The economic growth in Mena is expected to remain broadly stable at 2.8 percent on average in 2019, weighted by nominal GDP, compared with 2.6 percent in 2018, S&P Global Ratings noted in its ‘Mena Sovereign Rating Trends 2019’ published yesterday.
The net hydrocarbon importing sovereigns will continue to outperform their regional hydrocarbon-endowed peers, with economic growth at 4 percent in 2019, improving marginally to 4.5 percent over the remainder of the forecast period to year-end 2021.
This is partly due to the “catch-up effect” whereby countries with lower wealth levels have higher economic growth rates. However, stronger growth also reflects ongoing reforms, strong domestic consumption, and sufficiently robust external demand, the ratings agency said. The S&P Global projected an economic expansion of 2.5 percent in 2019 by the Mena net hydrocarbon exporters up from 2.1 percent in 2018, after contracting by 0.5 percent in 2017. Non-oil activity in Mena oil exporters will remain supportive of growth over the medium term, due to strong government capital expenditure in Qatar, Saudi Arabia, Iraq and, Kuwait.
“Our growth outlook for Mena oil exporters is subject to significant volatility predicated on future oil prices. The average Brent oil price rose to about $72 in 2018, up from $52 in 2017. We assume Brent will fall to $55 in 2019, remaining at this level in the subsequent years. Flat oil prices and the completion of some large-scale projects are likely to result in a modest deceleration in Mena net hydrocarbon exporters’ economic growth over 2020-2021, to 2.3 percent on a weighted average basis,” the ratings agency said.
Economic activity in Mena hydrocarbon exporters will remain supported by strong government capital expenditure and positive spillovers from a pickup in oil and, in some cases, gas production.
Strong growth in the construction industry will be supportive of economic activity in the Mena hydrocarbon exporters over 2019-2021. In particular, government investment in large-scale infrastructure projects in Qatar, Saudi Arabia, and Kuwait, and reconstruction projects in Iraq will remain strong. S&P expects public capital expenditure in hydrocarbon-endowed economies will average 7 percent of GDP in 2019. “Qatar’s economic growth started to recover in 2018, following a slowdown in 2017 when the boycott started. We project real GDP growth of 2.8 percent in 2019, reflecting our expectations of further increases in construction and infrastructure investment projects ahead of the FIFA 2022 World”, the report said.
In contrast to most GCC sovereigns, an increase in fiscal consolidation in Bahrain in 2019, which posted the highest growth among peers in 2017, could dampen its non-oil activity, despite rising aluminum production capacity. As a result, S&P expects real GDP growth to remain moderate at 2.7 percent in 2019, reflecting a marginal uptick from 2018.
Source from: The Peninsula