The economic growth in the Middle East region recovered in 2018 from a contraction in 2017, benefiting from the increase in average oil prices. Meanwhile, the pace of fiscal consolidation eased and the non-oil economic activity picked up. Private sector economic activity strengthened in countries like Saudi Arabia, United Arab Emirates (UAE) and Qatar, although the overall private credit growth remained subdued. Supported by increased oil revenues, most Middle East economies have seen some improvements in their fiscal and external balances. The oil production rose after the Organization of Petroleum Exporting Countries (OPEC) and its allies agreed to boost output in June 2018, but they may cut oil production in 2019 despite pressure from the United States to lower oil prices.

Overall, the economies in Middle East are set to show stronger gross domestic product (GDP) growth in 2019.The oil price is expected to remain firm, which will support stronger government spending. Non-oil sector will continue to grow, albeit at a slow pace. The implementation of government stimulus packages such as the Saudi Arabia’s National Transformation Program 2020, Expo 2020 in the UAE and 2022 FIFA World Cup in Qatar will continue to spur the growth in the region. Nevertheless, the economic growth for the region remains vulnerable to the volatility in oil markets, escalating trade and geopolitical tensions, and faster increases in US interest rates.

In recent years, Middle East countries have carried out a number of reforms, which aims at streamlining business procedures, attracting foreign investments, supporting job creation and expanding the role of the private sector. Despite the economic recovery in the region, the governments need to continue the fiscal and structural reforms to achieve consistent and sustainable economic growth. The delay in the implementation of these reforms could weigh negatively on the region’s economic outlook.

Please login to read the complete article. If you already have an account, you can login now or subscribe/register.