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BY DOMINIKA GAJDZIEL
MECOS Infocredit Insight
The worldwide turbulences of last quarters, caused by the breakdown of the financial market, showed that every country in the world was affected by the crisis and suffered economic slowdown, some more than others. The MENA region is an interesting case of diversified countries, in which the scope of the crisis has varied according to the alliances with other countries, contribution of the financial and property markets to the economic growth and government policies.
The MENA region has been less affected by the economic crisis than any other region in the world even though the economic crisis ended the oil boom in 2008 and settled the price
of barrel at the level of $60 – $80, costing GCC countries and other remaining oil exporters
a drop in the revenue of $270 billion. The overall GDP growth slowed down to 2.9 % in 2009 and it is projected to bounce back to 3.7 % in 2010 and 4.4 % by 2011 according to the Global Economic Prospectus 2010.
Oil wealth overcomes the real estate bubble
As the crisis loomed, GCC economies were considered to be the strongest. As the providers of the biggest oil wealth compared to a relatively small population, in 2008 when the world economies were hit hard, GCC countries were able to stand still and handle exceedingly well the first effects of the crisis. However, not every GCC country managed to go through the apogee of the crisis unblemished.
The UAE, with the Dubai World financial crisis, has witnessed a change of the internal power balance between emirates. The UAE economy has suffered from the crisis due to many factors among which it is essential to mention the burst of the real estate bubble, decrease in oil prices and strains in the financial sector. It is foreseen that from now on the economic recovery will be driven by Abu Dhabi, the capital which is oil rich. The real GDP growth in UAE is projected to reach 2.8% in 2010 and 5.2% in 2011 (comparing to the 7.4% in 2008). It is predicted that the growth slowdown for UAE will be the highest in reference to any other MENA country.
Qatar at the forefront
While all of the GCC countries noted a decline in the real GDP growth in 2009, Qatar was the only one that recognized a positive growth and it is still expected that the GDP in 2010 will reach the level of 16.2 %. Qatar’s economy managed to smooth the economic crisis effects simply by diversifying from its neighbors. As reported by Reuters, Qatar's four new liquefied natural gas plants will yet double the capacity of the country. Likewise the world's largest natural gas exporter is expected to overwhelm two other key players in the world's oil production (UAE and Saudi Arabia).
Oil Exporters with a Large Population Number and Low Revenue Per Capita
Iran, Iraq, Libya, Syria and Yemen entered the crisis period in a much weaker position than any other GCC country. A significant impact on the condition of the countries’ economies slowdown resulted directly from the decrease in revenues from the oil exports and due to governments’ social programs: energy subsidies in Iran, subsidized prices on food in Syria etc. For 2010 the sharpest fall in the real GDP growth is foreseen for Iran (drop to 3%).
Non-Oil Exporters Depending on Assistance from GCC, Foreign Aid
Jordan and Lebanon have been affected by the economic slowdown in the most significant way notably due to the specifics of their economies. Since both countries have no independent source of oil, and are strongly dependent on the help of GCC countries, it seems that the impact of the crisis will be linger for the next couple of years.
Diversified Economies of Non-oil Exporters with Strong Economic Connection with OECD and Europe
The diversified economies of Tunisia, Morocco and Egypt felt the impact of the global economic crisis first. Due to the developed alliances with Europe through export and tourism, the slowdown in countries’ economies was notable early in 2008.
Necessity of Insolvency Reform in MENA Region
Ultimately, apart from dealing with the effects of the economic crisis, MENA region has
to handle another significant issue. MENA Region has to work on the insolvency regulations, that are considered to be one of the least developed in the world. As for now, insolvency procedures in MENA countries take twice as much time as in OECDs economies.
