World Bank upgrades Mena growth forecast to 2.4% in 2021

Oil-exporting countries in the region are expected to fare better this year as higher crude prices bolster their finances

Cairo, Egypt. The Arab world’s third-largest economy was one of a few economies to escape a coronavirus-induced contraction in 2020 but growth is expected to soften this year. Reuters

The Middle East and North Africa's gross domestic product is expected to grow 2.4 per cent in 2021, as higher crude prices and the roll out of vaccines drive recovery in oil-exporting countries, according to the World Bank.

The recent projection is 0.3 percentage points higher than initially forecast in January, the Washington-based lender said in its latest Global Economic Prospects report on Wednesday.

"The region should benefit from the recent rebound in oil prices, stronger external demand and less economic disruptions from Covid-19 outbreaks," the report said.

Growth in Mena's economies is expected to accelerate to 3.5 per cent in 2022 on the back of vaccinations, easing mobility restrictions and rising oil production that will drive more revenue for the oil-exporting countries.

The World Bank also upgraded the global economic growth outlook to 5.6 per cent in 2021 – the fastest post-recession pace in 80 years – up from 4 per cent projected earlier this year as the world emerges from the pandemic-induced slowdown. It follows similar revisions from the International Monetary Fund, which raised its global economic outlook for this year to 6 per cent in April from an earlier 5.5 per cent forecast.

Despite the bounce back, global output will still be about 2 per cent below pre-pandemic projections by the end of this year, the World Bank said.

"As the health crisis eases, policymakers will need to address the pandemic’s lasting effects and take steps to spur green, resilient and inclusive growth while safeguarding macroeconomic stability,” World Bank Group president David Malpass said.

The coronavirus pandemic has also reversed poverty reduction gains in many low-income countries, further aggravating the inequality between the developing and developed countries, the lender noted.

In the Mena region, oil-exporting countries are expected to fare better this year as higher crude prices bolster their finances.

"In oil exporters, a stronger-than-expected rebound in GDP in the second half of 2020 has created the foundation for growth to accelerate to a projected 2.3 per cent in 2021," the World Bank said.

Oil prices are expected to average $62 per barrel in 2021 and 2022 – significantly higher than the bank's projections in January, it added.

Crude prices are up about 40 per cent year-to-date and are at their highest since October 2018. The oil market has benefitted from the Opec+ group's decision to taper production cuts in line with increasing market demand.

Brent, the international oil benchmark, was trading at $71.66 at 7.02am UAE time on Thursday. West Texas Intermediate, the main gauge for US crude, was trading at $69.42am.

Saudi Arabia, the world's largest exporter of oil, is forecast to grow 2.4 per cent this year and 3.3 per cent in 2022.

The pandemic is continuing to weigh on oil importing economies, though. These are expected to grow 2.8 per cent in 2021, which is 0.2 percentage points slower than projected in January.

Egypt, which was the only Middle East economy to grow last year amid the Covid-19 outbreak, will see growth slow to 2.3 per cent in its 2021 fiscal year, the World Bank projected.