World Bank forecasts mideast economy to slow after healthy 2003
Regional, Economics, 4/21/2004

Middle East economic growth is poised to slow after resisting during the Iraq war to expand at the fastest rate in 12 years in 2003, the World Bank forecast Monday.

Gross domestic product (GDP) growth in the Middle East and North Africa (MENA) was forecast at 5.1% last year, 3.7% this year, and 3.9% in 2005, it said.

As crude oil output was lowered by members of the Organization of Petroleum Exporting Countries (OPEC) in 2004, growth in oil exporting countries was expected to ease, said the Bank's Global Development Finance 2004 report.

"In the case of Iraq, however, the continued recovery in oil production will support the recovery in GDP growth as the interim government focuses on building capacity for essential services, reconstruction, and job growth with the assistance of international donors," the report pointed out.

Gradual recovery in Western Europe would be critical to stimulating exports from the Maghreb, as well as enhancing prospects for tourism and remittance revenues across the region, it said.

Regional growth would likely be about four percent by 2006, the Bank forecast, but the outlook depended on oil producers managing volatile revenues and others cutting their reliance on the public sector.

"Geopolitical tensions form the principal backdrop of risk to the outlook, which may threaten steps toward freer trade and constrain the free movement of labor and, in turn, worker remittances," the Bank said.

Despite the Iraq war, GDP growth in 2003 in the region was the strongest since 1991, the Bank said.

"Underpinning the advance was a sharp upturn in growth for the region's oil-exporting economies," the report said.

"Higher oil prices and a ramp-up in crude oil production provided substantial revenue gains, supporting increased public current and capital spending."

Other exporters gained because of a rebound from severe drought in the Maghreb, including a 6.0% advance in Tunisia, up from 1.7% in 2002, helped by a pickup in tourism.

Egypt, Jordan and Syria stabilized or slowed a little, it said.

Despite security tensions, capital spending expanded by 10 percent, providing a 2.3 percentage point boost to growth in 2003, up from 0.2 points during 2002.

The Bank reported strong gains in capital spending in Algeria, Iran and Saudi Arabia, supported by rising petroleum revenues.

The aggregate current account surplus was close to 25 billion dollars, or 4.2% of the region's economic output.

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