Key Themes Of 2014
BMI View : Growth in the Middle East and North Africa region will remain subject to downside political risks over 2014. We expect the major themes over the coming year to include; a slight convergence in growth as the GCC slows while economic activity in North Africa picks up; a lack of resolution in the Syrian conflict continuing to have negative knock-on implications on neighbouring countries; and further gains to be found in GCC equity markets.
Three years since the onset of the Arab Spring, we expect the Middle East and North Africa (MENA) region to continue feeling its effects. Political instability and social tensions will remain elevated throughout 2014, particularly in North Africa and the Levant, where political transitions have thus far been turbulent and incomplete. Although the six economies of the Gulf Cooperation Council (GCC) will continue to be the regional outperformers, we forecast a modest slowdown in growth on the back of limited gains in hydrocarbon output coupled with declining oil prices. Some of the key themes for the MENA region in 2014 include:
Convergence In Growth Rates: We expect GCC countries to record the highest growth rates in 2014 on the back of growing non-oil sectors and rising household incomes. However, the average real GDP growth rate differentials between the economies of the hydrocarbon-rich Gulf and the net-oil importers of North Africa are set to narrow. Base effects are a key aspect of this convergence, with the former group of states beginning to experience a cyclical downturn following two consecutive years of above-average economic expansion. We expect the non-oil sectors across the GCC to outperform the oil sectors - marking a significant break from recent economic history for much of the region.
Slowdown On The Horizon GCC - Real GDP Growth (%)