World Bank: Gulf States to lose $215 billion on cheap oil

Challenges are now reduced investment, high unemployment, and first fiscal deficit in four years, a World Bank report says.

World Bank: Gulf States to lose $215 billion on cheap oil

World Bulletin / News Desk 

Growth in the Middle East and North Africa will be flat for the next two years, and the low price of oil will cut $215 billion from state revenue, a World Bank report released late on Wednesday said.

Regional GDP growth in the Middle East and North Africa is expected to be 3.1 to 3.3 percent for the rest of 2015 and for 2016, the report said.

Prolonged conflict and political instability in several countries in the region, low oil prices, and the slow pace of economic reform are the main drivers of low growth, the report said.

The World Bank expects the Gulf Cooperation Council countries -- Saudi Arabia, Kuwait, Qatar, United Arab Emirates, Bahrain and Oman-- "to lose about $215 billion, or 14 percent of their combined GDP, from lower oil prices this year," the report said.

This has resulted in "low investment, high unemployment and - for the first time in four years - a fiscal deficit for the region as a whole, " the report noted.

However some countries in the region are forecast to significantly exceed the performance of their peers.

“A third of the countries in the region, all oil importers, will grow at about 4 percent in 2015, helped by some policy reforms, notably in Egypt and Morocco, as well as low oil prices,” said Hafez Ghanem, World Bank Regional Vice President for the Middle East and North Africa.

The countries mired in conflict, such as Iraq and Libya, are likely to see economic contraction in 2015, the report predicted.

The report suggested that the old development model - or social contract - where the state provided free health and education, subsidized food and fuel, and jobs in the public sector, has reached its limit.

“While it delivered high enrollment rates and basic health, not to mention civil-service jobs, the old social contract was unable to provide quality education and health, or jobs in the private sector,” the report quoted Shanta Devarajan, World Bank Chief Economist for the MENA Region.

Policies are needed to create private-sector jobs and to further open markets to international competition for many countries in the region, the report said.

Güncelleme Tarihi: 16 Nisan 2015, 17:08