The World Bank, on Wednesday, slashed the growth forecast for the UAE, GCC, and Middle East and North Africa (Mena) region for 2020 and 2021, due to geopolitical tensions and lower oil demand amidst a weakened global growth.
It slashed the UAE's growth estimates for 2019, 2020, and 2021 by 0.8 per cent, 0.4 per cent, and 0.2 per cent respectively, from its June 2019 forecast. In its January 2020 Global Economic Prospects report, released late on Wednesday, the World Bank predicted the UAE's growth at 1.8 per cent for 2019, but said that it will pick up over the next three years and expand at 2.6 per cent in 2020 and 3.0 per cent for 2021 and 2022.
Growth projections for Saudi Arabia, Qatar, Oman, Kuwait, and Bahrain were also lowered by the World Bank. Overall, GCC countries are set to grow for 2019, 2020, and 2021 by 1.3 per cent, 1.0 per cent, and 0.1 per cent, respectively. Similarly, the Mena region's growth rate has also been slashed by the World Bank for 2019 and 2020, but 2021's rate remains unchanged.
"Geopolitical and policy constraints on oil sector production slowed growth in oil-exporting economies, despite support from public spending. Risks are tilted firmly to the downside-geopolitical tensions, escalation of armed conflicts, slower-than-expected pace of reforms, or weaker-than-expected growth in key trading partners could heavily constrain activity," the World Bank said in its outlook.
The key reason for the slowdown in growth of the Mena region is blamed on a sharp contraction in the Iranian economy. The World Bank said that public spending has been roust in some oil-exporting countries, while non-oil activity has also shown supportive signs, but these developments were insufficient to offset the weak activity in the oil sector.
It said that banking systems in the GCC remain broadly resilient, with capital adequacy ratios generally sound and non-performing loan ratios contained.
"Medium-term growth prospects for the Mena region are contingent on an attenuation of armed conflicts, and on limiting their regional spillovers," said the report.
Oil prices averaged $61 a barrel in 2019, a 10 per cent fall from 2018 and $5 a barrel below previous projections. "Oil prices are forecast to decline slightly to an average of $59 per barrel in 2020 and 2021. US supply is expected to continue to increase in 2020 as new pipeline capacity comes onstream," it added.
World Bank cuts global growth forecast
The World Bank, on Wednesday, slashed the global economic growth forecast by 0.2 per cent for this year, and the next, from its previous forecast released in June 2019.
The global economy is now projected to grow 2.5 per cent in 2020, 2.6 per cent in 2021, and 2.7 per cent a year later.
Similarly, it slashed growth forecasts for advanced and emerging economies including the Euro area, China, India, Pakistan, and a number of other countries.
"With growth in emerging and developing economies likely to remain slow, policymakers should seize the opportunity to undertake structural reforms that boost broad-based growth, which is essential to poverty reduction," said Ceyla Pazarbasioglu, vice-president for Equitable Growth, Finance and Institutions at the World Bank Group.
"Steps to improve the business climate, the rule of law, debt management, and productivity can help achieve sustained growth," she said.
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