Rabat – 2018 might be the comeback year of MENA’s economy, according to BMI Research, which predicts a recovery of the region’s GDP growth. For the firm, Morocco, “a long-term growth outperformer,” is evolving into a manufacturing and exporting hub between Europe and Africa.
In its latest economic analysis report, BMI, a research firm that provides macroeconomic, industry and financial market analysis, delivers its economic outlook for the MENA in 2018.
According to the firm, the recovery of oil prices, as well as stabilising output in oil-exporting economies will boost real GDP growth in the MENA region, while “the positive impact of structural reforms will boost growth in several major oil importers.”
However, BMI is still apprehensive of the political unrest in the region, stating that it “risks weighting on investor sentiment,” limiting the acceleration of growth.
“Oil exporters will benefit from robust gains in prices,” reveals BMI, due to the favorable forecasts of Brent oil prices, expected to increase from USD 54.8 per barrel in 2017, to USD 65.0 per barrel in 2018, explains the firm.
As for oil-importing countries, the firm believes that “progress on structural reforms and overall improving political stability will drive economic activity.” BMI hols a “more favourable outlook” for economies with reform-minded governments, “such as Egypt and Morocco.”
While the firm forecast real GDP growth to slow to 3.8 percent in Morocco in 2018, down from 4.3 percent in 2017, “the economy will remain one of our long-term growth outperformers, a view which is underpinned by relative political stability and a favourable business environment, enabling the country’s transformation towards a manufacturing and exporting hub between Europe and Africa.”
Despite this optimistic outlook for the region overall, BMI “do not expect a dramatic acceleration in economic activity.” The firm forecasts real GDP growth of 3 percent for the MENA region in 2018, up from an estimated 2.6 percent in 2017.
For BMI, lower oil prices will continue to weigh on the pace of growth in oil-exporting economies, especially as diversification plans take time to yield results.
In this sense, BMI presents Algeria as an example, stating that “gains in oil prices won’t be sufficient to result in accelerating GDP growth.” According to the firm, “the Algerian government was slow to react to the slump in oil prices since 2014, which resulted in surging budget deficits in recent years.”
“This has forced the government to ramp up fiscal consolidation measures in the second half of 2017, and we believe that it will continue to take a toll on consumer spending in 2018.”
On the oil side, BMI believes that Algeria has limited capacity to increase production given maturing fields and insufficient investment in exploration; therefore reducing incentives to reduce compliance with the OPEC-stipulated cuts. “As such, we forecast growth to slow in 2018,” concludes the report.