Middle East and North Africa Economic Developments and Prospects 2005 : Oil Booms and Revenue Management

Abstract

The edtion of the Middle East and North Africa (MENA) economic developments and prospects reportsanalyzes the region's short-term growth prospects given global forecasts and current structural features of the economies, as well as the region's prospects for longer-term growth based upon progress in implementing comprehensive structural reforms. MENA region has experienced exceptional growth over the last two years. Over 2003 and 2004, economic growth in MENA averaged more than 5.6 percent a year, the strongest growth in a decade, and up strongly from the 3.6 percent average yearly growth over the 1990s. On a per capita basis, the MENA region's 3.5 percent average growth over the last two years was the region's strongest growth performance since the mid-1970s. Accompanying this strong growth performance, unemployment has declined with the rise in oil prices over 2000- 2004. Unemployment is estimated to have fallen from about 14.9 percent of the labor force in 2000 to 13.4 percent currently, the result of a 37 percent increase in the rate of employment creation over the 1990s. In many respects, the MENA region is in the midst of an economic boom. However, there are caveats to the region's growth acceleration. For one, it has not been especially broad based. Comparing growth over the 1990s with growth over the last two years, 97 percent of the regional growth upturn was driven by just four countries - Saudi Arabia, the Islamic Republic of Iran, Algeria and the United Arab Emirates. In fact, nearly half of the region actually experienced growth downturns relative to the 1990s. Moreover, MENA's recent positive economic developments have been driven largely by external events - in particular, dramatically rising oil prices. And importantly, on a per capita basis, the MENA region's growth over the last two years continues to lag that of other regions, a reflection of both the firming of GDP growth rates across developing regions and the MENA region's high population growth.