The economy of MENA region is expected to grow slowly at 5.1% by 2010 due to low oil demand in international market, rising food prices and sluggish growth in other industries.
The World Bank says that the GDP (Gross Domestic Product) growth rate in Middle East and North Africa (MENA) region is expected to fall to 5.1% by 2010 from 5.7% in 2007 due to decline in oil production and non-oil GDP revenue, as reported by Business24-7.
The World Bank also disclosed that the FDI (Foreign Direct Investment) is anticipated to reduce drastically in future. FDI played a vital role in economic growth of MENA region with $30.5 Billion contribution in 2007 against a record of $27.5 Billion in 2006. Moreover, the oil dominant economies current account balance will reach $132 Billion this year compared to $77 Billion in 2007.
Low oil demand worldwide due to high prices is a main reason for poor GDP growth forecast for MENA region. Besides, increasing food prices are also posing great risk and vulnerability to the region’s economy. The steep rise in oil and food prices have forced region to give heavy subsidies on prices in the domestic market, threatening fiscal position of economies already lacking resources.
In addition, the manufacturing and service sector of Mena might see slowdown linked to effects of poor financial conditions in the US and European Union. A sever credit crunch is retarding growth in both developed and developing countries, which, in turn abruptly declining the demand of crude and refined petroleum products. Consequently, there will be a sharp decline in price and will affect the revenue and growth in the region. Hence, the GDP growth of Mena region will fall in future.
Moreover, the oil exporters of the region have to face a difficult challenge of managing hydrocarbon windfalls. As the oil prices are expected to remain high till 2010, the risk of high domestic demand coupled with inflationary consequences presenting an overarching threat to the economy of MENA region.
According to a Research Analyst at RNCOS, “The GDP growth in MENA region is continuously falling as the oil industry, largest revenue generating industry, is struggling from low oil demand. Hence, countries under Mena region should diversify their economy, for instance promoting other industries and other industries, to overcome the situation.”
