World Bank says wars, low oil prices hit Middle East growth

World Bank announces 2015 economic growth rate for Middle East, North Africa were lower than expected at rate of 2.6 due to terrorism, war and low oil prices

Photo by: Reuters (Archive)
Photo by: Reuters (Archive)

People walk on rubble as others try to put out a fire after what activists said were air strikes followed by shelling by Assad forces in the Douma neighbourhood of Damascus, February 9, 2015.

The World Bank said on Thursday that 2015 economic growth in the Middle East and North Africa likely came to just 2.6 percent, falling short of a 2.8 percent forecast in October as war, terrorism and cheap oil took their toll.

In a new report, the bank said five years of war in Syria and spillovers to neighbouring countries have cost the region some $35 billion in lost output measured in 2007 prices, equal to Syria's gross domestic product that year.

The plunge in oil prices to around $30 a barrel from over $100 two years ago is causing major problem for the region's oil exporters, with government revenue falling sharply and budget deficits growing. The World Bank said Saudi Arabia's public debt would reach 20 percent of GDP in 2017, 10 times its level of 2.2 percent in 2013.

"The richest oil exporters in the region, Saudi Arabia, Qatar, Kuwait and United Arab Emirates, have large reserves that will enable them to run deficits over the coming years, although not far beyond that," the World Bank said in the report. "At current levels of spending, and an oil price of USD 40 per barrel, Saudi Arabia will exhaust its reserves by the end of the decade."

The report was issued as the World Bank is in talks on financing with some oil producers in other regions, including Azerbaijan, Nigeria and Angola.

The report cited World Bank estimates of $3.6 billion to $4.5 billion in physical damage to just six cities in war-torn Syria: Aleppo, Dar'a, Hama, Homs, Idlib and Latakia. The damage was assessed to housing, health, education, energy, water, transport and agriculture infrastructure.

A similar assessment in Yemen, also hit by war, found $4 billion to $5 billion in damage to four cities: Sanaa, the capital; Aden; Taiz and Zinjibar.

But the wars there and elsewhere may be extracting a bigger toll on human capital, as Syrian refugees languish with little or no work, the bank said, while educational gains are being reversed. More than half of school-age children in Syria were prevented from attending school during 2014-2015, it said.

"A peace settlement in Syria, Iraq, Libya and Yemen could lead to a swift rebound in oil output, allowing them to increase fiscal space, improve current account balances and boost economic growth in the medium term with positive spillovers to the neighbouring countries," said Lili Mottaghi, World Bank economist for the region and the author of the report.

TRTWorld, Reuters