Growth could rise in MENA region in 2014

Growth in the MENA region could rise to 4pct in 2014 from 3pct in 2013, while growth in most transition countries will remain below par, averaging closer to 3pct, said a report. Ongoing challenges in the Middle East and North Africa countries undergoing transition - including Egypt, Jordan, Libya, Morocco, Syria, Tunisia and Yemen - will continue to affect economic performance in this region, said the National Bank of Kuwait in its financial report. While regional and international aid has helped to stabilize transition economies and reduce short-term external funding pressures, better medium-term prospects depend upon achieving the political consensus needed to bolster economic reforms and the return of foreign capital. In the resource-rich Gulf Cooperation Council region, by contrast, growth prospects remain favorable, supported by high oil prices, a steady flow of government development spending and - in some cases - an increasingly buoyant private sector. We maintain our forecast for oil prices at USD 100 per barrel (pb), added the report, on average, for 2014, a fall of 8pct from 2013. Although oil prices held up well last year, continued strong growth in non-OPEC supplies and a potential rise in output from OPEC members Iran, Iraq and Libya are expected to loosen oil market fundamentals in the first half of 2014. Key GCC OPEC members - led by Saudi Arabia - are forecast to cut oil output from current elevated levels early in 2014 in order to balance the market. Real oil sector GDP is therefore seen declining 2pct in 2014, pushing overall GDP growth down to 3pct. Inflation across the GCC region could be pushed higher by a combination of solid growth and rising pressures on housing rents. But at around 3pct on a weighted basis, it is unlikely to concern policymakers very much. Meanwhile, the decline in oil revenues will reduce the GCC's aggregate fiscal surplus to 7pct of GDP, from 10pct in 2013. Although this is still very strong by international standards, we expect GCC countries to pay growing attention to the sustainability of their fiscal positions going forward. This could translate into slower growth in overall spending than before, and tighter curbs on current spending in particular. This, in turn, will have implications for macroeconomic performance in the years ahead. In Egypt - a pivotal economy for the MENA region - a combination of capital controls, a managed depreciation of the pound and financial support from the GCC helped ease pressures on the external position in 2013. Along with a slight improvement in the political climate, this has set the stage for a modest acceleration in growth to 3pct in FY 2014/15.