Economic Analysis - GDP Roundup: Picking Up After 2017 Slowdown - MAR 2018

BMI View: Real GDP g rowth will pick up in the MENA region in 2018, with recovering oil prices and stabilising output in oil-exporting economies, while the positive impact of structural reforms boosts growth in several major oil importers. That said , with persist ent political risk weighing on investor sentiment and oil prices still structurally low by historical standards , a return to the economic gains seen during the mid-2000s boom years is off the cards .

We expect the macroeconomic backdrop to improve in 2018 across the MENA region, after slowing in 2017 due to the OPEC-stipulated oil production cuts, oil prices taking longer-than-expected to recover and persisting political risk. Oil exporters will benefit from robust gains in prices, with our Oil & Gas team now forecasting Brent to average USD65.0 per barrel (/bbl) in 2018, up from USD54.8/bbl in 2017. Higher oil proceeds will enable a boost in government spending which will support economic activity. Meanwhile, progress on structural reforms and overall improving political stability will drive activity in oil-importing economies.

That said, although we hold a more optimistic outlook for the region overall, we do not expect a dramatic acceleration in economic activity. We forecast real GDP growth of 3.0% for the MENA region in 2018, up from an estimated 2.6% in 2017. Structurally lower oil prices will continue to weigh on the pace of growth in oil-exporting economies, especially as diversification plans take time to yield results. Persistent political risk will also weigh on investor confidence across the region, limiting the acceleration of growth.

Accelerating, But No Return To Boom Years
MENA - Average-Weighted Real GDP Growth, %
e/f = BMI estimate/forecast. Source: National sources, BMI

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