Following on from last week’s blog which looked at the economic prospects for Latin America in 2014, this week, it’s the turn of Middle East and North Africa (MENA). As it ties in with this article, I’d just like to draw attention to Ti’s upcoming Middle East and North Africa Transport and Logistics report, which you can find out more about by reading Lilith’s blog published earlier in the week. Now, back to the economics.
The performance of MENA remains difficult to predict. Political and social tensions termed as the “Arab Spring” – which began as far back as December 2010 in Tunisia – cloud the accuracy of any economic forecast. The greatest immediate problem the region faces is Syria and its devastating civil war. Not only is Syria affected, but the conflict has consequences for its neighbours with Syrian refugees accounting for 19% and 8% of Lebanon’s and Jordan’s populations respectively. Social and political problems may get worse or get better in the year ahead, meaning the uncertainty attached to any economic prediction is perhaps greater in this region than others. These consequences also played out in the Agility Emerging Markets Index 2014, where industry executives ranked Syria as the least attractive logistics market while also indicating that neighbouring countries, like Jordan and Lebanon were becoming increasingly unattractive.
Despite these relatively recent problems, the reality is that the region has long-term economic issues such as inequality of access to economic opportunities, poor service delivery and high youth unemployment. Many commentators have suggested that these issues are part of the reason why the Arab Spring began in the first place. Above all else, it seems these are the economic problems that should be tackled first in order to secure a promising growth trajectory for the years ahead.
Excessive government subsidies are also a long-standing problem the region faces. According to the IMF, almost half of global subsidies in 2011 were spent in MENA, and in 2012, fuel subsidies alone amounted to over 6% of regional GDP. In 2012, for the first time ever, Morocco spent more on subsidies than on public investment.
When discussing MENA, you also obviously have to mention the oil situation. According to the World Bank, the production of the region’s developing oil exporters (Algeria, Iran, Iraq, Libya, Syria and Yemen) fell by 8.5% in the year to November 2013. These countries represent about one third of the region’s total oil output. Meanwhile the developed oil exporters (GCC countries) picked up the slack and produced more. If social and political problems recede in the developing oil exporters then expect their production to rise.
Despite the problems discussed above, the World Bank predicts an improving situation in MENA during 2014, as it does for the rest of the world. It estimates that regional GDP was basically flat in 2013, and will increase to 2.8% in 2014. Looking at trade, export volumes are anticipated to rise by 2.9% in 2014 compared to growth of 1.4% in 2013. Imports are expected to grow by 4.4% in 2014 compared to 3.3% in 2013. But as mentioned earlier, these forecasts have to be taken cautiously as analysts are probably more uncertain about the uncertainties here than anywhere else!