NEW YORK // The United Nations has issued a gloomy forecast for financial growth in the Middle East, with a sluggish recovery in the developed world and limits on oil production holding back expansion of the region's economy.
This year's economic growth rate of 5.5 per cent within a bloc of 14 Arab nations is expected to fall to 4.7 per cent next year, and then 4.4 per cent in 2012 - lower than the rates from before the financial crisis of 2007.
This forms part of a global outlook in which the world economic recovery has begun losing momentum because of high unemployment rates, spending cuts in much of the developed world, and the threat of currency wars and trade protectionism.
Rob Vos, who led the team of UN experts that prepared the World Economic Situation and Prospects 2011 report, predicted the economy of the Arab bloc, known as Western Asia, would experience weaker growth in the next two years.
"The growth figures for Western Asia are below potential, meaning that the region will be on a lower growth trend than it was before this crisis," Mr Vos said. "This is across the board, and the reason for this is the sluggish recovery in the developed countries - Europe, the US and Japan - which spills over to the rest of the world."
Officials from the region limited oil production to help inflate crude prices to their current level of more than US$85 per barrel, but economies continued to suffer from an overall decrease in hydrocarbon revenues, said the director of the UN's development policy and analysis division.
"Even while the oil price is increasing again, less money is coming in because oil production is lower than it used to be," he said. "This is another reason why economic growth will be less fast than it was before the crisis."
The report, a preview of the full document to be released next month, offers some positive news for Gulf nations by describing a "robust" construction industry that continues to help South Asian labourers send money home.
While global remittances to developing countries and transitional economies fell by six per cent from US$336 billion (Dh1.23 trillion) in 2008 to $315bn last year, cash transfers to South Asia increased in the same period thanks to a resilient Gulf construction sector.
“Remittance flows to Mexico and Central America were steeply down because so many workers there depend on the US economy,” Mr Vos said.
“Western Asia, by contrast, has lots of workers from South Asia, and continued construction meant employment levels were maintained and the remittances stayed high in most recipient countries.”
Globally, the UN report said, the economic growth rate was expected to fall from 3.6 per cent this year to 3.1 per cent next year, and then rise to 3.5 per cent in 2012 – less than is required to replace the 30 million jobs lost in the economic crisis.
The UN said the “co-operative spirit among major economies is waning” and poor co-ordination between governments had resulted in turbulent financial markets, threatening a double-dip recession in Europe, Japan and the US. The report called for better harmonised monetary policies and new efforts to stimulate flagging economies.
The Western Asia region encompasses Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Sudan, Syria, the UAE, Yemen and the Palestinian Territories.
jreinl@thenational.ae
