Global economic prospects will show a clear upward trend in 2014 and signs of the recovery can now be quantified for the world at large and the MENA region in specific.
According to the Al Masah Capital assessment reflected in its recently released MENA Yearbook 2013 there will be growth of 3.2% across the international board much of it spurred by recovery in high-income economies.
This not only indicates a substantial improvement over the latest 2013 growth estimate of 2.4% but occurs against a backdrop last year where the World Bank had downgraded the GDPs of several economies.
“This rising graph augurs well for the fiscal health of the world,” said Shailesh Dash, CEO of Al Masah, adding that despite the modest and guarded projections by most of the major fiscal institutions including the IMF and the OECD growth has begun to manifest itself in a tangible fashion.
Referring to conditions closer to home he said, “It would be safe to say that the headwinds were significant in the MENA region and fragile political scenarios in countries like Egypt and Tunisia did face the ‘slowdown’ effect, but the new buoyancy indicates a growth of 3.8% in this year, giving MENA a sharp edge over the global growth rate.”
It has to be remembered that in 2013 it was only 2.1%, a steep drop from the 4.6% registered in 2012. The GCC mirrored much the same situation with the rate dropping from 5.2% rise in 2012 to 3.7% last year.
The Al Masah report is confident that the headwinds have eased up and contributing to the positive outlook is the fact that there has been a marked recovery in the oil production sector.
“As far as we see it, last year the lower performance of the oil exporting countries did impact on the rate of growth,” said Dash. “This year, the other factor of inflation which reached an inordinately high level last year will now ease up and this fall in pressure will combine with the upbeat oil market to generate financial recovery at a much swifter pace than had been envisaged in the second half of 2013.”
The Al Masah study does caution against the slowness of the growth for MENA oil importers and signposts it as being relatively weak due to political instability. This uncertainty has resulted in delays of much-needed reforms and, hence, deterred investments and short-term growth prospects.
“Despite the geo-political situation and the disruption of the oil flow, even these countries are looking up,” said Dash. “ We believe that from all the indicators available to us, the outlook for the MENA region will continue to improve in 2014 and beyond with strong stock market performance and through encouraging monetary policy adoption by many of the regional economies, thereby rendering the overall sentiment as a tangibly positive one.”
Specifically referring to the UAE, the estimate quoting the IMF stands at 3.9% for 2014.
Dash puts forward a slew of valid reasons for the continual growth. “Other positive influences include increased investments, the country’s favorable demographic profile (rapidly growing population base), stable political environment, and increased trade relations with neighboring GCC states.”
The report emphasizes the roles played by the hospitality industry, with manufacturing, trade, and logistics being the other primary drivers of growth in the non-hydrocarbon sector during 2014.
“Because of its diversification initiatives, the UAE is expected to emerge as a regional powerhouse in trade and tourism and as an investment destination. Government expenditure is scheduled to increase 4.5% in 2014, which would further help sustain growth in the non-oil sector,” he added.