Oil and public cash help to boost MENA economy

MENA Economy

2010 looks like it could be a good year for the MENA region as the economy is likely to be given a welcome boost from higher oil prices, a stronger global economy and loose domestic policy conditions, according to a new report by the Economic Intelligence Unit (EIU).

OPEC continue to exercise restraint but this may not last long as oil production is expected to pick up throughout this year and grown even stronger in 2011, helped massively by the consistent government spending in major oil-producing countries.

"US$50-70 per barrel is good, prices above this are better. [However], triple digit prices would stifle global recovery. A low price would mean greater prioritisation/scrutiny of projects and adjustment in expenditure levels," Giyas Gokkent, Group Chief Economist of National Bank of Abu Dhabi (NBAD), told Emirates Business.

GCC member states in particular will benefit from the global uptick in credit market conditions last year, with ambitious infrastructure projects continuing to be churned out across the region.

"High levels of public spending"

"GCC governments will maintain relatively high levels of public spending and investment," an EIE analyst stated.

"This will, in turn, support non-oil-producing countries in Mena that benefit from regional oil-related liquidity in the form of inward investment, tourism demand and workers' remittances."

Saudi Arabia, the largest of the Arab markets, is forecast to enjoy the strongest growth across 2010-11, 3.4 percent.

For other countries in the region, Gokkent said Kuwait will likely see 3.1 per cent real GDP growth, Qatar 15.8 per cent, Oman 2.64 per cent and for Bahrain the expected real GDP should be 2.2 per cent.

The EIU concluded: "Having stagnated in 2009, regional economic growth is expected to rebound strongly to average 4.5 per cent in 2010-2011, although this is still lower than the 6.8 per cent average annual growth rate in 2005-2007."

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Daniel Jones

Daniel is a Politics and Philosophy graduate from Cardiff University where he also worked as a section editor on the award winning student newspaper. After university he joined an IT support company where he was a B2B online writer. He loves anything to do with sport and joined GDS in July 2009.

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