Economic Research | Country Risk Weekly Bulletin | Country Risk Weekly Bulletin 574 | Growth prospects vary among oil exporters in the MENA region | Lebanon | Byblos Bank

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Byblos Bank

Country Risk Weekly Bulletin 574

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Growth prospects vary among oil exporters in the MENA region

The Institute of International Finance indicated that economic prospects vary among the nine oil-exporting economies in the Middle East & North Africa (MENA) region. It projected real GDP growth in the six Gulf Cooperation Council (GCC) countries to decline from about 2.3% in 2018 to 1.8% in 2019, due to compliance with the OPEC production cut agreement and to relatively lower global oil prices. However, it expected non-hydrocarbon sector growth in the GCC to accelerate from 2.7% in 2018 to 3.3% in 2019, driven by stronger domestic demand amid fiscal expansion and improving confidence. It added that tight global financial conditions and geopolitical tensions continue to weigh on private sector activity in the GCC. Further, it forecast growth in Iraq to rise from 2.3% in 2018 to 4% in 2019, supported by post-war reconstruction, while it anticipated Iran's economy to contract by about 3% in the fiscal year ending in March 2020 due to a sharp decline in oil exports and the depreciation of the Iranian rial from the re-imposition of U.S. sanctions. It said that downside risks to the outlook of the region's oil exporters include lower-than-anticipated global oil prices, slower implementation of reforms, and the collapse of the nuclear deal with Iran. 

In parallel, the IIF expected the fiscal balance in most of the region's oil exporters to deteriorate in 2019, mostly due to lower hydrocarbon revenues and rising public spending. It forecast the GCC's aggregate fiscal deficit to widen from 1.5% of GDP in 2018 to 4% of GDP in 2019. However, it anticipated governments to comfortably finance their fiscal needs through external and domestic debt issuances, which would increase their debt levels. Further, it projected the aggregate current account surplus of the region's oil exporters to decline from $172bn, or 7.3% of GDP, in 2018 to $60bn, or 2.5% of GDP, in 2019 due to lower oil export receipts. It noted that external pressures persist in Algeria, Bahrain and Oman, given their wide fiscal and current account deficits and declining foreign currency reserves.
Source: Institute of International Finance
 
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