Key economic initiatives launched by Kuwait are steps in the right direction, said the World Bank (WB) in its latest assessment of economic performance of countries in the region. Reforms to laws, privatization of government held assets, public-private partnerships in the generation and supply of electricity and water, as well as in transport, sewage and solid waste management are measures that further buttress Kuwait’s economic outlook, said the Bank.
These reforms are especially commendable given the sluggish growth in many other countries that make up the Middle East and North Africa (MENA) region. In its latest economic update for the region, the bank predicted that economic growth in MENA would slow to 0.6 percent this year compared with 1.2 percent last year. The region’s growth forecast for 2019 is revised down by 0.8 percentage points from the April 2019 projection due to lower oil prices since April 2019 and a larger than expected contraction in Iran, said the bank.
Economic outlook for the MENA region as a whole is subject to substantial downside risks, most notably, intensified global economic headwinds and rising geopolitical tensions. In the latest edition of the MENA Economic Update titled ‘Reaching New Heights: Promoting Fair Competition in the Middle East and North Africa’ the World Bank” discusses the current sluggish growth due to conservative oil production outputs, weak global demand for oil, and a larger-than expected contraction in Iran.
On the other hand, a boost in non-oil activities in the Gulf Cooperation Council (GCC) countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates), most prominently in construction, partially offset the dampening effect on the region’s average growth numbers as a result of Iran’s economic contraction. “Countries in the region have implemented bold reforms to restore macroeconomic stability, but the projected growth rate is a fraction of what is needed to create enough jobs for the fast-growing, working-age population,” said Ferid Belhaj, World Bank Vice-President for the Middle East and North Africa region.
“It is time for courageous and far-sighted leadership to deepen the reforms, to bring down the barriers to competition and to unlock the enormous potential of the region’s 400 million people as a source of collective demand that could drive growth and jobs.” In the medium-term, the World Bank expects real GDP in the MENA region to grow at 2.6 percent in 2020 and 2.9 percent in 2021. The projected pickup in growth is largely driven by increasing infrastructure investment in GCC countries and the recovery in Iran’s economy as the effects of current sanctions wane.
However, the report warns that a further escalation in regional tensions could severely weaken Iran’s economy and spill over to other countries in the region. While rising oil prices would benefit many regional oil exporters in the short run, the overall impact would be to hurt regional trade, investment, and spending on infrastructure.
In addition to providing economic growth forecasts for each country, the report highlights how unfair competition results from markets dominated by state-owned enterprises and politically connected firms which deters private investment, reducing the number of jobs and preventing countless talented young people from prospering. “The lack of fair competition is holding back the development of the region’s private sector, which history has shown to be the source of broad-based growth and jobs,” said Rabah Arezki, World Bank MENA Chief Economist.