15 December 2011
Deleveraging in EU banks is one of the many issues impacting the ME economies in the 2012. Tourism, trade, investment and oil exports could also suffer as the EU crisis unravels. 

All eyes are fixed on the European Union these days, as the region remains mired in a sovereign debt crisis that threatens the very future of the economic bloc.

"The whole world has an interest in the resolution of a crisis that deepened dramatically through the fourth quarter, and enveloped more and more major economies putting European leaders on the back foot as events threatened to overwhelm them," says Deutsche Bank in a report on the world's economic outlook for 2012.

Clearly, a region as large and diverse and important as the European Union will have an impact on a wide range of economic sectors across the global economy. The U.S. is dreading that the EU could upset and delay American's own slow recovery and Asia - a big trading partner of the OECD countries - is also dreading the impact. In fact, analysts expect China's nominal exports to slow from 20% in 2011 to 10% in 2012 due to EU and American woes.

The Gulf and the wider Middle East will not be any different.

North African states, especially are more aligned to the EU than they are to the rest of their own continent and are likely to continue to suffer from the EU's continued ill health.

North Africa has had a terrible 2011 with great domestic unrest in Tunisia, Egypt and Libya, and it hardly helped that its largest international financier, trading partner and tourist market has showed no signs of a quick recovery.

Slowing growth in the euro zone could delay the recovery of the Tunisian economy by adversely impacting the prospects of exports, tourism income, remittances, and investment flows, says the Institute of International Finance (IIF).

In Moroco, non-agricultural growth is expected to decelerate from 4.7% in 2010 to 3.5% in 2011, partly due to weaker investment and demand from the euro area.