Khaleej Times reported that the World Bank has cautioned developing countries to get ready for a downturn but said economies in the Middle East and North Africa are set for a better than predicted growth of 4.1% this year and 3.8% in 2012.
Raising the forecast for the Middle East for 2011 is up by half a per centage point relative to a May 2011 forecast the global body warned that global uncertainty is clouding the horizon.
The World Bank said that the upgrade in the regional outlook was due to more expansionary fiscal policies in the region, expanded oil production, better than expected growth in Iran and a quicker than anticipated pickup in industrial production in Egypt. In 2012 however, growth is expected to decline by half a per centage point because of lower expected oil prices and slower global growth.
Ms Caroline Freund chief economist for the Middle East and North Africa region at the World Bank said that unlike in 2008 when MENA countries were in a strong position to weather the storm, the ongoing political and economic uncertainties have put a number of countries in a weaker position for additional response to another global downturn. Overall while improving government institutions is necessary for voice and accountability it is also necessary for growth and efficient use of resources.
Ms Freund said that to revive investment above and beyond pre Arab Spring levels, a move to transparency and accountability is urgent. With contracting global demand, lower oil prices will put further pressure on fiscal balances in many developing oil exporters, especially in a period of expanded government spending. Indeed, if we look at examples from other countries undergoing transition, investment surged in many economies that made early moves to improve governance.
The report noted that investment in the MENA region has been strong over the last two decades in comparison with Latin America and Eastern Europe. However in the oil exporting countries such as Algeria and Oman, it has been primarily supported by large and expanding public investment. Oil importers, in contrast like Egypt and Morocco have shown more strength in private investment which has increased in recent years.
Mr Justin Yifu Lin chief economist and senior vice president of World Bank said that developing countries can prepare for the threat of a global recession by improving policies to generate growth and jobs, diversifying economies, bolstering their banking sectors and readying social safety nets. The sentiment in the international economic community had abruptly changed from a feeling of general confidence in global recovery 6 months ago to alarming uncertainty now facing policy makers.
Mr Lin said that we once again are seeing the financial markets in the world in turmoil. The creditworthiness of several countries on both sides of the Atlantic was now in question, fuelling the general crisis of confidence. This was a worrying scenario for the world’s developing countries, as investors and consumers across the globe might now be inclined to hold back out of caution.
He said that we still hope for the best but for the developing countries it is very important for them to prepare Lin and the World Bank’s top economists covering regions from East Asia to Africa and Latin America, warned that while many regions had weathered remarkably well the 2008-2009 financial crisis, this meant that their economic defences might not be as sturdy now to face another global recession.
(Sourced from Khaleejtimes.com)
