Dubai – “ASWAQ”
The World Bank reduces its 2016 growth forecast for the GCC nations recently to two per cent amid low oil prices and budgetary spending cutbacks. The UAE is also said to be growing at a slower pace than predicted earlier.
The GCC’s dimmer outlook was predicted as the bank downgraded its global growth forecast to 2.4 per cent from the 2.9 per cent projected in January, on the back of “sluggish growth” in advanced economies.
The Washington-based bank warned, in its Global Economic Prospects report, that the global economy is increasingly vulnerable to a sharp slowdown as the crisis in emerging markets surge, and as advanced economies struggle to grow.
The UAE growth forecast is pegged at two per cent, down 1.1 per cent from its January estimate of 3.1 per cent. Growth in the second largest Arab economy is predicted to pick up next year to reach 2.4 per cent.
The low oil prices is expected to continue, together with tightening fiscal and monetary policies, and this is said by the bank to drag on activity across the GCC this year. The growth forecast in the GCC region is down from last year’s 2.9 per cent, said to be the slowest pace since 2009.
As for Saudi Arabia, the Arab world’s largest economy, the growth was revised downward to 1.9 per cent from 2.4 per cent.
The World Bank report is based on the assumption that the average oil price for 2016 is US$41 per barrel, down from US$51 per barrel outlook in January. The price is projected to rise to US$50 in 2017 and US$53 in 2018.
Meanwhile, growth in the wider Middle East region is forecast to pick up slightly to 2.9 per cent in 2016, 1.1 per cent less than the expected January outlook. The downward revision is based on expectations that oil prices would be lower for the year, at an average of US$41 per barrel.
The bank said that the main reason for the slight improvement in regional growth in 2016 is an expected strong recovery in Iran following the lifting of sanctions in January. An envisaged upturn in average oil prices in 2017 is projected to support a recovery in regional growth to 3.5 per cent in 2017.
However, the risks in the Middle East were still high as the bank was reported as saying, “Risks to the growth outlook for the Middle East and North Africa are mainly to the downside. Three risks have been identified i.e. a further slide in oil prices, escalation of conflict, and further negative effects of security challenges and social unrest in countries not entrenched in war.”
The sluggish global growth is said by the World Bank Group President Jim Yong Kim to underscore why it is critically important for countries to pursue policies that will boost economic growth and improve the lives of those living in extreme poverty.
Among major emerging market economies, China is forecast to grow at 6.7 per cent in 2016 from 6.9 per cent last year, while India’s robust economic expansion is expected to remain steady at 7.6 per cent. Brazil and Russia are however projected to remain in deeper recessions than forecast in January, and South Africa is forecast to grow at 0.6 per cent in the same period, 0.8 per cent slower than the January forecast.