MENA economic growth to stabilize in 2019: S&P Global

Economic growth in the Middle East and North Africa (MENA) is expected to remain broadly stable in 2019, according to a recently released report by S&P Global Ratings.

The reports forecasted a growth of 2.8 percent on average in 2019 (weighted by nominal GDP) compared with 2.6 percent in 2018.

“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,” the report said.

“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,” it further noted.

The report projects 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. We assume Brent will fall to $55 in 2019, remaining at the level in the subsequent years,” the report said.

The report predicted that 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 average MENA sovereign rating has broadly stabilized at close to 'BBB-', although the GDP-weighted average is closer to 'BBB'. The gap between the weighted and unweighted average ratings widened again in 2018 due to the rebound in oil prices, which supported the GDP of the largely higher rated oil-exporting GCC sovereigns,” the report concluded.