Wednesday, January 21, 2009

World Bank Predicts Slow Growth in the Middle East

Sources: World Bank Sees Slower Mideast Growth, Financial Times; MENA Growth in 2009 to Slow to 3.9%-World Bank, Arabian

In December the World Bank predicted that economic growth in the Middle East and North Africa, excluding the Arab Gulf nations, will slow to less than four percent in 2009. This prediction can be attributed to the global financial crisis—-which extended its reach into the MENA region—and a subsequent decline in oil prices.

Specifically, the World Bank’s 2009 Global Economic Prospects report indicates that the MENA region will grow by 3.9 percent in 2009, compared to 5.8 percent in 2008.

The World Bank concludes that the global financial crisis is likely to affect developing countries in several ways. The biggest impact will be from slowing investment growth. However, there will also be a decline in international trade and a drop in oil prices.

Naturally, the greatest issue facing the region is the uncertainty surrounding the outlook for oil prices. In December, oil prices fell below $40. Although prices have been steadily rising, unless they can reach $65-$75 per barrel fairly quickly, the World Bank indicated that a quick economic recovery in the MENA region is unlikely.

Discussion: How do you think that autocratic governments in the MENA region will deal with this decline in economic growth? Will this decline be likely to negatively affect domestic social programs? Or will governments jaded by the Western origins of the crisis be deterred from international investment and spend more domestically?

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