Middle East grows as oil rises

(Source Article: Middle East enjoying oil boom - WB news)

With recent geopolitical tensions and continued high demand for oil, the oil-rich countries of the Middle East are experiencing an influx of cash—and most of them are being frugal with their spending. During the last major hike in oil prices in the 1970s and 80s, the Middle Eastern countries engaged in massive spending which put a lot of them into deep debt. This time around, says the World Bank’s report on the Middle East and North Africa region (MENA), they are restraining themselves.

The economies of the so-called MENA countries grew at an average of 6% in 2005, and the growth experienced over the last three years has been the highest since the 1970s. However, not all are benefiting like the major oil-producing countries: increased energy use and decreased cash flows from the regions oil economies are having adverse effects on the region’s resource-poor economies, such as Lebanon and Morocco (see Financial markets in a new age of oil - WB news)

Saudi Arabia, the world’s most oil-rich country, is spending their oil profits wisely: the country has cut its debt almost by half, fueling economic growth. Nevertheless, World Bank officials urge the Middle East to not become too reliant on oil revenues, and to diversify their economies to the point that more jobs are produced in preparation for the depletion of their oil reserves in the future. (see Mid-East learns oil-boom lesson - BBC)

Specifically, Saudi Arabia reduced its debt from 97% of its GDP in 2002 to just 41% by the end of 2005. Meanwhile, both Morocco and Lebanon (the latter now experiencing a crisis with Israel) experienced a collapse of their growth rates from 6.3% in 2004 to 1.5% in 2005, and 6% to 1%, respectively.