a per centage point relative to a May 2011 forecast, the global body warned that global uncertainty is clouding the horizon.
The upgrade in the regional outlook was due to “more expansionary fiscal policies in the region, expanded oil production, better than expected growth in Iran, and a quicker than anticipated pickup in industrial production in Egypt,” the World Bank said in a report. In 2012, however, growth is expected to decline by half a per centage point because of lower expected oil prices and slower global growth, the report said.
Caroline Freund, chief economist for the Middle East and North Africa region at the World Bank, said unlike in 2008, when MENA countries were in a strong position to weather the storm, the ongoing political and economic uncertainties have put a number of countries in a weaker position for additional response to another global downturn. “Overall, while improving government institutions is necessary for voice and accountability, it is also necessary for growth and efficient use of resources.”
To revive investment above and beyond pre-Arab-Spring levels, a move to transparency and accountability is urgent, she said. With contracting global demand, lower oil prices will put further pressure on fiscal balances in many developing oil exporters, especially in a period of expanded government spending, she said in a report.
“Indeed, if we look at examples from other countries undergoing transition, investment surged in many economies that made early moves to improve governance,” Freund said.
The report noted that investment in the MENA region has been strong over the last two decades in comparison with Latin America and Eastern Europe.
However, in the oil exporting countries, such as Algeria and Oman, it has been primarily supported by large and expanding public investment. Oil importers, in contrast, like Egypt and Morocco, have shown more strength in private investment, which has increased in recent years.
World Bank chief economist and senior vice-president Justin Yifu Lin said on Wednesday that developing countries can prepare for the threat of a global recession by improving policies to generate growth and jobs, diversifying economies, bolstering their banking sectors and readying social safety nets.
Lin said the sentiment in the international economic community had abruptly changed from a feeling of general confidence in global recovery six months ago to “alarming uncertainty” now facing policy-makers.
“We once again are seeing the financial markets in the world in turmoil,” Lin said, adding that the creditworthiness of several countries “on both sides of the Atlantic” was now in question, fuelling the general crisis of confidence. This was a worrying scenario for the world’s developing countries, as investors and consumers across the globe might now be inclined to hold back out of caution.
“We still hope for the best,” Lin said, but he added: “For the developing countries, it is very important for them to prepare Lin, and the World Bank’s top economists covering regions from East Asia to Africa and Latin America, warned that while many regions had weathered remarkably well the 2008-2009 financial crisis, this meant that their economic defences might not be as sturdy now to face another global recession.
“The fiscal cushions are not as strong anymore as they were in 2008,” Augusto de la Torre, the bank’s chief economist for Latin America and the Caribbean, told the round table on “Developing Countries and the Global Economic Outlook.” Lin urged developing countries to gird their economies for another downturn by identifying new drivers of growth, overhauling banking regulations to protect their banking sectors against transmitted financial shocks and fine-turning policies to sustain productivity and job creation.
Abu Dhabi was ranked 16th in the Expat City Ranking 2021 by InterNations
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