Political risks weigh heavy on regional growth
Saudi Arabia, the largest economy in the Middle East, is expected to grow at near-zero levels.
It's not the West but some emerging and developed economies that will drive the engines of growth for the world during the next couple of years. The International Monetary Fund (IMF) is confident that the world economy is on a stable growth trajectory and would accelerate at 3.5 per cent in the current year, as predicted earlier. It's reassuring, given the constant feed of negative news from stronger economies like the US, and the UK.
Events such as Brexit and rising threats of protectionism by US President Donald Trump won't just affect the respective countries but also the world at large. Policies such as these threaten to rock the boat and wipe out some of the gains made by the global economy in the last few years. On the other hand, the election of Emmanuel Macron in France has diminished political risks in Europe. The Eurozone, along with Japan and China could push growth faster. Besides, what's encouraging is the data on trade which is on the upswing. The volume of goods and services traded globally is expected to grow 4 per cent this year, or 0.2 percentage points faster than the IMF forecast in April. In effect, it all bodes well for all. World trade could once again grow faster than overall economic output.
Regionally, the oil rich nations might continue to bear the brunt of suppressed oil prices and conflicts in the region. Oil prices have remained at sub-50 levels for long and affected state revenues and budgets. Saudi Arabia, the largest economy in the Middle East, is expected to grow at near-zero levels. But things could change once the proposed reforms are implemented and the kingdom starts to diversify its economy.
The UAE, in contrast, has weathered the post-2014 oil shock well, thanks to firm leadership and a vision beyond oil. But for the region on the whole, conflicts remain a concern. How countries resolve them and how soon will reflect in its growth. Managing geopolitical risks is the second best option, if conflict resolution is distant, and this will take combined political will.