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HEADLINE NEWS

Thursday, September 22, 2011

MENA economies to grow 4.1% in 2011: WB

JEDDAH: Economies in the Middle East and North Africa are set to see growth of 4.1 percent this year and 3.8 percent in 2012, according to a World Bank report released on Wednesday.

The report added: "With the strong caveat that global uncertainty is clouding the horizon, the forecast for 2011 is up by half a percentage point relative to the May 2011 forecast due to more expansionary fiscal policies in the region, expanded oil production (excluding Libya), better than expected growth in Iran, and a quicker than anticipated pickup in industrial production in Egypt."

The report said growth is expected to decline by half a percentage point in 2012 because of lower expected oil prices and slower global growth.

It said: "Unlike in 2008, when MENA countries were in a strong position to weather the storm, the ongoing political and economic uncertainties have put a number of countries in a weaker position for additional response to another global downturn. With contracting global demand, lower oil prices will put further pressure on fiscal balances in many developing oil exporters, especially in a period of expanded government spending."The report said lower oil prices will be a relief to developing oil importers, but this will be offset by lower exports and remittances, and these countries have little room to stimulate their economies.

The study also highlighted the important links between good governance on a level legal and regulatory playing field, and the ability of investment to stimulate growth.

"Indeed, if we look at examples from other countries undergoing transition, investment surged in many economies that made early moves to improve governance," said Caroline Freund, chief economist for the Middle East and North Africa region at the World Bank.

"Overall, while improving government institutions is necessary for voice and accountability, it is also necessary for growth and efficient use of resources."

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