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According to the Institute of International Finance (IIF), Kuwait, Saudi Arabia and the UAE will post growth rates of 0.8 per cent, 0.7 per cent and 0.6 per cent, respectively, in 2020. Qatar and Oman will see 0.4 per cent and 0.2 per cent growth, respectively, but Bahrain will witness negative growth of 0.7 per cent.
"We assume modest increases in oil production in Saudi Arabia, the UAE and Kuwait, leading to higher headline growth," Garbis Iradian, chief economist for the Mena at the IIF, said.
"Governments are trying to mitigate the economic damage with stimulus packages, but many are starting from a weak position. Central banks in the region have cut policy rates and announced plans to provide liquidity to financial institutions, particularly those lending to SMEs. Mena countries with limited fiscal space to ramp up public services and support affected sectors [including Algeria, Iraq, Bahrain, Oman, Lebanon and Tunisia] would face substantial pressure," he added.
"Saudi Arabia's decision to increase oil production to 12 million bpd until June, will support GDP growth in 2020," said Madhavi Bokil, vice-president-senior credit officer at Moody's Investors Service. Moody's noted that Saudi Arabia is the only nation in the G20 countries that will see a positive growth of 1.5 per cent this year.
Meanwhile, Capital Economics paints a gloomy picture for the Mena region, predicting 1.7 per cent negative growth but Saudi Arabia will outshine and grow by 2 per cent this year.
GCC to grow, Mena won't
According to the IIF, overall Mena region growth will contract by 0.3 per cent but GCC region will see positive growth of 0.6 per cent.
It estimated that nine Mena oil exporters would see a fall in hydrocarbon earnings in 2020 of $192 billion - 11 per cent of GDP. Consequently, the cumulative current account balance would shift from a surplus of $65 billion in 2019 to a deficit of $67 billion in 2020, and the fiscal deficit would widen from 2.9 per cent of GDP to 9.1 per cent.
The forecast is based on baseline scenario of an average oil price of $40 per barrel.
"We expect growth in Mena oil importers to decline by 2.4 per cent to 0.8 per cent in 2020, the lowest since the early 1990s. The potential benefits of lower oil prices are unlikely to overcome the drag from dramatic limits on movement of people and goods within national borders to prevent unchecked spread of the virus, along with deep ties to oil exporters in the region as well as to economies elsewhere that are already seeing rapid contraction," said Iradian.
Resident outflows - mostly in the form of sovereign wealth funds - will also decline sharply from $215 billion in 2019 to $136 billion in 2020, reflecting the increasing need to tap SWFs to finance the large deficits.
Nonetheless, official reserves are expected to drop by $120 billion - mostly in Saudi Arabia, Algeria, Iraq and Iran. "We also project a sharp decline in the cumulative SWFs of Kuwait, Qatar and the UAE," he said.
- waheedabbas@khaleejtimes.com
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