(MENAFN- Kuwait News Agency (KUNA)) BEIRUT, Dec 13 (KUNA) -- The UN Economic and Social Commission for Western Asia (ESCWA) reported Wednesday that economic expansion in the Arab region slowed down in 2016.
In its Survey of Economic and Social Developments in the Arab Region 2016-2017, the Beirut-based ESCWS said the average growth rate of gross domestic product (GDP) in the Arab region went down from two percent in 2015 to 1.8 percent in 2016 and in the GCC member states from 3.5 percent two percent in the same period.
International commodity prices, including for crude oil, remained low, agriculture in the Maghreb was hit by severe drought and geopolitical tensions continued to discourage tourism, according to the report.
Rising interest rates in the United States of America dampened domestic credit growth. The balance-of-payments situation remained tight for non-oil exporting Arab countries, particularly Egypt, the Sudan and Tunisia.
War and political violence continued to plague Iraq, Libya, Palestine, the Syrian Arab Republic and Yemen.
Global economic recovery in 2017 should improve the region's prospects, in spite of the political and social fallout of tensions affecting it, such as potential travel restrictions affecting certain Arab countries.
Recovery in oil prices and expansion of domestic demand should accelerate the real growth rate to 2.5 percent.
Nevertheless, the degree of recovery is unlikely to be enough to fund policies aimed at implementing the Sustainable Development Goals (SDGs). Arab countries need to redouble fiscal consolidation efforts, and should deepen regional cooperation to make optimum use of financial, human and natural resources, the report said.
According to OPEC data, the total world demand for oil in 2016 averaged at 95.1 million barrels per day (b/d), up by 1.4 million b/d from 2015 --.
Rising demand and a slowdown in supply growth, mainly due to a significant decline in crude oil production in the United States in the first half of 2016, reduced the margin of oversupply to 0.8 million b/d (total supply was 95.9 million barrels a day) in 2016 from 1.8 million barrels the previous year.
Towards the end of 2016, major oil producing countries, excluding the United States, agreed to coordinate a reduction in production --. Total crude oil production for 2016 in the Arab region is estimated at 25.3 million b/d on average, up 1.7 million b/d on 2015. GCC countries are estimated to have produced 18.4 million b/d in 2016, an increase of 0.7 million b/d over the previous year. Production in Iraq grew substantially, due to the recovery of production facilities in the north and facility expansion in the south. In Libya, production plunged to an estimated 360,000 b/d in 2016, while in Yemen facilities remained shut down. Total production in the Arab region is forecast to decline moderately in 2017 to 24.4 million b/d. The region's total gross oil export revenues are estimated at USD 321 billion for 2016, a 14 percent drop from the previous year. Since the projected price increase should outweigh the decline in production, total revenues are forecast to increase by 29 per cent to $415 billion in 2017. Nevertheless, that total is still 51 percent lower than the peak in 2012. On natural gas, the report said that although more reserves have been found in the Arab region, its export potential has been exploited by only a limited number of Arab countries, namely Algeria, Egypt, Iraq, Libya, Oman, Qatar, the UAE and Yemen. Saudi Arabia uses natural gas for domestic consumption only. Iraq exported its first shipment in March 2016. Nevertheless, like Egypt and the UAE, it remained a net importer of gas due to rising internal demand. In Egypt, an increase in production is likely to return it to net exporter status by 2019.
The non-oil sector in the GCC countries continued its downward trend, except in Bahrain and Kuwait, where it expanded moderately in 2016.
With low oil export revenues, governments extended austerity measures into the fiscal year covering 2016. The value of financial and real estate assets stagnated, albeit above the lows recorded in the wake of the global financial crisis of 2008.
With the rising cost of finance and tighter monetary policy, broad money growth declined throughout the sub-region. Qatar and Saudi Arabia recorded negative broad money growth in 2016, indicating unusually weak domestic credit growth. Consequently, the economic expansion of 2015 could not be replicated in 2016. GDP growth should recover moderately in the GCC countries in 2017. The recovery in oil export revenues is expected to improve business sentiment and consumer confidence. Less austere fiscal policy should stimulate domestic demand. Financing costs will rise further, spurred by expected interest rate hikes in the United States. However, their impact on credit growth is uncertain, as it is determined mostly by the value of financial and real estate assets. Economic growth in China and India should have a positive influence on growth in the GCC countries. Average real GDP growth rate for the sub-region is projected at 2.3 percent for 2017. Kuwait, Oman, Qatar and the United Arab Emirates are projected to grow faster than the sub-regional average.
Growth in Saudi Arabia will be subdued as structural adjustments in the supply side continue and financing costs rise. Forecast growth for 2016 is 2 percent for Bahrain, 2.4 percent for Kuwait, 2.6 percent for Oman, 3 percent for Qatar, 1.8 percent for Saudi Arabia and 2.9 percent for the UAE.
Growth in the Mashreq countries in 2016 averaged an estimated 1.6 percent in 2016, up from the 1.1 percent registered in 2015, but was dampened by deteriorating foreign exchange conditions.
The situation was particularly precarious in Egypt, which was obliged to seek a substantial inflow of foreign financial resources and, in November 2016, devaluate its national currency by 53 percent.
Regarding the Arab Maghreb countries, the report said economic growth averaged 2.4 percent in 2016, up on the 0.9 percent recorded in 2015. The figure is heavily conditioned by estimates for Libya, where economic activities are constrained by violence and political instability --.
Severe drought hit Algeria, Morocco and Tunisia, causing a contraction in agriculture in those countries. Other sectors, however, experienced consistent growth. Broad money growth accelerated in 2016, especially in Tunisia, after a slump in the previous year, indicating a recovery in non-agriculture sectors, including tourism, the report added. (end) wsm.gb
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