Thanks to an increase in oil prices and recovery in remittances and tourism, the MENA region fared well during 2010 according to the World Bank's recently published Global Economic Prospects 2011. Sherine Abdel-Razek leafs through the report Developing economies in the Middle East and North Africa (MENA) are to grow 4.3 per cent this year fostered in part by a healthier financial and economic environment among the economies of the Gulf Cooperation Council (GCC), recovery in Foreign Direct Investments (FDI), with a continued pick-up in portfolio equity and private debt, according to the World Bank's Global Economic Growth Prospects report issued last week. Shedding light on the performance of the economies during 2010, the report said that GDP gains for developing Middle East and North African countries picked up modestly from 3.1 per cent in 2009 to 3.3 per cent in 2010. The main engines behind this modest upturn were the increase in oil prices, recovery in the euro zone, a modest increase in capital flows to the region, and stronger recovery in tourism and remittances. However, the modesty of the recovery came on the back of an increase in international dollar denominated food prices, especially wheat, maize and other grains. As most of the region's countries are developing and mostly dependent on imported food, the increases are particularly worrisome, especially for those countries where currencies are fixed to the dollar. Such countries include the rich oil producing countries of the GCC in addition to other developing exporters like Algeria. The crude prices increased by $17 per barrel on average during 2010, on the back of stronger demand in emerging markets, expectations of improved future global demand, and continued supply restraint on the part of OPEC. Overall, the region's oil revenues increased 28 per cent from $450 billion in 2009 to $575 billion in 2010. Saudi Arabia, for example, bore the brunt of production cutbacks during 2009-10 with 35 per cent of Saudi oil capacity currently idle. Oman, on the other hand has been able to boost crude oil output using enhanced recovery techniques, and is not bounded by OPEC quotas. While the rise directly benefits the region's exporters, it indirectly benefits regional oil importers in the form of improved remittance flows into the diversified economies. There was also a surprising pick-up in worker remittances and tourist arrivals in 2010 that provided additional support for growth and household consumption. According to the World Bank, the dollar value of remittances to the region increased 5.3 per cent to $35.5 billion, on recovery in Europe and to a lesser degree, the GCC economies. Egypt was the largest gainer with its expatriates transferring back home 25 per cent more. Lebanon and Jordan came next with increases of 8.2 per cent and 5.3 per cent respectively. Tourism was another key element in the forces propelling growth in the Middle East and North Africa. During the year, visits by foreigners to the region yielded $32 billion or 3.5 per cent of the developing region's GDP over the past three years. Moreover, the United Nation's World Tourism Organisation estimates that arrivals will increase by as much as 13 per cent for the region, with arrivals to the Middle East rising 20 per cent, and up six per cent for North Africa in the first half of 2010. Also, the revival in the economies in the European side of the Mediterranean supported the MENA region's growth . Following a record 4.1 per cent decline in euro area GDP in 2009, activity is likely to recoup to a 1.7 per cent pace in 2010, led by strong growth in Germany and increasingly in improved domestic demand. Though not a stellar recovery, and one hindered by a continuation of substantial sovereign fiscal and debt difficulties among smaller area members, import demand accelerated over the course of 2010 offering export opportunities for the diversified economies of Middle East and North Africa, notably Morocco, Tunisia and Egypt. The rebound of activity in the euro area, and recovery in Morocco's exports of specialised products including phosphate acid and fertilisers (up 80 per cent in October), and fish exports (seven per cent), have underpinned overall exports from the Maghreb. The euro area accounts for between 60 and 70 per cent of goods exports, remittance receipts and tourist arrivals for these countries, with the United States also accounting for a substantial share. In Morocco for example, dollar exports increased 23 per cent in October 2010 on a year-on-year basis. Similarly, Tunisian total exports were up 17.2 per cent as of June, with shipments to Germany gaining momentum. However, the jumps in remittances and tourism and the domino effect of euro zone economic revival were offset by the near 12 per cent decline in FDI inflows to the developing countries of Middle East and North Africa. This is compared to a notable average growth of 32 per cent between 2000 and 2005 and its jump to $35.3 billion, or 3.7 per cent of GDP in 2008. The Dubai financial crisis of late 2009 was one of the main reasons that hindered attraction of more capital to the region. Outbound FDI from the GCC halved from 2007 levels by 2009. Developments among GCC economies suggest that the likelihood of a quick return to the halcyon days of 2007-08 is small, though signs of economic recovery and financial improvement are emerging. As for the net capital flows to the region's stock markets and banks, it came at $25.8 billion during 2010, only 1.2 per cent higher than the previous year. This is in contrast with the sharp pick-up inflows into East and South Asia. The exceptions were bourses of Egypt and the UAE with the latter witnessing improvements in fall 2010 as the Dubai World restructuring was settled and banking results improved. Looking through the specifications of different countries in the region, the report highlighted the fact that industrial production boosted the growth rate in both Egypt and Tunisia during 2010. In Tunisia, industrial production was up 6.7 per cent over the year through September on an upturn in domestic and foreign demand for manufactures. In Egypt, industrial production recovered sharply, growing at an annualised pace of 8.5 per cent between January and August 2010. However, industrial production has since decelerated in line with the slowdown in global growth in the third and fourth quarter of 2010.
