World Economy

Oil to Catalyze (P)GCC Growth

UAE is poised grow by 2.5% in 2017 and 3% in 2018 from 2.3% in 2016.UAE is poised grow by 2.5% in 2017 and 3% in 2018 from 2.3% in 2016.

Economic growth in the Middle East and North Africa is set to accelerate through 2018 following the bottoming out of oil prices in 2016 with all (Persian) Gulf Cooperation Council Arab countries with the only exception of Bahrain registering gains, the World Bank said.

The region’s growth is forecast to recover modestly to a 3.1% pace this year, with oil importers registering the strongest gains, the World Bank said in its January 2017 Global Economic Prospects report, Albawaba reported.

Among oil exporters, the UAE, the Arab world’s second largest economy, is poised to grow by 2.5% in 2017 and 3% in 2018 from 2.3% in 2016, while Saudi Arabia is forecast to accelerate modestly to a 1.6% growth rate in 2017 and 2.5% in 2018. Qatar is expected to grow 3.6% and 2.1% in 2017 and 2018 respectively, while Kuwait is set to record 2.4% and 2.6% GDP growth over 2017-18. Oman is to register 2.9% and 3.4% growth in the two years.

The World Bank said continued gains in oil production and expanding foreign investment are expected to push up growth in Iran to 5.2%. The forecast is based on an expected rise in oil prices to an average of $55 per barrel for the year.

Global economic growth is forecast to accelerate moderately to 2.7% in 2017 after a post-crisis low in 2016, but efforts by the US president-elect Donald Trump to renegotiate trade deals and impose new barriers could set back the global economy, the World Bank warned.

Growth in advanced economies is expected to edge up to 1.8% in 2017, said the report.  

“After years of disappointing global growth, we are encouraged to see stronger economic prospects on the horizon,” World Bank Group President Jim Yong Kim said.

The report noted that fiscal stimulus in major economies--particularly in the United States—could generate faster domestic and global growth than projected, although rising trade protection could have adverse effects. Growth in emerging market and developing economies as a whole should pick up to 4.2% this year from 3.4% in the year just ended amid modestly rising commodity prices.

  Trump Policy Impact Unclear

The report noted that Trump’s tax cuts and spending plans could deliver a shot in the arm to the US economy, lifting growth around the world, although uncertainty about his trade policies adds to the risks.

The Trump administration could squander the economic gains of fiscal stimulus if it imposes new trade barriers that provoke retaliation by other countries, the Washington-based development lender said.

Overall, it is too early to assess what the net impact will be of Trump’s economic policies, the World Bank said. Accordingly, it left its forecast for US growth this year and next unchanged, at 2.2% and 2.1%, respectively. The outlook doesn’t incorporate the expected effect of Trump’s policy proposals, according to the report.

The World Bank estimates global growth will pick up to 2.9% next year, also down 0.1% from its June call.

Japan is seen growing 0.9% this year, while China’s output is set to expand 6.5%.

US growth could accelerate to as much as 2.5% this year and 2.9% in 2018 if the Trump administration follows through on a pledge to cut the corporate income-tax rate from 35% to 15%, and slash individual rates, the bank estimates.

“When you have this combination of tax cuts, you have a positive outcome on investment and personal consumption,” Ayhan Kose, director of the bank’s Development Prospects Group, said.

“The single most important issue we are focusing on in this report is the persistent investment weakness in emerging and developing economies,” Kose said. “The issue is critical. We can help governments offer the private sector more opportunities to invest with confidence that the new capital it produces can plug into the infrastructure of global connectivity,” said World Bank Chief Economist Paul Romer.

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