WASHINGTON, June 8: The World Bank has lowered its 2016 growth forecasts for Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE due to lower oil prices.
The organisation said its new outlook assumes an average oil price of $41 per barrel in 2016, down from $51 per barrel in January, and that prices will rise to $50 in 2017 and $53 in 2018.
Based on this criteria, it expects the UAE economy to grow 2.0 per cent this year from a previous prediction of 3.1 per cent, Saudi Arabia 1.9 per cent down from 2.4 per cent and Qatar 3.3 per cent down from 6.8 per cent.
In addition it projected growth in Oman this year to drop to 1.6 per cent from 3.2 per cent, Kuwait from 2.4 per cent to 1.3 per cent and Bahrain from 2.7 per cent to 2.2 per cent.
“Both oil-exporting and oil-importing countries face substantial fiscal challenges. While expenditure cuts in oil exporters implemented in 2015 and underway in 2016 are a step in the right direction, additional cuts are needed to achieve fiscal sustainability, together with a boosting of non-oil-sector revenuesthrough tax increases, policy changes encouraging private sector participation and investment, or other changes,” the organisation noted in its June report.
The World Bank went on to warn that the recent reliance on sovereign debt issuance, like Qatars record bond issue last month, meant countries should ensure that they have solid debt management frameworks in place.
It said if annual oil prices do not reach a trough in 2016 it would likely trigger an additional downgrading of the forecast for oil exporters in the region.
The downward pressure on growth from fiscal consolidation will be reinforced in the GCC countries by tightening monetary policy in tandem with any rate increase in the United States, the bank said.
More broadly, the World Bank said the Middle East and North Africa region would grow 2.9 per cent this year, largely due to the lifting of sanctions against Iran.
Brent crude prices recently broke the $51 a barrel mark after hovering around $50.
Meanwhile, a worried World Bank slashed its growth forecast for the global economy Tuesday, saying advanced economies are rebounding more slowly than expected and low commodity prices continue to hurt other countries.
The Bank said that the global economy should grow at just 2.4 percent this year, the same lethargic pace of 2015 and much slower than the 2.9 percent it predicted in January.
It said that the slow growth in advanced economies is holding back developed countries, with world trade and investment both depressed, and called for
Prospects for a pickup “remain muted,” the Bank said, in a report especially downbeat for countries dependent on commodity exports like oil.
It said risks to growth have risen since the beginning of the year, particularly the high level of borrowing by companies in developing countries, which has left them vulnerable to credit crises as growth stagnates.
It also includes the rise in doubts that the aggressive monetary easing in developed countries, with negative interest rates in several, is doing the intended job of firing up economic activity.
“Economic growth remains the most important driver of poverty reduction, and that’s why we’re very concerned that growth is slowing sharply in commodity-exporting developing countries due to depressed commodity prices,” said World Bank Group President Jim Yong Kim.
“This sluggish growth underscores why it’s critically important for countries to pursue policies that will boost economic growth and improve the lives of those living in extreme poverty.”
The report comes as the main developed country drivers of global growth — Japan, Europe and the United States — struggle for traction.
A sharp deceleration of the US economy since the beginning of the year is not helping carry the rest of the world, and the World Bank has cut its expectations for the world’s largest economy by 0.8 percentage point to 1.9 percent in 2016.
The Euro area will achieve only 1.6 percent growth, and Japan, fighting off deflationary pressures, will manage just 0.5 percent.
In all three, the bank said, investment remains soft amid doubts about the efficacy of policies, particularly those of central banks holding interest rates at extraordinarily low levels.
China, the other major wheel of growth, will manage to hold onto a 6.7 percent pace, but the Bank sees it slowing further to 6.3 percent by 2018.
India too is holding onto a good pace, helped by the cheap prices of key commodities it imports, including oil.
But other large emerging economies like Brazil and Russia remain locked in recession, and Nigeria and South Africa are expanding very slowly.
“Conditions remain markedly challenging for commodity exporters,” the Bank said.